Guest post by Patrick Gibbels, Secretary-General of the European Small Business Alliance (ESBA).
On 5 March, the European Commission handed over a draft of its impact assessment on the upcoming Platforms to Business Regulation to the Regulatory Scrutiny Board. The Board is designed to look at proposals at the early stages and give its recommendations as to whether it is legally sound.
Several weeks ago, the Commission, accidentally or not so accidentally, leaked an early draft of its proposal which aims to regulate the business to business relationships between platforms and its business users.
The proposal falls in line with the Commission’s recent obsession of clamping down on the large online players in every way possible and under the guides of ‘making big platforms more transparent in how they treat third-party sellers’, slaps additional burden on companies of all shapes and sizes. The European Commission’s go-to solution is to simply ‘exempt’ micro and small companies from crucial aspects of the proposal, claiming to be operating according to the Think Small First principle, promoting the best interest of micro and small companies.
In reality, the Commission is doing the opposite of that and here’s why.
The European Commission’s own definition of the Think Small First principle is as follows: [Think Small First] implies that policymakers give full consideration to SMEs at the early policy development stage. Ideally, rules impacting on business should be created from the SMEs point of view or in other words, SMEs should be considered by public authorities as being their “prime customers” as far as business regulation is concerned. It then continues by saying that “The principle relies on the fact that “one size does not fit all” but a lighter touch approach can also be beneficial to larger businesses”.
Following this – very sound – logic, creating unwieldy legislation and then simply slapping on an exemption for small companies does not work. Exemptions can be dangerous in the sense that they demote micro businesses to second- or third tier companies, and should only be used as a last resort solution, not as a principle.
At the basis of the proposal is the way in which platforms handle complaints. In other words, how to handle customer satisfaction. Being an entrepreneur myself, I know that customer satisfaction is the very core of any successful business. I would even go so far as to say that without it, any business is doomed to fail and therefore any business will have customer satisfaction as a part of its DNA. Do we really need the Commission to tell us how to do this?
Putting forward quite heavy demands for complaint handling mechanisms, the Commission wishes to exempt the smallest companies from having to implement these new riles. Whilst I appreciate the underlying thoughts of wanting to reduce the burden on our smallest companies, I sincerely doubt whether exempting companies from putting in place effective internal complaint-handling mechanisms will have any meaningful effects. Any business will inherently need to deal with its customers’ complaints. Failing to apply the same standards as larger players will result in SMEs being put in at a disadvantage as customers will choose an offer with a more effective complaint-handling system. This means that SMEs will not be able to compete with large companies unless they offer the same level of protection. In the case of the former, it will inevitably lead to a loss of customers and can lead to a failed business. I would, therefore, suggest that the Commission sticks to its own principles and creates a light touch regime that works for companies of all sizes.
How can we support something that encourages keeping micro-companies artificially in their seed-phase? Excluding micro and small enterprises from parts of the proposal by applying thresholds arbitrarily defines how much they can grow without facing additional administrative burdens. What is needed instead is a set of rules unleashing their full potential on the Internet.
Several crucial parts of the draft need urgent reflection. The extension of the obligations of the initiative to all platforms ‘that have a very large number of business users’ needs to be refined. Not only do we need to clarify what constitutes a ‘very large’ number. We also need to consider that a large number of users does not always equal much higher revenue, as platform memberships are in many cases initially free of charge. ESBA, therefore, questions whether the number of users is an adequate measure of a platforms capacity to comply with certain aspects of the initiative.
Having said all this, my biggest concern is not the European Commission’s initial proposal but the potential politically motivated mess it might turn into once it hits the European Parliament, especially in the period after the summer. I would sincerely urge MEPs and the Member States to limit the scope of the legislation to an absolute minimum, otherwise, the P2B proposal might turn into a catch-all piece of legislation covering and curbing too many activities. Here, I would remind the Commission of its general principle to not curb enabling technologies by overregulation. Only a light-touch approach will ensure a healthy development of the European online ecosystem.Guest contributor