How to create Fairness for SMEs in Platform-to-Business Relations?

On September 12^th SME Europe and SME Connect hosted a Working Breakfast in Strasbourg on the topic: “How to create Fairness for SMEs in Platform-to-Business Relations?”

The importance of this event was increased by the participation of Christel Schaldemose MEP,  Member of the Committee on the Internal Market and Consumer Protection, Rapporteur on p2b Regulations, Herbert Dorfmann MEP, Member of the Committee on Agriculture and Rural Development, President of the European Parliamentary Association, Sebastiano Toffaletti, Secretary General of European Digital SME Alliance, Lenard Koschwitz, Director of Public Affairs at Allied for Startup and Michela Palladino, Director of European Policy and Government Relations at the Developers Alliance.

The Working Breakfast was moderated by Dr. Horst Heitz, Executive Director of SME Europe of the EPP and Secretary General of the European SME Business Club.

In a fast and more digitilized world we should expect more regulation

Christel Schaldemose opened the event and announced her clear position in favor of the Commission’s proposal. In a fast and more digitized world, it is obvious that more regulations will follow. Mrs. Schaldemose supports the demand for more transparency, however, the definition of fairness is different for every actor. Therefore, she suggested to the Commission to differentiate the application of the regulation by various situations and areas. Moreover, Schaldemose proposed to clarify the parameters and to make them more visible, so that business users and platforms know how to apply. Apart from that, in order to tackle the misuse of data collection from the dominant platforms, Mrs. Schaldemose was welcoming any suggestions from all stakeholders’ side. But one thing is certain: platforms must not forward data to third parties without the consent of the party concerned, however, since the content are mostly not personal data, it is not covered by the GDPR. Besides, there is a need for more transparency in the platform’s additional products they sell. For instance, the additional insurance offer next to the car renting must be clearly indicated if it is applicable in the real world. Regarding the parity clauses, Mrs. Schaldemose clearly stated that at the present she will not change anything unless the pressure from the stakeholder’s side (the business users and the platforms) is too high. For the time being, she suggested waiting for the first experiences/impacts of these clauses. In addition, observatories shall be created to detect and evaluate the incidents in the digital environment, which are not only established by the Commission but also by the Member States and the economy itself.  All in all, SMEs will take center stage in the decision making.

The values have moved from assets to software intermediation, which benefits from a huge network effect.

Sebastiano Toffalletti recalled in his keynote address the importance of the rapid growing IT industry and how much it is now and will be more integrated into our everyday lives. In the energy sector, 7 out of 10 companies are an IT company, which are also the most valuable ones in the world. Furthermore, the platform economy including Uber and Airbnb that do not possess any hotels and cars. The values have moved from assets to software intermediation, which benefits from a huge network effect. The question is not whether dominant companies, such as Google and Microsoft, will take over more sectors, but when. Europe must not oversleep the opportunities of digitization but should act immediately for the future of Europe. China, for example, understood this challenge and created own digital champions. A positive thing is that Europe has a strong independent digital industry in all sectors, however, it lacks a model to survive this revolution, in terms of bureaucracy, taxation and so on. Mr. Toffaletti believes that the Commission’s regulation causes a significant multisided asymmetry between the businesses and the platforms.

This current proposal lays basis for major legal proceedings, but which SME would dare and could afford to start the war against legally well-prepared large platforms, which are for some even the only distribution channel?

Sebastiano Toffaletti doubts that national judges have enough competence to understand the global scope and the digital dimension of the situation. In terms of delisting and ranking at their own convenience, large platforms will easily interpret the transparency clause in their favor since the law is only asking for an explanation. Thus, there is no enforcement to give chances to SMEs.

In his keynote speech, Lenard Koschwitz emphasized the need to increase the number of Start-ups and support them since statistics show that 9 out of 10 tend to fail. Apart from mainly addressing some big platforms, there are around 3600 Startups and SMEs which are considered as platforms too.  Lenard Koschwitz calls for a more specific explanation of the scope of application of this regulation and more exchange on the exact course of the P2B relations.

The predominated understanding of the relations stands for big platforms enabling the success of SMEs whereas in reality large help large ones and small cooperate more with small ones.

Despite the fact that SMEs have the potential for large companies to merge new markets and new user groups. The P2B relation is not a one-way, but it is based on mutual exchange. It is not a new phenomenon that this amount of data poses a risk of misuse. The data collection happens online as well as offline. Platform help the consumer to easily understand and compare complex information. Allied for Startups fully agree on the urge for transparency, however, in terms of fairness they believe the parameters cannot be applied to all business models and sectors. Furthermore, they apprehend the risk of companies being more attuned to parameters of the laws than to the needs of customers.

Michela Palladino based her speech on Developers Alliance’ very positive survey results on the customer satisfaction with platforms, which also shows that EU’s concerns about an abusive P2B relation are not truly reasonable. Businesses and Platforms work together as a synergy depending on each other’s support and success. Furthermore,

Appstores offer around five million apps which creates up to 1,6 million jobs alone in Europe.

Those who provide the belong to a relevant and innovative sector with an immense growth potential. For this reason, Mrs. Palladino emphasized that the opinion of a developer needs to be addressed and considered. Developers Alliance encourages the approach of transparency but sees difficulties to define fairness. In her closing remarks, she stated, that she believes that

Europe’s current focus on regulations of online platforms fuels fear amongst all parties involved.

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