Regulation vs Innovation in the EU
Blunt, compulsive regulation of the tech industry in Europe is a threat to our fledgling economies in a sector that demands growth, not obstacles. The solution, as all of us doing business in this sector know, is to streamline the laws and policies that put tech companies in Europe through bureaucratic contortions.
If existing policies are already stifling innovation, as relatively stunted growth in tech indicates, new laws and proposals threaten to undercut us further. The new General Data Protection Regulation (GDPR), which will take effect in 2018, is a great example of good intentions getting in the way of growth. The requirement for companies to report data breaches within 72 hours is welcome, but the GDPR also creates a confusing regulatory environment. For example, companies doing business in Europe are required to keep data within Europe’s national borders, but if that data is accessed from the U.S., it could be treated as though it were housed in the U.S. If that’s confusing to massive corporations with teams of lawyers — and it is — then how is a bedroom developer supposed to make sense of it?
To be fair to the European Commission, they seem to genuinely want to help developers. The Commission’s proposal for a Digital Single Market (DSM) presents us with tremendous opportunity. The idea is to spare tech companies and their customers from 28 sets of fragmented regulations imposed by EU member countries. “It’s time to make the EU’s single market fit for the digital age,” proclaims the Commission’s DSM homepage. As it is now, an Android developer can instantly publish her app to every EU state, but by doing so she exposes herself to 28 legal contexts.
The DSM is exactly the kind of policy those startup leaders are hoping for. And yet the devil is in the details. As my friend and fellow developer Ian Rumac has written, the proposal, “has multiple problem points and proposed practices that may hinder development, stunt business growth and hurt consumers.” It is wholly unreasonable, to cite just one example, to hold small developers responsible for users’ copyright violations.
In addition to regulation in the form of new laws, we must also contend with regulation in the form of investigations, and Europe has an investigation addiction. The European Commission is currently investigating crowdfunding to explore “the risks of this relatively new and growing form of finance, as well as the national legal frameworks applicable to it, in order to identify whether there is value added in European level policy action in this field.” That’s a mouthful. Crowdfunding is a new and exciting fundraising model that has launched countless startups, and the EC’s first instinct is to investigate and regulate. That would be fine, except that the Commission doesn’t have the warmest relationship with tech.
Apple recently suffered a €13 billion tax penalty for not paying enough tax in Ireland, which says it doesn’t want the money. And there are those three separate but simultaneous investigations of Google. As an Android developer, I’m especially concerned with the potential for the Commission to interfere with the world’s most popular mobile OS, making decisions that will surely resonate beyond the Eurozone.
At issue are Google’s agreements with phone makers about what apps come preinstalled on their devices. In exchange for Google’s free apps, hardware partners agree to put the entire bundle on the home screen, usually in a folder. The Commission has said this is anticompetitive, but in practice the lure of Gmail, Chrome and the Play Store has incentivised partners to provide a quality experience for consumers. In addition, partners have been more restrained in their redundant and pointless customizations of Android, costing devs less time and money.
I’m sure the Commission has the best intentions, but I’m not as sure it has the best information. They have announced, for example, that Google doesn’t compete with Apple in the smartphone market. This comes as a surprise to Google, Apple, and anyone who has gone shopping for a phone in the last nine years.
Writing in their Startup Manifesto, the leaders of Spotify, Rovio and other successful European companies warn that “Entrepreneurship, which has been the engine for growth in the United States, has not been cultivated in an effective or systematic way in Europe.” They offer 22 actions that might correct the problem, none of which is to impose even more regulation on tech companies.
There is a powerful role for the Commission to play in enabling European businesses, especially the smaller ones, to thrive in a globally connected, tech-driven economy. We have the means to compete at the highest level. But we need our political leaders to hear us, and respect our expertise.