Public Policy and Regulatory Issues

As small businesses increasingly benefit from partnerships with digital platforms and the use of data-driven digital tools, government regulation of technology is often regulation of small business. 3C ensures that policymakers understand the essential intersection of technology and small business, and supports policies that respect the interests of digitally-empowered small businesses.

Digital business transformation has been underway for more than a decade. However, it became an urgent matter during the COVID-19 pandemic when many restaurants, retail stores, and offices were forced to shut down or severely reduce operations. Research conducted during the crisis has documented digital tools’ positive impact on European small businesses ability to survive COVID-19, as aggressive digital adoption led to 60% more revenue, 40% improved customer retention and 300% more hiring by small businesses.

Against this backdrop, as small businesses adopt and benefit from digital technologies (platforms, services, and tools), the European Commission is considering the Digital Markets Act (DMA). The DMA is a legislative proposal intended to promote opportunities for new digital companies and services that presumably would benefit SMEs by delivering creative innovation and price competition. But there is an undercurrent of unacknowledged risk and concern that as the DMA inhibits the growth or reduces the size and scale of digital incumbents that are so valuable to SMEs, there won’t be any substitute companies or services that serve SMEs as well.

To consider the DMA’s impact on small businesses, Catalyst Research convened a panel of experts with deep understandings of the European economy, small businesses, technology and innovation, and public policy. We asked a series of critical questions about the DMA’s goals, its intended and potentially unintended consequences, and how these could affect small businesses – in particular, digitally-empowered small businesses that survived the pandemic and are looking optimistically (but warily) toward a stronger future.

Read the full DMA working group report here.

Privacy

Privacy is a fundamental right and a practical concern for consumers, including small business owners and their families. But burdensome privacy laws and different rules in each market severely limit small business growth opportunities. The DSA package and other privacy laws should place strict information management obligations on society’s biggest privacy risks – the companies that manage vast quantities of personal financial and health data. Small businesses that handle modest amounts of data should not be overwhelmed by information liability and data security regulations that create more cost than benefit.

Trade

In today’s global digital economy, international data flows should be seamless while data should be secure and protected. This combination allows European companies – including the smallest and newest companies – to innovate responsibly, inexpensively and efficiently reach new customers, promote new and exciting products, and quickly share useful information across the globe.

Data Collection, Security, and Use

Data is the fuel that powers Europe’s fast-growing digital economy. Data helps companies understand how to identify and reach potential customers and potential employees, and also improves business efficiency and profitability.

Companies that collect your data must treat it responsibly, but proposals to restrict data collection must appreciate that anonymous data and large data sets are essential inputs for digital tools that power small business. Data-driven marketing, advertising and business services can be the difference between a small business that thrives and one that falters – and Government restrictions on data usage could make all of these services less effective and more expensive.

Competition

Particularly during the COVID-19 pandemic, small businesses increasingly rely on large technology platforms’ free and low-cost tools and services to support basic operations, including advertising and marketing at home and accessing new markets. If Europe’s “modern” digital framework restricts platforms’ scale, or ability to offer new and innovative services, small businesses will inevitably pay more for digital services or perhaps lose some services altogether. Competition oversight is important, but government must take a broad view of the entire economy in order to avoid unintended consequences that could devastate small businesses.