June 25, 2020

This new European law could make-or-break startups

Startups will be directly affected by the Digital Services Act. They need to start talking to the Commission to help shape the policy.

Later this year, the laws that govern Europe’s digital economy will get shaken up. The EU will introduce the Digital Services Act (DSA), designed to address safety, regulation and liability challenges that have come with the rise of online platforms in the last two decades. 

While it’s mainly aimed at the likes of Google, Facebook and Twitter, experts say that it could also have a large and potentially negative impact on startups and their ability to operate and scale freely across Europe if not designed in the right way.

Startups are therefore being urged to join the conversation and help shape the policy. “In Brussels, policy decisions are being made for startups. As a startup, you’re either at the table or on the menu,” says Benedikt Blomeyer, director of EU policy at Allied For Startups, a worldwide network of startup advocacy organisations.


Travis Todd, founder of Berlin-based international startup community Silicon Allee, says: “A lot of times policymakers’ lenses narrow to only focus on regulating the big guys — Facebook, Google, Amazon, Apple. This often leads to somewhat broken systems that can hinder small and innovative businesses.”

So what can startups do?

Allied For Startups is one of those working to make sure the exchange of information continues to flow throughout the drafting of the DSA, and that all startups can get involved.

“We’re ensuring that every MEP knows at least three startups in his or her constituency. We’re also building what we call the Rocket Club, which is an informal group that will allow MEPs to have more conversations with founders,” says Blomeyer.

Speaking on a panel earlier in the month discussing the issue, Alexandra Geese, a Member of the European Parliament (MEP), said that startups must help legislators understand the perspectives of companies that aren’t necessarily dominating the market. 

It’s these voices that often don’t get a seat at the table, and this needs to change.

“Our colleagues who may be sceptical about liability exemption need to hear your stories — that your companies need liability exemption to thrive, because this is what they might not be hearing,” she says. 

What are the issues?

The Digital Services Act is going to be a big deal particularly for startups that host any user-generated content (i.e. social media platforms, online marketplaces, media sharing apps, collaboration platforms, search tools, etc.).

The risk is that small companies are going to have to take on so much responsibility for what is put on the platforms that they will no longer be able to operate as intended.

Blomeyer said that European policymakers can succeed in drafting startup-supportive legislation if they stick to improving on the existing frameworks laid out in 2000 by the E-Commerce Directive.

Essentially, this would mean giving startups straightforward and realistic liability rules for hosting third-party content in Europe. The legislation should also ensure that startups only need to worry about compliance in the country where they are founded, while also being able to operate and grow across borders.

To really benefit startups, the laws shouldn’t force them to monitor or blanket-filter all the content that users upload. This is how things are now under the E-Commerce Directive.


Noam Gerstein, founder and chief executive of adaptive international primary school bina, mentioned an example of how strict liability could easily get messy: “Let’s say I have a child that says something offensive to another child. As an educator, I can address it, work around it and understand why that happened. But am I liable for what that child said?”

The idea that startups might be liable upfront for users’ content through broad filtering, known as “general monitoring”, is something that should be avoided, says another Member of the European Parliament Svenja Hahn.

“When we think about monitoring digital content, this should not be done by any companies or third parties, but solely by democratically accountable, competent, public authorities,” says Hahn. “Companies should be liable for the content on their website, but only after they’ve been made aware of it and can take down what is illegal.”

Proportional laws

Some also argue that to help startups, new laws should also take into account the size of the platforms they’re regulating. Svenja Freisfeld, Soundcloud’s director of product counsel for business and legal affairs, stressed the importance of proportionality in regulation. 

“We see that legislative efforts would impose even shorter response times on our Trust and Safety team to tackle illegal content,” says Freisfeld. “We would need to employ more monitoring headcount in order to have 24/7 coverage for content moderation.”

This need for proportionality also applies to enforcement: smaller startups shouldn’t be penalised just because they don’t have the content monitoring resources of companies like Google or Facebook. 

Small companies that take the right steps and act with good intent need to be incentivised by the laws, not be made more liable by them. 

This very issue reared its head in the wake of GDPR, Todd said, when small startups who tried to be proactive in asking legislators for help with compliance ended up being fined for non-compliance. Better systems must be put in place with the DSA.

“As startups, we implement built-in mechanisms to measure how well a new feature is working. I’d like to see more of these ‘KPIs’ in policymaking and with the DSA. We can’t penalise the companies acting with good intent who may not have the resources to comply.”