This article is part of our special report Thinking of the whole ecosystem: EU’s plans to regulate the platform economy.
As app makers, we may not immediately come to mind when discussing the perils of platform regulation. After all, the new competition rules will only directly apply to large companies acting as ‘gatekeepers’.
This opinion is the result of a collaboration between the following members of the ACT: Francesco Ronchi, Synesthesia (IT), Vincent Keunen, Andaman7 (BE), Peter Deckers, SyndoHealth (BE), Sveatoslav Vizitiu, Wello (RO), Kim Baden-Kristensen, Brain+ (DK), László Grad-Gyenge, Creo (HU), Fernando Guerrero, Lucient & Nouss (ES), James Hanson, Layers Studio (UK), Philip Tudor, Multispectral Limited (UK).
Speaking about the upcoming Digital Markets Act (DMA), European Commission Executive Vice President Margrethe Vestager recently said that “very few small businesses will be touched by the new digital rules”. However well-intentioned these rules are, they will ultimately impact every part of the app economy. Gatekeepers are part of a broader ecosystem where everything is connected. Larger app makers with access to more financial and human capital can, and often do, fare better than the small businesses these regulations intend to help.
Smaller app companies like ours benefit from built-in services such as developer toolkits, intellectual property protection, and consumer trust. Those benefits let us focus on what we do best — creating products and services that turn your phone into a hub for education, commerce, and more. Simply by being present on the app stores, we can reach a huge global customer base, regardless of our budget or where we’re located. Gatekeepers use a rigorous review process to keep bad actors out of their app store, giving users the confidence to install apps even from unknown companies. This quality check fosters an environment where new and unknown companies can compete with global brands on a level playing field.
As we consider the possible text of the DMA, we are concerned that some policies may alter this level playing field. For example, currently, all developers on the app stores operate under the same terms and conditions. A mandate to allow negotiation of more favourable terms and conditions would only benefit larger app companies with leverage and legal resources. This would put the smaller players at a significant disadvantage.
Some have called for the abolition of the 30 per cent fee on app store purchases. We are very concerned that forcing app stores to change their business models may raise costs for smaller developers. The current system works quite well for us. Other than a low annual participation fee, we only pay the platforms when we make money from the customers they bring to us. Eliminating this option for platforms to recover their investments may cause them to simply pass down these costs to developers in a different way, as happened with the digital tax in France. In the long term, regulating gatekeepers may make the business climate in Europe less attractive for ambitious start-ups and for the investors hoping to finance them.
While a ‘blacklist’ of prohibited practices would be highly problematic, we also see the possibility of a ‘grey list’ of unfair practices as an area of concern. For example, a smartphone’s default camera app is helpful for developers because they don’t have to integrate another service or design a camera app to use it in their app. Such a default app may be categorized as an ‘unfair’ act of self-preferencing on a grey list. Of course, anti-competitive behaviour should be prohibited – but the European Commission already has a range of tools to effectively address antitrust issues. The list of practices must consider and separate by the unique differences between platforms in their respective sectors. Not all platforms behave in the same way, and app stores cannot be put in the same basket as social media or search sectors. Any regulation that doesn’t take these market differences into account risks not being future-proof and creating an additional layer of complexity.
The DMA may not include any rules with which SMEs must directly comply. Nonetheless, it is important to us that any rules targeting gatekeepers preserve the successful app ecosystem on which our businesses rely. As well-intentioned as these new laws maybe, if not thoughtfully drafted and carefully applied they may cause more harm than good. Looking at how much the platforms evolved over the last decade, codifying today’s practices into law may slow the growth of Europe’s app economy, creating a bigger gulf between large and small companies.