On 8 December, ACT | The App Association hosted the final edition of its App Makers Tour of Europe. The event brought together app developers, policymakers, and industry to discuss the Nordics’ app ecosystem. The panel considered the impact of future legislation such as the Digital Markets Act (DMA) on small app makers and how we can develop solutions as a community of innovators. Our panellists included:

  • Hannele Timonen, Chief Specialist, Ministry of Economic Affairs and Employment (Finland)
  • Kim Baden-Kristensen, Chief Executive Officer (CEO) and Founder, Brain+ (Denmark)
  • Peter Kofler, Chairman, Danish Entrepreneur Association (Denmark)

If you missed the event, you can read the recap, or watch the event recording below.

 

In his opening remarks, Mike Sax, founder and chairperson of the App Association, thanked European policymakers for including small and medium-sized enterprises (SMEs) throughout the legislative process of the DMA. Because the regulation focuses only on certain specific behaviours of large online platforms, Mr Sax worried it may not be flexible and future-proof. He expressed hope that during further negotiations, the European institutions will put forward solutions that prevent harming the smallest companies—the businesses with the most to gain from platforms. Lastly, Mr Sax stressed that economic objectives should never take precedence over the fundamental rights of users.

What is the impact of regulation on app developers in the Nordics, and how can we avoid unintended consequences of the DMA and other legislation?

To kick off the discussion, Hannele Timonen from the Finnish Ministry of Economic Affairs and Employment gave a status update on the DMA. She supported the general approach by the Council of the EU but emphasised that there is a lot of work left to do before the upcoming negotiations with the European Parliament. Ms Timonene noted, in particular, some concerning proposals from the European Parliament to expand or add obligations on online platforms acting as gatekeepers. Because the question of how the regulation will take shape remains, she emphasised the importance of including multiple stakeholders’ views. She also stressed that the ‘DMA obligations should be targeted, proportionate, justified, and clear’. Further, Ms Timonen highlighted that the original timeframes the Commission proposed are justified and that Finland does not support any shortening of timeframes because platforms must have enough time to apply the regulation correctly.

‘DMA obligations should be targeted, proportionate, justified, and clear’ – Hannele Timonen, chief specialist at the Finnish Ministry of Economic Affairs and Employment

The CEO and founder of Danish app company Brain+, Kim Baden-Kristensen, shared how his company achieved its initial growth. When Apple’s App Store recognised one of his apps—the work of a five-person team—as one of the best new apps, downloads surged to over a million. Mr Baden-Kristensen explained the value of accessing global markets through the App Store and that consumers are willing to trust unknown, up-and-coming apps on trustworthy platforms.

Mr Baden-Kristensen noted that the more bureaucracy and requirements regulations impose on businesses like his, the higher the risk of stifling innovation as it becomes increasingly difficult for small companies to meet those requirements. He believes that although safety and trust is important in the app economy, we also need to ensure that platforms remain accessible to SMEs.

‘Although we need to ensure consumer safety and continued trust in the app economy, we also need to ensure that three to five-person companies can still access the platforms without additional barriers’ – Kim Baden-Kristensen, CEO and founder of Brain+

Peter Kofler, chairman of the Danish Entrepreneur Association, reflected on the impact of regulation on SMEs in the Nordics. He noted that regulators overlook or don’t understand that multiple and overlapping compliance costs already exist and can create difficulties for businesses. ‘We need to talk about how to make legislation with startups, not just for startups’, he added. Further, Mr Kofler emphasised that instead of focusing on regulating non-EU companies, regulators should find better ways to support and build EU unicorns. Entrepreneurs build successful products by releasing them and incorporating real-world feedback in a continuous cycle. Policymakers would be wise to adopt the same approach and be more flexible in their policymaking, he said.

‘We need to talk about how to make legislation with startups, not just for startup’ – Peter Kofler, chairman of the Danish Entrepreneur Association

What impact could the DMA have on smaller app developers?
Hannele Timonen stressed the importance of including a provision to appeal or remove obligations in the DMA, if they are not working, or if they are causing harm. Developing regulations based on careful impact assessments that are flexible enough to avoid disincentivising innovation in the EU is crucial, she said. Therefore, gatekeepers, regulators, and third-party stakeholders will need to discuss the application of the many different obligations.

‘It will be very important that there is the ability to remove obligations in the DMA if they are not working or if they may cause harm to businesses or end-users. […] This is a red line in Council’ – Hannele Timonen, chief specialist at the Finnish Ministry of Economic Affairs and Employment

Mr Baden-Kristensen noted that achieving equal access or increasing the competitive behaviour of platforms is possible in many ways. However, whether effects on the competitive environment are positive or negative, of course, depends on the specific path regulators choose. He also stressed that when regulating the online ecosystem, the EU should not risk disincentivising behaviours that might be positive for the ecosystem (e.g., removing the ability for gatekeepers to collect fees in exchange for services).

Peter Kofler from the Danish Entrepreneur Association also emphasised that EU policymakers need to recognise the interdependencies of the app ecosystem. Its network effects benefit the entire ecosystem, not only gatekeepers, he said. Although fees represent a part of their business models for platforms, some lawmakers have proposed to make gatekeepers’ software and hardware services available for free. Mr Kofler responded that, usually, if something becomes free the cost simply moves somewhere else. He recommended that rather than having discussions about startups, policymakers should bring them into the conversation to understand what risk, uncertainty, and compliance mean for these companies. Mr Kofler also urged lawmakers to develop evidence-based policy that does not undermine the efficiency of network effects;

‘Policymakers need to recognise that the interdependencies of the app ecosystem–network effects benefit the entire ecosystem, not only gatekeepers. It’s not David v. Goliath, rather we stand on the shoulders of Goliath!’ – Peter Kofler, chairman of the Danish Entrepreneur Association

We thank our speakers for their participation and insightful interventions. With this stop in the Nordics, the App Makers Tour of Europe came to an end. However, the discussion on the DMA and other platform regulations continues, so stay tuned for more content.

App Makers Tour of Europe

Nordics: 8 December 2021 – Recap & highlights

Spain: 22 October 2021 – Recap & highlights

Italy: 22 September 2021 – Recap & highlights

France: 13 July 2021 – Recap & highlights

Germany: 17 June 2021 – Recap & highlights

Romania: 26 May 2021 – Recap & highlights