As elections shape new governments around the globe, small businesses are closely watching how the results will impact their ability to innovate and grow. In Europe, the re-election of Ursula von der Leyen as President of the European Commission kicks off an era of regulatory priorities that could significantly affect small and medium-sized enterprises (SMEs). On 17 September, von der Leyen unveiled her list of Commissioners-designate and their respective portfolios, setting the stage for the priorities of the new Commission. While this list is not definitive, as the European Parliament still needs to give their approval, we’ve identified some of the policy priorities we can expect from the new Commission mandate, including three potential challenges and three potential opportunities.
Challenges for SMEs under the new commission
1. Increased Regulatory Pressure through the Digital Fairness Act
The mission letters suggest that proposals such as the Digital Fairness Act will be moving forward. The Act aims to ensure consistent fairness in both online and offline environments, seeks to address issues like dark patterns, addictive design, automated contracting, and personalisation—concerns highlighted in the Commission’s evaluation. However, with regulations like the Digital Services Act(DSA) already covering many of these areas, this new legislation seems like another instance of over-regulation from the EU. Rather than fostering innovation, it risks imposing additional compliance burdens, particularly on SMEs.
2. AI Liability Directive and Complex AI Regulations
The AI Liability Directive has resurfaced after seeming to lose momentum following the European Commission’s 2020 report. Initially, it appeared that policymakers did not prioritise it, but now it’s back in focus. The Directive is not only referenced in the mission letter of Vice-President-designate for Tech Sovereignty, Security, and Democracy, Henna Virkkunen, but the European Parliament has also already conducted a study on it, with the JURI Committee set to confirm rapporteurs soon. With the ongoing uncertainties surrounding the AI Act, the still-developing Code of Practice, and the early stages of implementation, introducing yet another layer of AI regulation creates growing concerns for SMEs. This additional complexity could create more challenges, increasing the regulatory burden at a time when businesses are already navigating a rapidly evolving landscape.
3. Uncertain Direction of the Digital Networks Act
Additionally, we’ll be keeping a close eye on the forthcoming Digital Networks Act, also stated in the mission letters. Although the Commission’s White Paper makes no mention of the controversial ‘fair share’ initiative, the proposal is still in its early stages and we remain cautious about how it will develop.
Opportunities for innovation and growth
1. SME and Competitiveness Check in New Legislation
On a brighter note, we have identified some good news for SMEs. According to the mission letters, the European Commission will now be required to include an SME and competitiveness check when drafting proposals and conducting impact assessments. We’ll have to wait and see how this initiative unfolds, but it could signal a more SME-friendly approach to regulation, with the hope that future EU regulations will pay close attention to inadvertent negative effects on SMEs and incorporate more SME voices in the legislative process.
2. Dedicated SME Passport for Simplified Access to Resources
Another positive key task is the creation of a Dedicated SME Passport, aimed at improving access to finance, simplifying the regulatory environment, and promoting innovation for SMEs, while reducing administrative burdens and costs.
3. European Innovation Act and Expanded Support for Startups
Additionally, the European Innovation Act is set to streamline regulatory frameworks, facilitate access to venture capital for European startups and scale-ups, and support them in testing new solutions through regulatory ‘sandboxes’. It will also contribute to the development of a comprehensive EU startup and scale-up strategy, improving conditions for these businesses to thrive. Only time will tell how these ambitious plans will take shape.
Call to ACTion
As the new European Commission takes shape, it’s clear that technology and innovation will continue to be at the heart of EU policymaking. While proposals like the Digital Fairness Act and AI Liability Directive raise concerns about regulatory overreach and additional burdens on SMEs, there is also room for optimism with initiatives aimed at supporting startups, scale-ups, and SMEs.
Stay tuned for updates from the App Association as we advocate for a balanced regulatory approach and ensure that SME voices are represented in the EU’s evolving tech landscape. To get involved in our EU policy activations, reach out to our global membership & programming manager, Brad Simonich here.