The European Commission is to make a fresh assault on the longstanding goal of lowering competitive barriers in the EU’s single market, introducing 22 broad measures to tackle obstacles including onerous bankruptcy laws, the high cost of registering start-ups, ambiguity over the legality of companies operating in the so-called sharing economy, and uncertainty over how the extended patent protection offered to pharmaceutical companies will operate under the new unitary patent scheme.
Removing unjustified barriers would create huge opportunities for new companies to enter the market, improve competitiveness and lower prices for consumers, the Commission says in its plan, published yesterday.
The drive comes as the single market, which in the past has been praised for greatly facilitating cross-border trade, is beginning to look a little frayed around the edges, with countries inclined to protect national industries in a sluggish economy.
The Commission wants to deal with several problems:
Clarity on rules for sharing economy
Flag-bearers of the sharing economy, where non-professionals provide cheap and easy access to products and services, have caused significant friction in European countries, and faced resistance from established professions and companies.
There is no consensus on whether companies like the US-based accommodation service Airbnb or France’s journey-sharing service BlaBlaCar are innovators or outlaws. The taxi service Uber has been banned in France, Italy, Spain, Belgium and Germany and embraced in Lithuania and Estonia, for example.“It’s a new business model that will exist whether we want it or not,” said Industry Commissioner Elżbieta Bieńkowska at the launch of the plan. In some members states such services are welcome, in others they are banned.
“The basic instinct in some European countries is to kill new business models and favour the traditional ways to do things,” said the Commission's Vice-President for growth and jobs Jyrki Katainen. “It would be very sad if Europe was the only continent which denied new business models, and this would lead to bad situations in terms of jobs and economic growth.”
However, Brussels is not preparing any legislation and will instead provide guidance on how to apply current rules to the sharing economy.
"These companies have to pay taxes, and consumer and health protection [requirements] must be fulfilled," Bieńkowska said.
Cutting the cost of starting a company
The EU says an entrepreneur should be able to start a business inside three days for less than €100, completing all procedures through a single online portal.
But things are far from working that smoothly in reality. While in Ireland, the UK, France and Bulgaria registering a business costs less than €100, in Italy and Luxembourg the cost runs into the thousands. Registering a business can be done in less than one week in Estonia, but takes about three months or more in Austria, Lithuania, Poland or Spain.
So, the EU has decided to try again, with a fresh commitment to slash the time and effort needed to start a company.
Clarify IP rules for big pharma
The Commission also said it will provide clarity on how to interpret rules on supplementary protection certificates (SPCs), which provide extended patent protection for drugs, under the EU’s new intellectual property rights regime.
The certificates are given to pharmaceutical companies in recognition of the extended timelines involved in developing, registering and launching new drugs.
As yet there is no clarity on how SPCs will fit into the unitary patent scheme, which may come into force next year.
“There’s some concern an absence of SPCs would have a chilling effect on the participation of pharma companies in the unitary patent,” said one Commission official.
Currently, pharma companies have to apply for a SPC from Europe’s 28 national authorities and the Commission would like to introduce one certificate that covers the whole continent.
Improved access to finance
The new strategy also comes with a promise to create a European venture capital (VC) fund-of-funds.
Investors have poured €9.5 billion into European companies so far in 2015, according to new data this week from US investment data firm PitchBook.
It sounds pretty healthy, but several giant valuations disguise a fall in the number of VC deals being done. For instance, a flood of money to Swedish music streamer Spotify and Berlin-based online food and drink service Delivery Hero, skews the numbers. Both companies account for close to 11 per cent of total VC spend in Europe on their own.
From the early days of 2014 to date, the number of VC deals in Europe has plummeted by half.Passport scheme, bankruptcy laws
A "services passport" is to be introduced, allowing service providers to file papers only in the first EU country where they want to work. A German engineering company pitching for business in Belgium can show its passport to demonstrate it complies with the laws and standards that apply in its domestic market.
There will also be a push to simplify the EU's welter of different national insolvency laws, which the Commission says deters Europe’s entrepreneurs.
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