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IT startups suffer from strict, out-of-date Dutch laws

The Netherlands government needs to ensure that legislation enables disruptive technology to flourish

To make sure the Netherlands keeps ahead in IT, the Dutch government must help technology companies and disruptive digital services to develop and grow – but many of them have to wrestle with outdated regulations.

In 2014, Uberpop was banned in the Netherlands because it was deemed to be competing unlawfully with regular taxis. The Dutch Taxi Act, introduced in 2000, stipulated that taxis had to have a taxi meter.

Uber says the law is out of date. “Back then there were no smartphones or other innovative ways to guarantee quality of service,” said Neelie Kroes, former EU commissioner and now adviser at Uber. “The legislature is falling behind technological developments.”

The Netherlands Bureau for Economic Policy Analysis (CPB) recently published a policy brief that said the Dutch government should respond more quickly to IT developments such as the internet of things, digital platforms, robots and block chain technology. It said the government often waited too long until the new technology developed further in the market.

Companies such as Uber and Airbnb are appealing for more flexible regulation and the European Commission (EC) thinks that banning such high-tech companies is dangerous for the European economy. “We want to keep up, and keep Europe as open as the US for new, innovative business models, at the same time as addressing the negative effects,” said Jyrki Katainen, the senior European official for jobs and growth, when the EC published new guidelines for the sharing economy.

Bastiaan Overvest, economic researcher at the CPB , said out-of-date legislation posed a big challenge . “If a company can’t handle a new development, there will be a new competitor that can,” he said. “But in the case of a ‘legacy’ of outdated government regulations, it is difficult to change them.”

In the case of Uberpop, for example, the Netherlands’ Taxi Act is too strict about the technical requirements of the technology, said Overvest. “There is good reason to use a taxi meter,” he said. “The government wants to make sure customers don’t get ripped off. A taxi meter shows what customers have to pay and why.

“Uberpop doesn’t use a taxi meter; it uses an app to register kilometres. This is not in compliance with the law.”

Read more about disruptive technology

The answer is to adopt regulation that is more future-proof. Overvest said the Dutch government should make sure that legislation concentrates on its objective, not the method of achieving it. “For example, if the Taxi Act stated only that customers have to be given accurate information about the cost of a journey, that is enough – it doesn’t need to state that a taxi meter must be used.”

This would future-proof laws, and regulation would be independent from technological developments, he added.

“The Dutch government is working hard to make laws future-proof,” said Overvest. Last July, economic affairs minister Henk Kamp and security and justice minister Ard van der Steur explained in a letter to the House of Representatives that the government wanted to work on future-proofing laws at the earliest possible stage in the legislative process.

Legislating for experiment

When the Dutch government allows room for experimentation with technological developments, such as self-driving cars or drones, it helps to attracts new businesses. Currently, the “experiment law” for self-driving cars is under consultation. If it is made easier for organisations to practise with these technologies, it will help new technologies mature, so they can be put into practical use, said Overvest.

Experimental laws for drones and self-driving cars are a good start, he said, but added: “There is no fixed structure to start an experiment.”

An ethical commission, as there is in the scientific world, could help, said Overvest. “An ethical commission for technology could – if current legislation does not allow the use of certain technology – make an exception, so the technology can be tested under certain conditions, such as using the technology only locally, temporarily or with good monitoring. This could help to get these experiments started sooner.”

An example of where the Dutch government acted in good time to legislate is the law on internet neutrality, according to the CPB. In 2012, the Netherlands became the first country in Europe to enact a network neutrality law, which requires that internet service providers (ISPs) do not hinder or slow down services or applications on the internet.

“At first, a lot of companies didn’t agree with this, but the government still went through with the law,” said Overvest. “A lot of ISPs had to change their business model. Consumers and businesses have made an enormous shift to smartphones and using apps. That would not have happened if services were expensive and there was uncertainty over whether the use of a smartphone would still is free tomorrow.”

Better cooperation

Overvest wants better cooperation between startups and government. “A new technology can cause problems if a startup ignores the issues it can lead to,” he said. “Airbnb, for example, ignored the problems caused by tourists in Amsterdam.”

These problems included tourists causing disturbances when the accommodation they had booked was in a heavily populated area. And as the popularity of tourists renting houses grew, prices rose for residents.

Governments and startups should discuss these problems and find solutions, said Overvest. “And governments must enforce new regulations. For example, Amsterdam stated that an Airbnb location could only be rented for 60 days a year.”

Disruptive technology is not new, said Overvest – history is just repeating itself. “The car, or rather the petrol engine, ensured that old traffic laws were no longer efficient,” he said. “When the first cars arrived, it was mandatory that someone had to walk in front of the car with a red flag.

“That was not very efficient because you could not take full advantage of the technology. Now the same is happening with IT.”

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