Last year, the European Commission (EC) began enforcing the Digital Markets Act (DMA), the European Union’s (EU) new digital regime. In the United States, the DMA – which almost exclusively targets American companies – has been widely criticized by industry experts, who warn that the DMA’s requirements pose a serious threat to U.S. innovation and consumers. Despite these warnings, some American lawmakers have advocated for policies that mirror European regulations like the DMA, arguing that these restrictions would encourage innovation and benefit consumers. However, as we have already seen in Europe, the DMA has done little to achieve those goals.
For one, the DMA and other European policies have disincentivized innovation and slowed economic growth. The European Commission – the EU’s executive body – even published a report last year pointing out the reasons why Europe’s economy has fallen behind the United States. The report directly links Europe’s lack of growth to the EU’s burdensome regulatory system, which more often than not smothers innovation. Since the release of the EU’s competitiveness report, European startups have reported a lack of investment for fear of regulation. In comparison, leading tech companies in the United States have invested billions of dollars in American startups, and 75% of all U.S. research and development funding comes from the private sector.
Similarly, Europe’s regulatory environment has left consumers worse off. Already, DMA mandates have degraded some popular digital services and products. For example, forced changes to Google’s advertising business have benefitted dominant players in the European airline industry, hurting small- and medium-sized carriers and lessened competition that benefits consumers. Other interoperability mandates that require app stores to hand over data to third parties have raised serious concerns among privacy experts and consumer watchdogs. These changes, they warn, could force companies to hand over sensitive information like banking details or personal information to malicious actors, presenting cybersecurity and privacy risks.
Officials in the Trump administration have identified these issues and have pushed back against the DMA and similar policies. Recently, Federal Trade Commission (FTC) Chairman Andrew Ferguson pointed out that “the goal of the DMA is to unlock innovation in Europe. We don’t have a DMA equivalent here, and we’re innovating.” Ferguson added that – while European officials claim their regulatory environment is meant to protect consumers and encourage competition – he has his “doubts about whether the DMA is…really about that.” Additionally, White House officials released a memo in February outlining the harms digital regulations like the DMA pose to U.S. economic interests.
These actions send a strong signal pushing back against regulations targeting U.S. companies that pose a significant threat to consumers and American innovators. Hopefully, leaders in the White House will continue to advocate for a pro-growth agenda.
