Why EU Competition Policy is a Bad Fit for the U.S.

A bipartisan group of U.S. lawmakers are engaged in a frantic race against the Congressional calendar to fundamentally change antitrust law. Their goal is to rein in the alleged excesses of large American tech companies, which, so the argument goes, have been allowed to go unchecked due to the inadequacy of existing antitrust rules and enforcement when dealing with the challenges posed by the digital economy.

As is often the case, this conversation does not happen in a vacuum. Many other countries are already in the process of clarifying and updating their competition rules. None more so than the European Union and some of its member states. Proponents of U.S. antitrust reform have long admired the vigorous, some might say heavy-handed, enforcement of existing rules that the EU has become famous for. The two main U.S. antitrust bills, the American Innovation and Choice Online Act (AICOA) in the Senate, and its companion bill, the American Choice Online and Innovation Act (ACOIA) in the House, also borrow heavily from the EU’s just-agreed Digital Markets Act (DMA). While the U.S. and the EU share many things in common, there are several reasons why attempts to duplicate EU competition policy in the U.S. is both ill-advised and doomed to fail.

Reform proponents adopt EU focus on “fairness” and a “level playing field”…

When introducing the DMA in 2020, the European Commission stressed that “European values” were at the heart of the proposal, which aimed to “prohibit unfair conditions imposed by online platforms that have become or are expected to become gatekeepers….” While the implied contention that existing EU competition law has fallen short in policing the digital economy is debatable, the DMA’s focus on risk mitigation and adherence to a code of “fair” competition undeniably represent a core European ethos.

What is more surprising is that those exact same arguments have been adopted, almost word for word, by proponents of antitrust reform in the U.S. When the AICOA was introduced, the bill’s authors released a statement lamenting that “our laws have not changed to keep up and ensure [that large tech] companies are competing fairly.” In a later statement, they argued that “[e]veryone acknowledges the problems posed by dominant online platforms. Our legislation sets out to level the playing field….”  

But those concepts have produced questionable results in Europe and are foreign to U.S. antitrust

There are several problems with these arguments in favor of antitrust reform that reform advocates elide or happily ignore.

First, it is not at all clear there are any antitrust “problems posed by dominant online platforms” that can’t be comfortably handled within the framework of current law. In fact, a recent economic study found “that trends in industrial concentration should not be [used] as a basis for changing U.S. antitrust policy.” To the contrary, “pursuing decentration as an economic policy objective is unwarranted and risks causing significant economic harm.” 

Second, one of the terms that figure prominently in both the DMA and the U.S. antitrust bills is the concept of “fairness.” The problem with using that term in a legal context is that no one knows for sure what it really means. Often it is “a vagrant claim applied to any value that one happens to favor.” In the EU, at least, it has been part of the legal lexicon for a long time, which presumably gives practitioners and judges a way to intuit what it most likely means in specific situations. The EU’s highest court, for example, has found that “[a dominant company] … has a special responsibility not to allow its conduct to impair genuine undistorted competition….” But there is no equivalent obligation under U.S. antitrust law and would therefore cause substantial uncertainty for companies, lawyers, and the courts.

Third, talk of “leveling the playing field” might, like the concept of fairness, sound good in theory, but it is important to be honest about what it means in practice. Singling out a small group of companies and imposing a set of obligations that apply only to them, is not leveling the playing field in any meaningful sense of how that expression is usually understood. Rather, it is tilting the field heavily in favor of some firms at the expense of others. To put an even finer point on it, it is the government intervening in the market to pick winners and losers – not to improve welfare for consumers.

The EU has an interest in fostering European entrepreneurship and subsidizing local champions in the tech space. There are no EU-based companies that compete at scale with cloud companies, social media platforms, and other essential consumer and business technologies developed by U.S. and Chinese firms. The DMA and other digital initiatives of the EU are intended to give domestic European tech companies a leg up to develop products and services to compete globally. While that may be sensible from the perspective of European lawmakers, it is a dangerous model for U.S. regulation. Picking winners and losers has never been seen as the role of government, or the antitrust laws, in the U.S. For over a century, since the Sherman Act was passed, the purpose of U.S. antitrust has been to protect competition, not competitors. And for good reason. Deciding which companies to advantage over others is not a role the government is equipped to fulfill.

Finally, there is a risk of serious collateral consequences. As the Antitrust Law Section of the American Bar Association recently pointed out, the main Senate antitrust bill, “as written, departs in some respects from accepted principles of competition law and in so doing risks causing unpredicted and unintended consequences.” And contrary to what the bill’s sponsors claim, those concerns have not been thoroughly examined. There is a significant difference between conducting hearings on problems, real or imagined, and holding hearings aimed at vetting the potential consequences of specific legislative text.

A way forward

The digital economy has opened the door to exciting opportunities. At the same time, it has created a new set of challenges. The question of whether antitrust law is flexible enough to adapt or needs to undergo substantial change is an important and worthy conversation. Some of the loudest American voices in favor of fundamental change are inspired by many of the same arguments that underlie EU competition law. What they miss is that these are two very different systems, and that attempts to transplant EU law principles in the U.S. would make for a very uncomfortable fit.

The U.S. and the EU share many interests in common. As the recently established U.S.-EU Trade and Technology Council shows, there are many ways for the two sides to work together to define the rules of the road for the future of the digital economy. The focus should be on promoting innovation and transatlantic democratic values, not a misguided attempt to import European legal principles that will not work in our U.S. system.

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