Striking Similarities: Comparing Europe’s Digital Markets Act to the American Innovation and Choice Online Act

Shortgo Posted On June 17, 2022

The White House rightly pushed back against Europe’s Digital Markets Act (DMA), which casts expansive plans to target leading American technology companies. Its message was backed by a bipartisan group of important voices in Congress —Senate Finance committee leaders Wyden and Crapo weighed in with their concerns as did some 30 members in the House.

However, there are proposed changes to U.S. antitrust law currently under consideration in Congress that mirror Europe’s flawed legislation – chiefly the American Innovation and Choice Online Act. In recent weeks, the administration has signaled general, albeit tepid, support for the legislation.

Similar to the DMA, the pending legislation would limit the ability of certain U.S. tech companies to compete. These bills would force captured companies to share sensitive data with rivals (including foreign rivals), constrain their ability to develop new products, and impose crippling damages for conduct that most people regard as healthy competition.

As former Treasury Secretary Larry Summers explained, the bills likely would force consumers to pay even higher prices for goods and services.

Across the Atlantic, however, the White House has vigorously fought similar proposals. In two démarches, or political steps, the Biden Administration highlighted specific concerns:

Discriminatory coverage thresholds that target U.S. companies. “[W]e oppose efforts specifically designed to target only U.S. companies where similarly situated non-U.S. companies would not be covered.”
Endangering cybersecurity. “[A]s drafted, the DMA could inadvertently create security vulnerabilities and harm the integrity and operations of platforms . . . the DMA will require gatekeepers to change their business practices, and even the design of their software, some of which may implicate security and consumer protection issues.”
Overregulating dynamic markets. “[A]s markets and technology evolve, certain [core platform services] and gatekeeper obligations may no longer be relevant to the purposes of the DMA or may no longer advance fairness and contestability.”
Unfocused regulations. “It is not clear that imposing all of the proposed DMA’s obligations on all Gatekeepers, regardless of business model, is necessary to advance fairness and contestability in digital markets.”
Damage to small business. “There could be implications for [small and medium businesses], such as small application developers that predominantly rely on larger platforms.”
Excessive fines untethered to actual damages. “The Commission proposal would empower EU regulators to levy fines of up to 10 percent of global annual turnover . . . based on the company’s worldwide revenues, as opposed to revenues within the relevant country or region.”

The administration is right to push back on Europe’s protectionist regulatory impulses. Unfortunately, every single critique applies with equal force to the domestic antitrust bills.

The bills endanger cybersecurity and user privacy by requiring U.S. companies to share sensitive data with foreign rivals. They heavily regulate markets that are already evolving naturally (see the beating tech stocks have taken this year as rivals cut into their market shares), apply a one-bill-fits-all approach to companies that have very different business models, and could harm many smaller companies in the ecosystem. Finally, like the DMA, the domestic antitrust bills impose exorbitant penalties, untethered from any actual harm to consumers, that could deter legitimate pro-competitive conduct.

The White House needs to read its own talking points, before it takes a final position on the legislation. Providing support for similarly misguided domestic bills, the administration could transform the world’s most innovative economy into one that reeks of stagnation.

The U.S., not Europe, houses most of the world’s largest and most successful tech companies. The U.S., not Europe, has a vibrant innovation ecosystem that allows startups to raise capital and garner technical expertise from larger companies. American companies lead the world because they have the freedom to invest, innovate, scale, and compete. The various antitrust bills would fundamentally change that formula, punish success, and place pioneering companies under the thumb of government regulators – just as in Europe.

The administration should support U.S. companies, not punish them, enhance cybersecurity, not undermine privacy, and encourage businesses to offer products at lower prices, not forbid competition. By adopting these sensible principles, articulated to our friends abroad, the administration would ensure that its tech policy remains grounded in an age of wisdom, rather than foolishness.