The European Union has long sought to constrain the operations of U.S. technology companies, hoping to create a competitive environment for weaker European firms. Over the past decade, the EU has unleashed a blizzard of new laws, regulations, and lawsuits designed to limit the success of digital companies from the United States. But the results will not be what Brussels desires. Rather than helping EU companies compete, these efforts are more likely to give the advantage to Chinese firms, thus creating the environment the EU dreads — a digital world dominated by a handful of champions not based in Europe.
Almost as bad is the apparent willingness of the Federal Trade Commission (FTC), under the leadership of Lina Khan, to piggyback on EU regulations in order to achieve policy objectives that Congress and the courts have repeatedly rejected. This appears to be an attempt by the Biden-era FTC to limit resistance to its agenda. It does not want to specifically protect consumers, but to constrain and shape the digital marketplace in a manner fitting the agency’s ideology.
In recent years, EU regulators have sought to limit the ability of American Big Tech to provide consumers with better products, not to mention critical security and support for its services and applications. In many instances, there is no evidence that Big Tech business practices cause harm to either consumers or competitors. In fact, Big Tech creates markets that allow thousands of new companies to exist. Ironically, one of the major goals of EU regulators is to increase access to precisely the networks, apps, and information provided by Big Tech firms such as Google, Meta, Microsoft, Amazon, and Apple.
At present, the EU has initiated a multi-part assault on the American tech sector. The first part of this is the Digital Markets Act (DMA). The DMA imposes strict controls over so-called gatekeepers — large tech companies that operate core services such as online search engines, networks, web browsers and operating systems. The DMA seeks to impose a-priori constraints on the behavior of these companies, based on the assumption that they are likely to use their size and technological capabilities to limit competition.
The second lever the EU will use to limit the operations of large, successful tech companies is the Digital Services Act (DSA). The DSA will impose controls over information on internet platforms, particularly those operated by large providers — essentially the same companies as the DMA’s gatekeepers.
The DMA and DSA work against companies that seek to create advantages for both consumers and competitors by operating at scale. They reflect an EU regulatory system grounded in what some observers characterize as a skepticism of the free market. This is reflected by the EU’s relatively low bar for anti-competitive activities, the suspicion with which regulators view the ability of companies to leverage market power in one area when they move into adjacent areas, and the rejection (in practice) of the idea of competition on merit. While supporters of the EU’s approach, including at the FTC, argue that it helps to maintain competition, they fail to recognize that these policies come at a significant price in terms of consumer welfare, business growth, job creation, and technological innovation.
The EU’s new regulatory endeavors will also cause direct harm to consumers and companies that need the services provided by tech giants. One recent study concluded that the EU’s efforts to control the digital market will increase the costs to European and American firms and consumers that rely on digital services provided by Silicon Valley companies.
But the EU will not stop there. Brussels is working on regulations for markets that are yet to exist. Its latest focus is to impose constraints on advanced technologies, particularly artificial intelligence, along with quantum computing and augmented reality. Here, too, the EU wants to step in and penalize potential success, another example of its belief that regulations should be imposed in anticipation of new technologies creating negative consequences. This can only have a chilling effect on one of the most dynamic and valuable market sectors. For example, the creator of ChatGPT has said he may have to pull his technology out of Europe if the EU implements its proposed regulations.
The FTC is not alone in seeking to impose an EU-style regulatory regime in this country. Member of Congress have proposed legislation that would penalize large U.S. tech companies for their scale and ability to create new markets. The proposed American Innovation and Choice Online Act was similar to the emerging EU regulatory regime insofar as it targeted a handful of large, innovative U.S. tech companies.
The FTC has generally been rebuffed in its attempts to rein in U.S. Big Tech firms, but now it seems to be ignoring court rulings and the prevailing sentiment in Congress by piggybacking on evolving EU regulations. EU regulators and the FTC are currently in negotiations to harmonize their approaches toward regulating IT. The U.S. Chamber of Commerce recently sent a letter to the White House calling on the Biden administration to prevent the FTC and DOJ from helping foreign governments implement regulations hostile to U.S. companies. But the FTC has now gone beyond negotiations, announcing that it would send representatives overseas to help enforce the DMA.
The FTC may also be looking to the EU to establish a pattern of anticipatory regulations for AI in the United States. Without any evidence of harm, FTC Chairwoman Khan has publicly argued for the need to regulate platform providers in order to avoid potential negative consequences of their use of AI.
Regulators in Brussels and current FTC leadership share a negative, arguably hostile, view of Big Tech. They presume that operational scale and technological prowess equal market control. The solution being pursued by both organizations is to constrain, even undermine, the capabilities and advantages provided by companies such as Google, Meta, Microsoft, Amazon, and Apple in the name of competition. No one other than the regulators will win if this viewpoint is allowed to prevail.
