Hypocrisy, Thy Name Is Europe

Beginning this week, tech companies must ensure they are in compliance with the European Union’s (EU) Digital Markets Act (DMA). The DMA’s regulatory thresholds ensure the law primarily affects American companies by naming 6 “gatekeepers,” five of which are American-based companies. The DMA will degrade the American tech sector’s capacity to compete globally with China and other international competitors.

Despite this assault on American tech, President Joe Biden seems not to object to the DMA. In fact, his preferred competition-policy proposals apes the DMA’s faulty economics and discretion-based governance. Meanwhile, the Federal Trade Commission (FTC), led by Biden-appointed wunderkind Lina Khan, has coordinated actively with European efforts to implement the law – not the only instance of FTC–EU collaboration.

Failing to enact disastrous DMA-style regulation domestically, the Biden administration – and the bureaucrats it has installed at “independent” agencies – seem happy for European authorities to enforce it almost exclusively against American firms abroad.

To call the DMA a classic case of protectionism oversimplifies the case. Europe suffers from no comparative disadvantage, no natural-resource deficit, no dearth of intelligence or talent. American companies have (on a fair basis) outcompeted their continental counterparts. European firms’ collective insignificance stems neither from anticompetitive U.S. business practices nor from some European youthful nascence.

Quite the opposite. The E.U.’s tech sector is as old as any but developmentally stunted. The continent has regulated its tech into obscurity, stifling its own potential and ensuring its citizens must rely on foreign devices and software. Experience bears this out. To take only one of myriad examples, the General Data Protection Regulation (GDPR) is a great case study. GDPR is Europe’s monumental data-privacy regime, which badly fractured the app industry. According to an analysis of 4.1 million apps listed on the Google Play Store, the GDPR “induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half.”

The EU, having plunged the regulatory knife into its own tech sector, will do the same to the U.S. – a friend whose prosperity and innovation have long served to mitigate the continental flirtations with command-and-control. Europe’s condition without access through trade to American prosperity (particularly in tech) would crumble as China’s authoritarian largess awaits.

Moreover, American politicians who hope to import the DMA’s economic principles should pause on economic grounds. The law’s ban on common and pro-consumer business practices such as self-preferencing, its general disregard for consumer welfare, and its confused market-share definitions make little economic sense. These faults, although economically indefensible, serve further to force American tech to its knees – down to the eye-level of stunted Europeans firms.

Consider the DMA’s incoherent applicability thresholds. As Aurelien Portuese explained in 2022, given Apple’s overall size, the company must comply with the DMA even when it operates in sectors where it functions as an upstart challenger, such as music streaming. “[T]he DMA will regulate Apple Music (which has 15 percent market share) while exempting Spotify (31 percent market share),” Portuese wrote. Europe’s only consumer-facing tech company of note, the Swedish Spotify has long campaigned against Apple, recently securing a roughly $2 billion judgement against its American competitor. Notwithstanding its self-assumed victimhood, Spotify dwarfs every competitor.

And, the DMA’s faults do not end self-serving protectionism and disastrous economics. As the DMA hurdles towards its full force, clear-eyed Europeans have warned of its reckless endangerment of device users. Those alarmed include government agencies.

A recent news story concerning sideloading (the process of downloading apps outside vetted app stores) illustrates this problem. The DMA, to realize its warped concepts of economic “choice,” would forbid device manufacturers to bar sideloading on their devices. The free market has produced true choice: Android devices typically allow sideloading, while Apple’s iOS devices (until required by the DMA) have not. Under the new law, European consumers may no longer weigh for themselves the relative benefits and risks of sideloading-permissive devices’ innate flexibility and insecurity. No, consumers must – by fiat – choose less-safe devices, the only ones manufacturers may market.

Yet, recognizing the attendant cybersecurity risks, European officials have asked Apple to continue to bar sideloading on government devices. “One EU government agency informed us that it had neither the funding nor the personnel to review and approve apps for its devices, and so planned to continue to rely on Apple and the App Store because it trusts us to comprehensively vet apps,” a representative from Apple recently said. It seems elementary that individual users also lack “personnel to review and approve apps” and might also wish to “rely on Apple…to vet apps.” But the government seeks to reserve for itself the very security and choice it denies the citizenry.

In many instances the DMA will excise consumer choice while purporting to promote it. The DMA has proscribed many – quite rational – consumer choices, meaning that the European consumer may choose however he likes, provided EU bureaucrats do not disapprove.

Regulations carry opportunity costs. Having chosen hypertrophic regulation and atrophied industry, Europe seeks now to force American firms to pay the same costs. As a matter of preserving U.S. competitiveness and innovation, Joe Biden has a duty to shield American firms from continental regulatory predations. As a matter of national security, excellence to maintain American interests against an increasingly aggressive Chinese Communist Party, U.S. tech firms remain the best in the world.

To protect this superiority, politicians and bureaucrats must stop the assault on tech in the United States.