As U.S. firms fall afoul of the continent’s strangulation-by-government, we must continue to encourage freedom and innovation, abroad and at home.
As U.S. firms fall afoul of the continent’s strangulation-by-government, we must continue to encourage freedom and innovation, abroad and at home.
T he average American knows and cares little about the European Union’s jungle of tech-industry regulations. But to appropriate the old phrase about politics, just because Americans don’t take an interest in EU tech policy does not mean EU tech policy won’t take an interest in them.
Europe’s immense market power, and the inherently international nature of digital markets, extends its regulatory reach beyond its jurisdiction. American consumers felt the EU’s touch when, to comply with EU privacy law, websites began to display cookie-consent boxes. Another European mandate strong-armed Apple to transition its iPhones to the USB-C charger. As ambitious laws such as the Digital Markets Act (DMA) and the Digital Services Act (DSA) become more fully enforced, Americans should anticipate that their technology will warp further to reflect the myopic anti-tech prejudices that European officials wish to inflict on markets and consumers.
It seems that continental lawmakers cannot be satisfied. They build one innovation-crushing regulatory regime after another, blissfully unaware of the straitjacket of red tape in which they have bound Europe’s would-be innovators.
Europe’s puny tech sector — the product of regulation on steroids — has furnished no serious competition to such giants as Google or Microsoft. To level the playing field, European lawmakers have enacted statutes that do not help their own firms but restrain the U.S. tech sector’s competitiveness. It resembles requiring the Philadelphia Phillies (winning percentage: .613) to start their bench players each game so that the Miami Marlins (winning percentage: .368) have a “fair” shot to win. The DMA’s design constitutes a particularly flagrant protectionist regime that punishes American companies.
Enforcement officials have also harried American companies for their successes. Indeed, arbitrary enforcement actions have proven central to Europe’s bids to break the internet. Bad regulation built on tremendous market power becomes still more potent and perilous for free markets and innovation when — as in the EU — bureaucrats enjoy vast latitude to interpret and enforce it. Very often, discretion within the law seems to morph into freedom to go beyond it.
Meta is a prime example of an American company victimized for its success. Finding itself subjected to EU data-privacy law requiring platforms to offer privacy-protective versions of their products, Meta offered Instagram and Facebook users the choice either to pay a monthly fee or to continue allowing the company to monetize their data. That is, Meta allowed users to choose whether to pay in currency or in revenue-generating information.
One struggles to see why a company should not require some kind of compensation from those who use its services. The Europeans seem to have reached this conclusion, however; Meta’s “pay or OK” model already has garnered several investigations from various meddlesome EU technocrats.
These actions are rife with nanny-statism, economic illiteracy, disregard for consumers, personal animus, and dubious legal reasoning. As usual, the DMA provides a case study in overreach, illustrative of the larger European malady. The European Commission’s preliminary findings in the DMA-related investigation into Meta (issued in July) seem clearly to venture well outside the law’s black-letter requirements and to contravene recent judicial precedent.
In a prepared statement, Margrethe Vestager, the EU executive vice president in charge of competition policy, declared her intention “to empower citizens to be able to take control over their own data and choose a less personalised ads experience.” As the Chamber of Progress’s Kay Jobelli noted, this betrayed the EU’s true motives: At every turn, it seems that continental regulators would rather dictate preordained consumer or market outcomes than safeguard consumer choice and fair competition. Much to regulators’ dismay, many European consumers prefer to pay in data, not euros. They prefer to trade privacy for monetary savings. This, regulators cannot abide — hence the EU’s multifront assault on “pay or OK.”
In this way, a protectionist and technocratic regulatory authority — an authority that, having smothered Europe’s tech sector, now moves the pillow toward the noses of U.S. firms — shrouds the aims of an ideological crusade at violent odds with consumers’ interests.
“Damned if you do, damned if you don’t” doesn’t quite describe the quandary of American tech firms flailing to comply with the DMA and other EU regulations. Compliance with the law’s enumerated prescriptions and proscriptions scarcely matters. Rather, enforcers will weaponize the closest provision at hand — even when it requires dubious legal interpretations — to nip, tuck, micromanage, and rearrange markets in the image of their own idiosyncrasies. American companies must submit to this larger scheme or be shut out of European markets..
Meanwhile, American policy-makers watch — some in horror, some in envy. The choice is stark, and it is easy. Washington, D.C., must eschew Europe’s failed model and maintain the freedoms that have catapulted U.S. firms to international dominance.