An immense amount of ink has been spilled recently on the American Innovation and Choice Online Act (AICOA) from both sides of the aisle. Aiming to eliminate the so-called competitive advantage that accompanies “self-preference”, it would only apply to the largest online platform companies in the economy. This would mean that companies such as Google and Amazon could not offer their own in-house products to those of a competitor.
It’s not clear that self-preference harms consumers, but that’s not really the point. Some argue that Congress is moving too quickly, while others insist that it is already late. Some claim that this proposal, along with the Open Markets Act (OMA), will destroy the internet as we know it, while others say the only way to save the internet is with these proposals. Arguments cross party lines, with notable Democrats voicing dissent and high-profile Republicans listed as co-sponsors of the bill. Similar talking points were offered about the bill’s impact on the economy, jobs and small businesses.
But no matter where the arguments come from, there is a sense of urgency that something needs to be done. What if there was another way?
The European Union (EU) recently finalized language for the Digital Markets Act (DMA), a proposal strikingly similar to those currently before Congress. The DMA is expected to go into effect by the end of the year, with companies expected to be fully compliant by the end of 2024. Unless Congress passes something before the midterm elections, DMA will begin to impact markets, including in the United States, much sooner.
The best option right now is to wait for these markets to react to changes in Europe and make the most informed choice possible, rather than forcing tech companies and consumers to deal with all the regulations at once. The European Parliament says the DMA will ensure fair competition and promote more innovation and more choice for consumers online. These lofty goals are laudable but can be exaggerated. The most recent rollout of omnibus legislation appears to be grossly insufficient.
The EU’s General Data Protection Regulation (GDPR) came into force in 2018 and was considered the gold standard for data protection at the time. The settlement was intended to give consumers more control over their data and reduce the data hoarding practices of the biggest tech companies. The European Commission has claimed that the GDPR will reduce compliance costs and make the EU a more attractive place for business, leading to an erosion of Big Tech’s online dominance. The reality, however, is the opposite.
By all available evidence, the GDPR has been a resounding failure. Not only has regulation increased the cost of compliance for all businesses, there are many claims that competition has diminished. By imposing serious restrictions on how data is shared and processed, companies that have already acquired large databases of consumer data have a significant head start. Small businesses are knee deep, unable to buy or collect enough data to compete with the biggest tech companies.
To some extent, therefore, DMA can be designed to solve a self-created problem. The GDPR has played quite a significant role in consolidating the dominance of big tech platforms within the European Union. While we can’t be certain of the competitive landscape without it, the initial consensus is that potential start-ups would be less burdened, spend less on compliance, and be better able to compete against their Big Tech rivals. Fortunately, the United States does not yet face this self-imposed competition problem.
The debate that is taking place today is, to a certain extent, unnecessary. First, we can learn from the EU’s past mistakes. Second, we can wait and see if DMA radically improves competition in Europe and leads to widespread prosperity and significantly better outcomes for consumers, or if it goes the way of GDPR by making the internet much harder to exploit. and removing petty online business competition.
If Congress ultimately chooses the European route, data and findings from the DMA deployment can inform its efforts. Applying a “now or never” approach to politics is not always wise.
Alden Abbott is principal researcher at Mercat Center of George Mason University and former General Counsel for the Federal Trade Commission. Andre Mercado is associate professor at the Faculty of Law Antonin Scalia.