Federal Trade Commission (FTC) Chair Andrew Ferguson, speaking before an audience of his fellow antitrust regulators at the International Competitors Network Conference in Edinburgh, Scotland, critiqued the European Union’s Digital Market Act (DMA). Chair Ferguson said the DMA used “rigid criteria to identify, in the first instance, the companies and their services that are subject to its complex and burdensome rules.”
This is not the first time Ferguson has discussed the dangers DMA poses to American technology companies. In April, he told an audience at the Little Tech Competition Summit in Washington, DC that he was “suspicious”of foreign laws like the DMA that target American companies. Ferguson also expressed concerns over the DMA’s grant of power to “Brussels bureaucrats” to level fines on American companies without first having to prove their allegations in a court of law. He contrasted this system with the American system which gives defendants in FTC cases the opportunity to have their cases adjudicated by an independent court before the FTC can punish the company. As Ferguson put it, “the DMA is the reverse [of the American system], the bureaucrats say pay the fine you can sue us to try to stop us.”
Ferguson is right to be concerned about how the DMA will affect American companies. The DMA forces large tech companies, (which are designated as “gatekeepers”) to share access to their intellectual property with their smaller competitors. The DMA also forces the gatekeepers to grant their smaller competitors access to their operating systems. Thus, the bill tramples on American intellectual property rights—a massive power grab by the EU.
There are currently seven companies appointed as “gatekeepers” by the European Union. Not surprisingly, five of the seven are American companies. The U.S. gatekeepers are Alphabet (parent company of Google and YouTube), Amazon, Apple, Meta (parent company of Facebook, Instagram, and WhatsApp), and Microsoft. The two non-American companies are Chinese company ByteDance (owner of, among other properties, TikTok) and the Dutch company Booking.com. So, the DMA imposes new and costly rules on some of the most successful and innovative companies in the world. Unfortunately, not everyone agrees with Ferguson that this is a bad thing.
Lina Khan, who chaired the FTC in the Biden years, spent taxpayer money to send FTC staffers to Brussels to help implement the DMA. Chair Khan may have wanted to assist with implementation of the DMA because it outlaws preferencing. Preferencing is when an online store manipulates search results to ensure their products are displayed at the top of the page. Opponents of preferencing assume most people are too lazy or stupid to scroll through multiple pages of search results. They also assume that government has the right to tell private businesses how to treat the smaller companies they allow to use their platforms. Banning preferencing may harm small businesses because it creates an incentive for the big tech companies to stop allowing them to use their platforms.
Congress has failed to pass legislation outlawing preferencing—so Lina Khan spent taxpayer money to help the EU ban something that is legal under U.S. law. When Ferguson refers to the DMA as imposing a “tax” he is correct.: the DMA can be thought of as imposing a tax on success. The DMA’s success tax will make it harder for new online businesses to attract investors. This will stop small companies from growing, thus helping the existing gatekeepers maintain their dominant position in the market.
The DMA poses a threat to some of the most successful and most innovative companies, not just in America, but all over the world. It also makes it difficult for the next Facebook or Amazon to grow. Ferguson is thus right to speak out against it. Hopefully, Chair Ferguson and the Trump Administration can convince their EU counterparts to repeal this legislation. Ferguson’s opposition to the DMA is also a hopeful sign that, despite some of his other actions raising concerns that he would follow Lina Khan’s bad example, he will fulfill his promise to end the FTC's war on business.
