In the classic movie The Godfather, Michael Corleone advises a young man to get a business degree to supplement his fine arts education to better provide for his future children. “This contempt for money is just another trick of the rich to keep the poor without it,” says Corleone.
European regulators’ contempt towards large U.S. businesses shows a similar manipulative cynicism towards its people. While the European Union (EU), through its Parliament and governing European Commission, has adopted onerous laws and imposed draconian fines for years, mostly against the tech sector, it does so with big company envy.
To be blunt, Europe wants what America has.
That was made abundantly clear when former European Central Bank President Mario Draghi issued a seminal report in September 2024 aimed at stopping the EU’s economic malaise. In a September 17 speech to the European Parliament, Draghi said:
“The core problem in Europe is that new companies with new technologies are not rising in our economy. In fact, there is no EU company with a market capitalisation over EUR 100 billion ($116 billion U.S. dollars) that has been set up from scratch in the last fifty years. All six US companies with valuations above EUR 1 trillion have been created in that period of time.” (Note: EUR refers to euros, the EU’s currency)
Draghi added that the EU faces an “existential challenge” in attracting investment and growing its economy.
The absence of big tech companies in the European Union has also corresponded with a dearth of mid-size and entrepreneurial ones.
In a December study, MIT Scientist Andrew McAfee found that in the past 50 years EU countries have only created only 14 publicly traded companies “from scratch” with a value exceeding EUR 10 billion. By contrast, the U.S. has been home to 240 such companies, in many industries.
The total market cap for the European companies stood at $430 billion. That is a big number, but just 1/70th of the $30 trillion valuation of the U.S. companies.
The disparities become even greater as the U.S. has a much larger and more thriving private sector than the EU, especially in the venture capital realm. As McAfee said, “Europe lags in VC funding at every stage by about a factor of five.”
Key takeaways from Draghi’s revealing remarks and the statistics include the following.
First, the European Union needs to re-evaluate its use of numerous laws targeted towards U.S. companies, like the Digital Markets Act and Digital Services Act. The laws have become forms of taxation and tariffs in sectors where the EU does not have comparable rivals.
As the U.S. Chamber of Commerce said in a June 5 report, such reform would create “meaningful guardrails (that) would restore credibility to European regulatory enforcement actions and remove the tension that fines have created in the bilateral relationship.”
Second, Federal Trade Commission (FTC) Chairman Andrew Ferguson made timely and important remarks to EU regulators at a May 7 speech in Scotland. He reminded them of the findings of the Draghi report, the dangers of overregulation, and its expansion into competition law.
“Unfortunately, the regulatory impulse has recently seeped into competition law. I think this is a dangerous development,” said Ferguson.
“Consider the Digital Markets Act (DMA) … To date, five of the seven gatekeepers are American firms, and only one originated in Europe … The DMA lacks any of the finesse that a typical competition law assessment would entail. It also lacks the tailoring of remedies to the injury.”
The FTC and the U.S. Department of Justice’s Antitrust Division would also do well to re-assess competition lawsuits against companies simply because they are big. The largest U.S. public tech companies are typically eight to ten times bigger than the EU’s largest companies.
And while Europe may feel daunted to ever catch up to those companies, America’s culture of innovation means our business leaders will have to innovate or lose their leadership most likely to other American companies, including mid-size ones.
While Microsoft, as of this writing, has the largest market cap in America of $3.6 trillion, there is $62 trillion in market cap on the New York Stock Exchange and Nasdaq, and more in private investments.
The U.S. cases should be dropped. What is big in Europe is not big here. Following the EU’s business course, especially hostility just because a company is big or perceived to be big, is a prescription for economic disaster.
