Brussels bureaucrats never seem to pass up to an opportunity to micromanage every market they can get their hands on. And having regulated its own tech sector into insignificance, American tech firms are the new object of their bureaucratic excess. The catalogue of the European Union (EU)’s misguided regulatory endeavors includes, inter alia, the Digital Markets Act (DMA), Digital Services Act, and the AI Act. These measures disproportionately disadvantage American innovators, who, unlike their continental counterparts, enjoy the liberty necessary to innovate—to make full use of their talents and capital for the benefit of their businesses and their consumers.
President Donald Trump, never one for being imposed upon, has made known his displeasure. He has even threatened a new investigation of discriminatory digital regulations under Section 301 of the Trade Act of 1974. The administration ought to begin the investigation posthaste. According to a report from the Consumer & Communications Industry Association, “EU regulation of digital services results in up to $97.6 billion annually in costs and revenue losses for U.S. companies, with a conservative floor estimate of $38.9 billion annually” (emphasis in original).
For the DMA alone, noncompliance could mean decimation: the confiscation (a “fine”) of up to 10 percent of the offending company’s global revenue (or 20 percent for successive infringements). Apple and Meta already have encountered announced fines of $586.7 million and $234 million, respectively.
American firms have all too often found compliance more difficult than simply fulfilling clearly promulgated obligations. Broad statutory language has begotten arbitrary, discretionary, and protean enforcement standards, shapeshifting as bureaucrats change their minds and their expectations of regulated companies.
Unsurprisingly, the costs of compliance have surpassed expectations. “During recent DMA workshops, Amazon revealed that its compliance costs have been ‘multiple orders of magnitude beyond that predicted amount,’” law professor Mikolaj Barczentewicz reports. “Meta representatives acknowledged that reality has dwarfed initial third-party estimates of $10-20 million per year,” he continues. Moreover, “Google reported conducting over 50 meetings with the Commission, responding to more than 55 requests for information, and making over 105 submissions in just one year—averaging one meeting, one request for information, and two submissions every single week.” Each dollar, every work hour, and every employee diverted toward regulatory compliance carries an accompanying opportunity cost, stifling dynamism and innovation.
Worse yet, the EU’s regime—equally myopic and stringent—outright proscribes disfavored business models, no matter the benefits they bestow on the competition process (rightly understood) and consumers. As Aurelien Portuese argued—in 2022, no less—of the DMA’s sweeping ex ante prohibitions, the law “is likely to generate numerous opportunity costs.” This toll includes the “[d]eterred innovation, reduced consumer welfare, and abridged consumer and business users’ choice [that] are likely to” result from “the DMA’s per se prohibition rules.” Experience has vindicated Portuese’s skepticism.
Moreover, tech companies have begun to withhold innovative features from Europeans, citing the regulatory unpleasantness afoot. European AirPods users, who, unlike their American counterparts, cannot access Apple’s new Live Translation, must seek redress in Brussels, and not in Silicon Valley.
Americans, however, may seek redress in Washington. Should President Trump’s promised Section 301 investigation yield a determination that the EU’s exotic regulatory hodgepodge merits action, the United States Trade Representative (USTR) must consider prudently the best remedy. Although Section 301 is thought of most often as a means by which to impose tariffs—indeed, Trump himself has threatened to impose tariffs in retaliation for the DMA and its ilk—another, better corrective, one that does not damage the economic interests of Americans, is available.
As an alternative to tariffs, the law “authorizes USTR to…enter into a binding agreement with the foreign government to either cease the conduct in question or compensate the United States.” The Trump administration ought to engage the considerable diplomatic heft of the U.S. government to bring about such an agreement. Politics is, after all, the art of managing competing goods and competing ends, which, although in tension, must be pursued all at once. The pilot of the ship of state must often navigate between rocks on the port side and shallows on the starboard. Seeing only one danger and sailing recklessly into another will cause the vessel to founder. The EU’s anti-tech adventurism must be challenged—but challenged prudently, without the use of tariffs, which menace American prosperity.
The EU has not exhausted its preference for regulation over prosperity, for technocratic timidity over bold innovation. The American tech sector, conceived in liberty, requires Washington, D.C.’s protection—posthaste.
