On July 22, the European Union fined Google 890 million euro (over 1 billion dollars!) for violating the Digital Markets Act (“DMA”). This law was passed by the European Union in May of 2023, giving the European antitrust authorities the right to regulate certain on-line platforms as “Gatekeepers.”
Being labeled a Gatekeeper subjects a company to a new kind of antitrust analysis, one that abandons the careful analysis of the economic effect of on-line business practices on consumers and competitors.
Instead, the DMA conclusively presumes a Gatekeeper has violated the law if it grants preference to its own products or services in answering a consumer’s search request, or if it makes it easier to use the gatekeeper’s own payment system than going outside to an alternative. Those prohibitions are two of the thirteen specific practices outlawed by the DMA in an absolute fashion. Even by EU standards, the DMA’s treatment of Gatekeepers is an exceptional instance of meddling in free markets.
By contrast, the antitrust laws of all other nations (including the EU for companies other than those they deem “Gatekeepers”) apply a balancing test. Each restriction that a platform might impose (such as making its own payments system easier to use than going outside its platform to pay for an app) is analyzed for the benefit it conveys on consumers weighed against the possibility of depriving a consumer of a competitor’s version of the service.
For instance, as part of an on-line restaurant search, Google might provide a map showing how to drive to the restaurant. MapQuest would prefer that Google simply deliver the restaurant’s name, forcing the user to cut and paste that information into MapQuest to deliver directions. Keeping MapQuest as a vibrant competitor to Google Maps might benefit the consumer in the long-run; but there’s no doubt Google’s furnishing the map is a convenience to the customer in the immediate case.
The ultimate conclusion of the balance between user convenience and possible exclusionary effect on a competitor is measured by whether the consumer benefits from a company’s practice in any given instance.
In United States, this balancing approach is the way courts apply the term “monopolization” under section 2 of the Sherman Act. Here’s an example of how it works. In 2021, a US federal court ruled that protecting a purchaser from the hacking of a credit card was sufficient to allow Apple to defend against a challenge by a game provider, Epic. Epic had attacked Apple’s restrictions on going outside Apple for payment systems.
A different federal court ruled the other way in Epic's similar suit against Google a couple of years later. These different outcomes demonstrate that the balancing test is open to the nuance of specific circumstances.
Under the DMA, however, a Gatekeeper is denied the benefit of this analysis. The DMA simply states that a Gatekeeper may not place limitations on using an alternative payment system—and the European Commission gets to decide who is a Gatekeeper. Using supposedly neutral criteria, the EU has identified only seven Gatekeepers in the world. Six are American: Microsoft, Meta, Booking.com, Apple, Amazon, and Google. (The seventh, Chinese-owned Bytedance, is currently challenging its Gatekeeper designation.)
Only three companies have ever been fined by the EU under the Digital Markets Act. They are Apple (500 million euro), Meta (200 million euro), and now Google (890 million euro) – all American companies.
“DMA” seems to stand for “Declare Monopolies in America” (but nowhere else). In practical effect, the DMA targets American firms.
There is an American trade law (“section 338”) that allows the US to levy tariffs against any country that “discriminates in fact against the commerce of the United States, directly or indirectly, by law or administrative regulation or practice.”
President Trump has dusted off section 338, not used in 77 years, to impose tariffs against Canada. He is also considering applying it to the EU. Whatever the evidence of discrimination by Canada the Administration might have, there is no doubt that the DMA Gatekeeper provision “discriminates in fact” against American companies. That violates American law. It also violates the international trade norm that countries grant “equal treatment” to their trading partners. The billion dollars the EU is trying to get from Google suggests the right amount for the US to impose on the EU in response.
