US should look to Europe before changing online marketing rules

An immense amount of ink has been spilled recently about the American Innovation and Choice Online Act (AICOA) from both sides of the aisle. Aimed at eliminating the alleged competitive edge that comes with “self-preferencing,” it would apply only to the largest online platform companies in the economy. This would mean that companies such as Google and Amazon could not feature their own in-house products over those of a competitor.

It’s not clear that self-preferencing harms consumers, but that’s not really the point. Some claim that Congress is acting too quickly, while others insist it is already late to the game. Some claim that this proposal, along with the Open Markets Act (OMA), will destroy the internet as we know it, while others say that 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 on the bill. Similar talking points have been offered about the bill’s impact on the economy, jobs and small businesses.

But regardless of where the arguments come from, there is a sense of urgency that something must be done. What if there is another way?

The European Union (EU) recently finalized language for the Digital Markets Act (DMA), a strikingly similar proposal to those currently under consideration in Congress. The DMA is slated to go into effect by the end of the year, with companies required to fully comply by the end of 2024. Unless Congress passes something before the midterm elections, the DMA will begin to impact markets, including in the United States, much sooner.

The best option right now is to wait for those markets to react to the changes in Europe and make the most informed choice possible, rather than forcing tech companies and consumers to cope with all the regulations all at once. The European Parliament claims that the DMA will ensure fair competition and foster more innovation and more choice for consumers online. These lofty goals are laudable but may be overstated. The most recent rollout of omnibus legislation appears to be falling tremendously short.

The EU’s General Data Protection Regulation (GDPR) came into force in 2018, and at the time was heralded as the gold standard of data protection. The regulation purported to give consumers more control over their data and cut down on the data-hoarding practices of the largest technology companies. The European Commission claimed that the GDPR would decrease 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 accounts, the GDPR has been a resounding failure. Not only has the regulation increased the cost of compliance for all companies, but there are widespread claims that competition has declined. By imposing serious restrictions on the way data is shared and processed, companies that have already acquired large databases of consumer data have a massive leg up. Smaller companies are kneecapped, able neither to purchase nor to collect enough data to compete against the largest tech companies.

To some degree, then, the DMA may be designed to fix a problem that was self-made. The GDPR has played a rather significant role in cementing the dominance of big technology platforms within the European Union. While we cannot be certain of the competitive landscape without it, the early consensus is that potential upstart companies would be less burdened, spend less on compliance and be able to better to compete with Big Tech rivals. The United States, thankfully, does not yet face this self-imposed competition problem.

The debate happening today is, to some extent, unnecessary. First, we can learn from the EU’s past mistakes. Second, we can wait and see if the DMA radically improves competition in Europe and leads to widespread prosperity and markedly better outcomes for consumers, or if it goes the way of the GDPR by making the internet a much more difficult place to operate and suppressing small business competition online.

If Congress eventually chooses Europe’s path, data and findings from the DMA’s rollout can inform its effort. Applying a “now or never” approach to policy is not always wise.

Alden Abbott is a senior research fellow with the Mercatus Center at George Mason University and a former general counsel with the Federal Trade Commission. Andrew Mercado is an adjunct professor with the Antonin Scalia Law School.