Why Are U.S. Regulators Helping the EU Hobble Top American Companies?

By Robert H. Bork Jr.

Wednesday, July 06, 2022

 

Perhaps your mother once asked you, as mothers everywhere tend to do, if you would jump off a cliff just because all your friends are doing it. And what is true for children is true for continents: Europe is determined to jump off a regulatory cliff. No surprise there — but why are so many in Washington, D.C., ready to follow suit?

 

Europe is pioneering policies that will retard and degrade the economic and technological backbone of technology companies that supply the infrastructure of modern life — all of which, perhaps not coincidentally, are based in the United States. These rules aim to make American “gatekeepers” such as Apple, Google, Meta/Facebook, and Amazon less competitive and to remove incentives for capital investors to fund innovation.

 

This is the thrust of the Digital Markets Act, approved on Tuesday by the European Union. Designed to break down the walled gardens of Big Tech, this measure will require Big Tech to let their services interact with rivals, allow calls from one messenger service to another, and admit competitors into their app stores. When the DMA goes into effect, Big Tech will have to scramble to comply with a labyrinth of laws, enforced by a Byzantine array of bureaucracies and courts able to levy death-penalty fines.

 

The result will be degraded service and weakened innovation, all to the detriment of the consumer.

 

Even the United Kingdom, which has liberated itself from the EU, remains (to use a proper English term) a dog’s breakfast for tech regulation. A prime example: The U.K.’s Competition and Markets Authority had stepped into the market to prevent Meta, owner of Facebook, from acquiring GIPHY, a company with the limited function of searching for short, GIF-like files with limited movement.

 

The British CMA intervened to block this merger, claiming a loss of competition in the U.K. advertising market. The CMA had, however, suppressed facts about this deal between Meta and this upstream image provider. The most telling facts: GIPHY had failed to sell a single ad in the U.K. market. A British court held that the CMA had engaged in selective disclosure of information from Meta, and that vertical integration of GIF providers by Google, Meta, and Snap was a sign of competitive health. Despite this ruling, the case will soon be sent back to CMA regulators, who are free to invent more specious reasons to block a highly competitive acquisition.

 

Such gamesmanship is endemic to doing business across the pond. That Europeans would be shortsighted enough to try to degrade U.S.-based companies in favor of national champions, if not admirable, is at least understandable. What is not comprehensible is why so many American policy-makers want to follow suit.

 

In late 2021 the FTC and the Department of Justice’s Antitrust Division launched a formal EU–U.S. Joint Technology Competition Dialogue. The two sides declared that the “Joint Dialogue will include high-level meetings as well as regular staff discussions focused on the shared competition enforcement and policy issues arising in technology markets.” In a speech in New York last year, Europe’s competition czar, Margrethe Vestager, said, “This moment of convergence is a moment of opportunity . . . between the heads of our authorities.” It is easy to imagine that these discussions between European and American regulators are convivial, punctuated by Belgian skate-wing sauté accompanied by excellent Chardonnay from the Sambre-et-Meuse region.

 

In a further sign that both sides are sympathique, the Biden administration recently announced that the United States has agreed on a new framework for conforming with the EU’s data-privacy laws. And don’t expect the import of European regulatory ideas to end with Big Tech. Last year the FTC announced a “working group” to build a common approach on pharmaceutical mergers.

 

Like the Europeans, U.S. progressive regulators seek to give competitors standing to bring antitrust actions. Biden regulators are proving to be just as heavy-handed and lacking in intellectual modesty as their European counterparts. When Federal Trade Commissioner Lina Khan goes to Europe, she no doubt finds in Vestager an ideological soul mate.

 

Unless Congress intervenes, the Biden administration is set to accept — and perhaps enthusiastically endorse — blatantly anti-American business laws. When antitrust law veers beyond the measurable and understandable metric of consumer benefit, it imposes vague and shifting priorities that empower government but stifle innovation by killing predictability for investors. American regulators are inexplicably joining Europeans to aim at the freedom that has made the United States the world’s technology leader.

 

Like most protectionist acts, these measures will not even serve the business interests of the protectionist powers. The European Union regime of severe, innovation-killing restrictions has prevented Europe, with half a billion people and an almost $20 trillion economy, from developing comparable technologies of its own . . . which is why no one is reading this article on their French-made Pomme device.