Two years after the European Union (EU)’s Digital Markets Act (DMA) took effect, the results have been mixed to negative. Promises about certainty, lower enforcement costs, and a more innovative and competitive digital ecosystem haven’t materialized.
Rather than learn from Europe’s mistakes, Californian policymakers and federal proponents of Sen. Amy Klobuchar (D-MN)’s American Innovation and Choice Online Act (AICOA) would import similar ideas to ostensibly help small businesses and hold tech giants accountable. The EU’s experience shows that DMA-style proposals aren’t just unlikely to achieve these goals. They’re also likely to harm consumers, competition, and innovation.
The DMA was intended to support “fairness” and “market contestability” for small businesses that rely on large digital “gatekeeper” platforms, like Amazon, Google and Meta, to reach customers. The “gatekeepers” are mainly American tech giants. The DMA bans them from engaging in certain business practices, even if those practices benefit consumers or competition
For instance, the DMA prevents Google from integrating its Maps, Flights and Hotel Ads tools into search results as this would be “self-preferencing” over third-party booking sites. Evidence shows that this ban has degraded the user experience by increasing the number of clicks required to see prices and make bookings, leading to reduced hotel bookings. Similarly, Apple is limited from excluding third-party apps and app stores from its App Store and iOS even though this has degraded security features, IP protections and trustworthiness in Apple’s products by increasing the proliferation of pirated, less secure and pornographic apps.
These mandates help some businesses, but harm others, including developers of apps aimed at children who rely on parental trust in the highly curated app store, and hotels that benefited from traffic directed through Google’s tools. Rather than upholding competitive markets, they let governments “pick winners” and undermine digital platforms’ ability to differentiate themselves or experiment to better meet consumer and business needs. This goes against American antitrust law’s focus on consumer welfare over punishing firms for size and success, or shielding businesses from competition- an ethos that has let the US produce leading tech firms that have eclipsed would-be European peers.
Like the DMA, AICOA bans large digital platforms from self-preferencing and from using third-party seller and service provider data to refine their own offerings or better serve consumers—even though such practices are routine in non-digital industries, like grocery stores. The bill also claims to provide legal certainty for businesses, yet its language is vague and grants regulators broad discretion. For example, it uses amorphous phrases like “materially harm,” which courts must interpret without precedent, and allows the FTC to define what constitutes an anti-competitive practice through guidelines.
In Europe, the DMA’s ambiguity about the conditions and costs a platform can impose on third-party services—intended to maintain security and ensure fair value—has led regulators to impose heavy, retrospective fines on Apple without providing clear instructions for compliance, all while soliciting feedback from competing app stores and developers on what Apple should do. This uncertainty has delayed the rollout of new features, including AI tools, for European Apple and Google users.
AI development depends on deploying new technology at scale to gather data, refine foundation models, and solicit user feedback. Rules like the DMA, which create legal uncertainty and impose arbitrary limits, can discourage AI infrastructure and software investments, stifle innovation, and undermine U.S. tech leadership, as well as the ability of small businesses that rely on AI-integrated platforms to compete.
Unlike AICOA and the DMA, recent California Law Reform Commission (CLRC) recommendations that could be adopted by that state’s legislature apply to even non-digital businesses and would dramatically lower evidentiary thresholds for market power. The reforms penalize broad swathes of conduct for firms deemed to hold “significant market power”, including self-preferencing, without need to show likely or actual consumer harm or weigh pro- and anticompetitive effects. By banning “predatory pricing” without need to show that alleged offenders would likely recoup their losses by raising prices later, the reforms discourage businesses from legitimately competing on price. The CLRC’s proposals radically pivot antitrust law from protecting consumers to protecting competitor businesses and stakeholders such as “trading partners.”
Such restrictions arbitrarily favor some businesses over others, leaving the competitive process at the mercy of government diktats instead of consumer demand.
Existing US federal and state antitrust laws already punish tech giants and platforms for anti-competitive behavior on a case-by-case basis that also allows judges to limit inadvertent restrictions to competition or harm to consumers that could result from legal fixes, as recent rulings against Google and Apple show. Existing laws can and should be strengthened only if there is a strong rationale supported by economic evidence. Importing flawed foreign competition policies would only empower government officials and some competitors at the expense of consumers, innovation and America’s global competitiveness.
