Tilting the scales in favor of the EU: How our own FTC and DOJ are working against American economic ... [+]
Can it really be true we’ve now moved into such an extreme realm of anti-technology fervor—despite technology being an indisputably essential dimension of U.S. global competition—that it now it comes down to presumed collusion between staffers of U.S agencies and departments with European regulators, to subvert, or even just ignore, decisions made by this country’s elected representatives? And is it possible that this putative collusion is putting the vibrant American tech success stories at risk in order to align unelected staffers with what many view as protectionist European policy?
That is what a recent, seriously worded letter from the Congressional Committee on Oversight and Accountability seems to imply for the FTC, accusing its chair, Lina M. Khan, of an abuse of power. The letter, dated August 21, has had less press scrutiny than it merits given the questions it poses on whether U.S. agency and department staffers have gone too far to skirt American law. The chairperson of the Congressional Committee, Congressman James Comer (Kentucky, R), says, “The FTC’s decision to send agency officials to Europe to help implement and enforce the European Union’s (EU) Digital Markets Act under the guise of ‘international cooperation’ undermines U.S. economic interests.”
The letter goes on to say, “Several other actions the FTC has taken in conjunction with EU agencies indicate an alarming pattern of FTC exporting its authority to Europe to achieve FTC’s political goals. The Committee is following up for documents and information regarding FTC’s engagement with officials at foreign governing bodies. The EU’s Digital Markets Act aims to increase competition in the European tech market space but does so by targeting American online platforms under the designation as ‘gatekeepers.’ The EU’s goal is to make European tech more competitive versus their American counterparts by subjecting the gatekeepers to greater scrutiny and burdens than their competitors.”
Well, that’s a lot of questions about the real intentions of the Digital Markets Act (DMA) and whether U.S. staffers have been popping over to Europe to collude with regulators there to hobble big tech U.S. companies in their competition with their European counterparts.
Moreover, Washington insiders have it that there has been closed-door cooperation between Khan’s staff and the U.S. Department of Justice, with such other players as Jonathan Kanter, DOJ Assistant Attorney General for the Antitrust Division, who’s also been hunting for allies abroad. This deduction comes from the DOJ announcement in July that the agency itself would send its own officials to Europe “to assist with implementation” of the DMA, which along with the Digital Services Act (DSA), was enacted by the European Union and both of which, many in the U.S. believe, threaten to regulate big U.S. tech firms unfairly.
The letter from Rep. Comer makes direct accusations that the FTC’s approach and actions are inconsistent with conflicting points of view in the Biden administration: “Other agencies with more experience in international competition issues have voiced concerns regarding the EU’s policies. The State Department has shared concerns regarding the Digital Markets Act with the EU and the Biden Administration has said it opposes ‘efforts specifically designed to target only U.S. companies.’ The Office of the United States Trade Representative published a report earlier this year that categorizes the Digital Markets Act as a barrier to digital trade. While the Committee recognizes long-standing cooperation between the FTC and EU counterparts, the FTC should not be using this framework to accomplish abroad what the agency cannot accomplish in its own jurisdiction.”
Now, whether one agrees with the intention or the result of these foreign regulations, the reality is that our own elected officials in Congress have failed to pass antitrust legislation in this country—despite multiple attempts.
In an April 2023 House hearing, only a few months after DMA and DSA were enacted, FTC Chair Lina Khan was grilled about revelations that her office has been actively helping Europe target U.S. tech companies. The issue is that the FTC and DOJ, according to the collusion theory, worked actively with the European Commission as it created a rule that would require U.S. companies to share customer data with competitors and ban them from bundling services or favoring their own products, among other things. The result according to many on this side of the Atlantic? Regulation intent on helping European tech companies compete with U.S. ones.
Just last week, on September 6, the European Commission sent out a press release announcing it had “designated, for the first time, six gatekeepers—Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft—under the Digital Markets Act (DMA). The six gatekeepers will now have six months to ensure full compliance with the DMA obligations for each of their designated 22 core platform services.”
Under the DMA, the European Commission can designate digital platforms as “gatekeepers” if they provide an important gateway between businesses and consumers in relation to core platform services. The press release goes on to warn, “In parallel, the Commission has opened four market investigations to further assess Microsoft's and Apple’s submissions arguing that, despite meeting the thresholds, some of their core platform services do not qualify as gateways…”
In addition, the news is, “the Commission has opened a market investigation to further assess whether Apple's iPadOS should be designated as gatekeeper, despite not meeting the thresholds. Under the DMA, this investigation should be completed within a maximum of 12 months [...] the Commission has concluded that, although Gmail, Outlook.com and Samsung Internet Browser meet the thresholds under the DMA to qualify as a gatekeeper, Alphabet, Microsoft and Samsung provided sufficiently justified arguments showing that these services do not qualify as gateways for the respective core platform services. Therefore, the Commission decided not to designate Gmail, Outlook.com and Samsung Internet Browser as core platform services. It follows that Samsung is not designated as gatekeeper with respect to any core platform service.”
The European Commission goes on to define the next steps for designated gatekeepers and remind them that they now have “six months to comply with the full list of do’s and don’ts under DMA.”
If that result after interaction between U.S. staffers and European regulators doesn’t sound shocking, it should.
For a multiple set of reasons, DMA is a really bad idea. It will kneecap the economic engine of this country, by disadvantaging specific successful American companies, and opening an unlevel playing field to European and Chinese companies. The U.S. Chamber of Commerce points that, “Plainly, the intent of the regulation is to target U.S. businesses and to and favor their European competitors. … These EU policies will handcuff U.S. business while favoring European national champions in the digital economy.” Also indications are that on the winning side would be Chinese companies like Huawei, which has a stake in Qwant, an originally French search engine that didn’t get the uptake it had hoped for and had to be bailed out by the Chinese investment. Qwant may now argue that under DMA, it's entitled to click-and-query data from U.S. rivals.
If these assumptions of abuse of power behind the scenes play out as assumed, this kind of backdoor regulation imposed by staffers and not our own legislators is a terrible precedent in a global tech and marketing economy. In fact, the FTC and DOJ seem to have been emboldened to do similar things in negotiations over the Indo-Pacific Economic Framework (IPEF), a new U.S. trade deal with Australia, South Korea and other members of the Indo-Pacific region that accounts for 40% of global economic output (and which is a replacement for the Trans-Pacific Partnership, from which the U.S. withdrew under President Trump).
A recent study by the Center for Strategic and International Studies found that 16% of European companies would switch from an American tech provider to a Chinese tech provider because of anticipated cost increases resulting from the implementation of DMA, which could burden companies with between $22 billion to $50 billion in compliance and operational costs. In other words, by sending U.S. government employees to help implement DMA, companies like Tencent, Xiomii, Alibaba and Temu may turn out to be the biggest beneficiaries of all.
If these accusations are true, then it’s way past time for the FTC and the Department of Justice’s Antitrust Division to get out of the business of interfering in U.S. international competition, particularly when anything they do in digital policy is actually in defiance of the choices made by our elected representation – let alone just helping our arch competitors. Or as a recent WSJ op ed put it: “Sorry, helping foreign governments undermine U.S. companies is bad government.”
