The DMA Is Harming Consumers, Competition, and Innovation. Other Nations Must Recognize These Flaws for What They Are.

In 2023, the European Union's (EU) Digital Markets Act (DMA) instituted a slate of new digital rules disproportionately targeting top U.S. tech companies. While European regulators claimed the DMA would result in a more competitive digital marketplace, the law has instead degraded European users' online experience, made it harder for startups in the EU to access capital, and caused web traffic for small businesses to plummet.

Yet, despite these harmful consequences, a number of other jurisdictions are considering similar deeply flawed digital competition frameworks. These global debates have sparked significant concern for the digital economy over regulatory contagion threatening to replicate some of the DMA's harmful impacts on innovation and consumers throughout the world.

We've written at length about the damaging consequences of the DMA on consumers, competition, and innovation. Additionally, we recently submitted comments to the European Commission (EC) outlining these harms as European regulators review the law. This includes reports from small- and medium-sized businesses across Europe that have reported steep declines in online traffic and sales. Hotel websites alone saw drops of up to 30%, and hospitality and travel industry groups warn that the DMA's rules have only further tilted the playing field toward dominant players. Additionally, the DMA's heavy-handed mandates have chilled investment, limited product offerings, and raised cybersecurity concerns by forcing companies to share sensitive data with third parties. As a result, some U.S. companies have delayed new AI launches, existing digital tools have been degraded, leaving European users to voice frustration over worsened search and navigation experiences.

Even some European policymakers have noted these harmful consequences. A report written by former Italian Prime Minister Mario Draghi, and released by the EC, found that the European Union's existing regulatory framework is strangling innovation and leaving Europe behind in the tech sector, among others.

Despite this, policymakers in countries like Australia and Brazil are debating their own measures that in ways large and small mirror the DMA. Faced with similar, often localized, concerns about perceived market imbalances, there's a tempting, yet dangerous, inclination to adopt the DMA as a template. However, the DMA's one-size-fits-all approach is proving to be ill-suited even for its own stated goals in Europe, making it an ill-fitting template for legislation elsewhere.

Should countries such as Turkey, South Africa, or Australia embrace DMA-like legislation, their own constituents will be among the first to feel the negative repercussions similar to those seen in the EU. The seamless, integrated digital tools that consumers rely on in their daily lives will become fragmented and clunkier. Worse, by forcing interoperability and opening platforms to unvetted third parties, these rules will weaken the very security architectures that protect user data, exposing consumers to greater risk. The immense compliance burden placed on companies will also inevitably be passed on through higher prices, a reduction in free services, or products of lesser quality.

It is important for policymakers in other countries to learn from, not emulate, Europe's regulatory shortcomings. Rather than importing a flawed, prescriptive framework, they should prioritize evidence-based approaches to foster dynamic, competitive digital markets that protect consumers while nurturing a thriving environment for innovation. Copying the DMA risks replicating its flaws, leading to a future that serves neither consumers nor the digital economy.