The recent House Judiciary Committee hearing on Europe’s Digital Markets Act (DMA) and related regulations drew intense attention in Washington and beyond.
Representing small app developers and connected device makers across the United States and Europe, ACT | The App Association’s president Morgan Reed underscored how Europe’s regulatory experiments threaten not just Big Tech, but the small innovators who have existing business relationships with them.
Morgan made clear that Europe’s ex ante (regulate-before-harm) model, from the DMA to the Digital Services Act (DSA) and EU AI Act, directly affects small businesses. Not a single witness or Member of Congress pushed back on his warning that the DMA hurts small businesses.
Small business gets crushed in the fight between billionaires and trillionaires. That was the reality Morgan drove home at the hearing. While large corporations can weather costly compliance regimes and shifting fee structures, startups cannot. Startups rely on online digital marketplaces for three basic and vital benefits:
- To take on the back-office overhead
- To open doors to global markets that turn niche local projects into international businesses
- To maintain the trust that makes customers willing to download an app they’ve never heard of and grant it access their most sensitive data, like physical location, medical information, or financial accounts.
By blocking offloading of overhead, fracturing global reach, and eroding trust, the DMA threatens all the benefits small businesses currently get from online marketplaces. Morgan pointed out that Europe’s rules are already producing perverse outcomes. The first app to exploit DMA-required sideloading wasn’t a disruptive startup but a porn aggregator called HotTub with the ability to bypass parental controls. In this riskier environment, consumers will default to big brands they already know, entrenching the very giants the DMA claims to want to restrain.
The result isn’t a fairer, more competitive market. It’s a distorted one, where regulation creates new advantages for billion-dollar players, freezes trillion-dollar operators in place, and leaves small businesses stranded, fighting uphill with fewer tools, less trust, and rising costs. Rather than empowering innovators, Europe’s model entrenches incumbents and opens the door to bad actors.
Morgan’s message was clear. Congress must avoid importing Europe’s regulatory mistakes. America’s strength lies in ex post enforcement, meaning action taken after conduct occurs, that punishes anticompetitive conduct without illegalizing procompetitive, routine marketplace management functions like vetting software and removing bad actors from smart devices. The idea that Europe’s model squeezes startups instead of empowering them was crystal clear.
What it means for Congress. At the hearing, Rep. Pramila Jayapal (D-WA-07) called the American Innovation and Choice Online Act (AICOA) “similar” to DMA and sought to dissuade other Committee members from pushing back. However, it is precisely this similarity that should give Congress pause as it considers DMA-style interventions like AICOA. Having seen the increased costs and greater uncertainty our EU members are dealing with as a result of DMA, Congress must be more cautious than ever with any proposals like AICOA or its app store-specific relative, the Open App Markets Act (OAMA). They, like the DMA, are designed to appease specific, multi-billion-dollar companies like Spotify, Match Group, and Epic Games, in a manner that would greatly disadvantage the rest of the ecosystem.
As Congress contemplates the future of online digital marketplaces, it must choose between preserving a culture of innovation or adopting Europe’s culture of compliance. For small businesses, the outcome isn’t abstract. It’s survival.