| The Honorable Jim Jordan Chairman House Judiciary Committee Washington, District of Columbia 20515 |
The Honorable Scott Fitzgerald Chairman House Judiciary Committee Subcommittee on the Administrative State, Regulatory Reform, and Antitrust Washington, District of Columbia 20515 |
Re: Letter in Support of the Protect U.S. Companies from Foreign Regulatory Taxation Act
Dear Chairman Jordan and Chairman Fitzgerald,
We, the undersigned representatives of consumer, trade, academic, and policy organizations across the United States and around the world, write in support of the goals and overarching policy of the Protect U.S. Companies from Foreign Regulatory Taxation Act.
This legislation is a step toward defending U.S. technology innovators, particularly small and mid-sized technology companies, from a growing wave of overreaching ex-ante regulatory regimes that seek to unilaterally dictate the terms of global digital competition. The European Union’s Digital Markets Act (DMA) exemplifies this troubling trend. Although the DMA purports to target only “big tech,” in practice, it imposes disproportionate obligations on U.S. companies and distorts the very innovation ecosystem that enables small developers to compete globally.
Policies modeled on or influenced by the EU’s DMA disrupt the pro-competitive dynamics of the app ecosystem by reducing the ability of digital marketplaces to provide the tools and services small businesses rely on. The market for services that complement distribution remains highly competitive across multiple platforms. Sellers and developers choose to contract with the curated online marketplaces (COM) that deliver the strongest suite of benefits—including privacy-by-design protections, robust security screening, removing copycats and harmful content, and—for physical goods—shipping fulfillment. These marketplace offerings deliver significant value to small businesses by lowering overhead and compliance costs, building consumer trust, accelerating time to market, and expanding global reach. The rise of these COMs has directly fueled the extraordinary growth of the small business developer community. With lower costs and fewer barriers to entry, both new and established app developers can succeed. These platforms also serve as vital bridges to the world’s five billion app users, representing a dynamic, two-sided market that benefits consumers and enterprises alike.
Under the DMA, so-called “gatekeeper” firms—almost all of which are American—face open-ended mandates and fines of up to 10 percent of global revenue (or twenty percent for repeat offenses). These penalties function as a de facto foreign tax on American innovation. Even more concerning, the DMA’s approach is being replicated; jurisdictions including Korea, Japan, Malaysia, Brazil, and Australia are nowconsidering similar ex-ante frameworks that could export this model worldwide. While the stated intent behind these regulatory approaches is to enhance consumer choice and digital competition, their effects are the complete opposite. By restricting platform design, mandating interoperability and side loading without regard for privacy or security, and curbing the ability to self-preference or curate app ecosystems, such regimes directly undercut the very conditions that enable small developers to reach consumers efficiently and safely. The consequences are clear: fewer small business competitors, less research and development, reduced consumer choice, and fewer opportunities for small firms that depend on trusted global platforms.
Congress has long recognized that regulatory overreach abroad can undermine American competitiveness and the small businesses that drive our innovation economy. We commend the House Judiciary Committee’s recent efforts in examining how ex-ante style regulation, specifically those that preemptively impose restrictions on conduct rather than showing proven explicit harms, risks entrenching existing players while stifling future entrants. Recent analyses estimate that the cumulative economic burden of these ex-ante style regulations could reduce U.S. research and development investments by more than $325 billion. Likewise, another estimate suggests that the costs of delays in the introduction of newer technologies due to DMA and related digital economy regulations in the EU and the United Kingdom to small business innovators range from $109,000 to $375,000 every year. Thus, the framework is proven to distort and rob small businesses of the resources that drive job creation, supply-chain growth, and continued U.S. leadership in emerging technologies. Similarly, an inevitable result of DMA’s open-ended approach has caused significant regulatory confusion—not only in U.S. markets but across European and APEC app markets as well. Small businesses, lacking the cash reserves and legal resources to navigate this complex regime, are losing ground to larger competitors.
The Protect U.S. Companies from Foreign Taxation Act would reinforce these principles by safeguarding American firms from discriminatory measures that effectively penalize innovation and success. Unlike regulatory frameworks that are not unfairly discriminatory, the DMA diverges significantly from established trade norms. Therefore, whereas foreign governments seeking to enforce laws that respect these norms may rightfully have recourse in U.S. courts, DMA is not owed this deference under principles of comity. The bill further signals to our trade partners that the United States will defend an open, transparent, merit-based digital economy rooted in due process, evidence-based enforcement with pro-competitive outcomes.
As organizations committed to fostering and preserving a healthy and robust digital ecosystem, we commend you for your leadership in highlighting the negative consequences of DMA and similar proposals. We respectfully urge the Committee to advance the Protect U.S. Companies from Regulatory Taxation Act, including considering any reasonable changes to add clarity to its provisions, and continue this important work to ensure that competition policy, both domestically and abroad, remains grounded in fairness, competitiveness, and the rule of law.
Signed,
Graham Dufault, General Counsel, ACT | The App Association
Ted Bolema, Antitrust and Competition Fellow, Innovators Network
Neil Chilson, Head of AI Policy, Abundance Institute
Joseph Coniglio, Director of Antitrust and Innovation Policy, Information Technology & Innovation Foundation (ITIF)
Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council
Jessica Melugin, Director of the Center of Technology & Innovation, Competitive Enterprise Institute (CEI)
David Williams, President, Taxpayers Protection Alliance