We recently highlighted a bright spot in the otherwise dismal outlook for global digital marketplace regulation. Specifically, as governments around the world consider Digital Markets Act (DMA)-style regulatory frameworks, we have highlighted the way that these regulations harm small innovators globally. President Trump has focused on another aspect, calling out DMA as designed to disadvantage American competitors. Shortly after that, House Judiciary Committee (HJC) leaders sent a letter to the European Commission taking aim at DMA’s discriminatory purposes in more detail and requesting a briefing. The scrutiny elicited an unusual response from a group of nine European Union (EU) lawmakers to Attorney General (AG) Pam Bondi and Commerce Secretary Howard Lutnick, as reported by the Wall Street Journal. Despite its questionable relevance to U.S. policymaking, the letter deserves a decisive dismissal from the AG and the Secretary.
The first of its dubious premises is that the EU and United States have shared values “in promoting fair competition and innovation.” This may be true at a high level, but in practice, the United States has roundly rejected the DMA’s approach. That approach elevates complaints by well-resourced competitors and gives them a hand in reshaping curated online marketplaces (COMs) in ways that could harm competition, small businesses, and consumers. U.S. antitrust law, meanwhile, still prioritizes consumer welfare over the gripes of competitors that would benefit from hobbling stronger competitors and can pursue that end through lawsuits and complaints. The way DMA translates any shared interests in competition is at stark odds with American antitrust principles.
The second premise, that some American competitors benefit from DMA, rings hollow as well. The American competitors the EU lawmakers list are precisely those companies U.S. antitrust law generally declines to afford a remedy. But it is especially important to note that the primary winner in DMA’s COM giveaway is China. China-backed companies own at least portions of many of the highest-grossing game apps, which may stand to gain even more from being able to force free or lower-cost distribution on app stores via DMA. Tencent also owns a portion of Epic Games, and this ownership structure even drew recent antitrust scrutiny from DoJ, as it had initially given Tencent board director slots. Further, Epic Games primarily supports DMA as a means of forcing free or discounted—and in many ways subsidized—distribution of its games on mobile app stores. The vast majority of App Association members who pay no commission or the 15 percent for digital-only purchases for revenue under $1million per year. So, they generally feel the negative effects of eliminating app store management practices, rather than the benefits of free distribution for gaming apps.
And Epic Games is a particularly egregious example: their reliance on in-app purchases as a business model unfortunately led it to engage in a practice of “tricking users into making unwanted purchases,” according to the Federal Trade Commission (FTC). Not coincidentally, in its antitrust lawsuit against Google, Epic Games sought court-mandated carriage of Fortnite on Android, which would eliminate the Google Play store’s ability to remove it from devices for things such as deceptive billing practices. Smaller developers, meanwhile, tend to want COMs to actively manage their stores and to provide meaningful alternatives to other, less managed distribution options like the open internet. Thus, the interests that DMA’s provisions tend to serve, especially as applied to app stores, are in large part those of the largest gaming apps, in which China has disproportionate ownership—and that includes Epic Games.
Despite aggressive and expensive astroturfing by Epic Games and its allies, Congress rejected the American versions of DMA, the American Innovation and Choice Online Act (AICOA) and the Open App Markets Act (OAMA). American policymakers are simply not on board with giving individual, well-resourced competitors the ability to dis-integrate COMs to suit their specific needs, which would necessarily subordinate the interests of consumers. The AG and the Secretary have a golden opportunity here to reiterate that DMA is, in fact, designed to hobble American competitors—and that in doing so, it harms small business prospects and elevates those of China.