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The European Commission believes that the giants of Big Tech monopolize the digital economy and that these “gatekeepers” control access to every possible virtual business model. That they could even drive any company off the Internet. To prevent this, it announces the proposal of a new Digital Markets Act (DMA).
The DMA is just the beginning of a path that in the European Union (EU) is usually completed with few amendments. The European Commission (EC) considers it a matter of more antitrust regulation, but its current regulation in this area is already economic nonsense. While Big Tech does threaten competition and freedom of expression, it does not do so as the EC would like to believe.
Fundamental economic errors
The DMA defines “digital sector” and “gatekeeper” companies against the economic theory of real market processes. There is no “digital sector” isolated from the rest of the economy and the “gatekeepers” are not monopolies—not even by the erroneous definitions of existing antitrust laws.
The new law subjects to special regulation “structuring” agents of the digital economy with a position rooted in intermediation services. It attributes to them allegedly unbeatable “network advantages” that would place clients and users in a position of dependence in the face of unfair practices.
It is a predictive regulation that reflects the bias of legislators; broadly orders companies what to do, in addition to prohibiting specific “monopolistic” practices; prohibits some companies and not others: self-preferring their own services to one another; combines data collected in two or more of their own services, and self-cross-advertises between channels.
The biggest mistake of the DMA is that the legislator considered itself, and the regulator, capable of objectively differentiating digital from non-digital markets. Digital technologies are all over the economy, not in isolated Internet platforms. Companies—whether large, medium or small—compete using a variety of commercial channels, digital and non-digital. Non-digital companies use digital tools to manage resources, produce goods, capture and evaluate data, and enter new markets. Industry, commerce and services increasingly employ digital technology. In the real market economy “digital sector” is almost the entire economy. It is impossible to objectively determine where digital and non-digital begin and end.
The digital economy in the real world
Uber is an app for millions of people who require real cars to get from one place to another. Its digital services include payment and routing. But there is no digital business there separate from the business of getting people in cars from one point to another, faster, safer, more comfortable and less expensive than without those digital services for passengers and drivers. There will be no Uber without actual cars, drivers and passengers using their services.
By selling books on the Internet, Amazon did not create a new publishing market. It created a new online sales channel to compete with other bookstores. Amazon is the largest online retailer of books. But its market share is less than 30% of the total global market. Amazon has its own physical bookstores. It sells online publishing and sales services for independent authors and diverse publishers. It is not a monopoly, but it has canceled authors for ideological censorship woke. Under current American law and jurisprudence, it would tend to lose such litigation in court.
The big tech companies enjoy privileges in the American regulation — S230 CDA — that other companies lack. It would be reasonable to demand net neutrality from them in return. This has not been achieved in the United States. And Europe is not even trying with a DMA that will slow down the adoption of digital technologies due to new regulatory costs that will affect the competitiveness of the European digital economy. Like the European General Data Protection Regulation — GDPR — the DMA aims to weaken the big American tech companies but creates barriers to entry against potential competitors of those established leaders. It will force data sharing and give access to competitors by making imitation more profitable than innovation and will set Europe back by hindering natural affiliations between low-digitized European companies and highly digitized American companies.
Guillermo Rodríguez is a professor of Political Economy in the extension area of the Faculty of Economic and Administrative Sciences at Universidad Monteávila, in Caracas. A researcher at the Juan de Mariana Center and author of several books // Guillermo es profesor de Economía Política en el área de extensión de la Facultad de Ciencias Económicas y Administrativas de la Universidad Monteávila, en Caracas, investigador en el Centro Juan de Mariana y autor de varios libros