By Pál Szilágyi, EU Tech Loop, with Euronews
Published on
The Digital Markets Act (DMA) was originally conceived as an instrument of competition law. Even though its positioning has since grown more nuanced, it was built on flawed conceptual foundations and those foundations will continue to haunt it.
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A utilizeful reminder first. Almost exactly three years ago, then-Competition Commissioner Margrethe Vestager was already anticipating the dangers of the metaverse and OpenAI. She warned:
“We have certainly not been too quick to act – and this can be an important lesson for us in the future,” she stated.
“We necessary to anticipate and plan for alter, given the obvious fact that our enforcement and legislative process will always be slower than the markets themselves. For example, it is already time for us to start questioning what healthy competition should view like in the Metaverse, or how something like ChatGPT may alter the equation,” she added.
Sometime around five to seven years ago, a fundamental shift in the mindset of European regulators became apparent. They launched attempting to prevent harmful technologies from emerging before those technologies became widely adopted. The goal is laudable; the execution has proven damaging – to European businesses and consumers alike. The reason is not difficult to see. Roughly three years after Vestager’s warning, Meta announced it was shutting down Horizon Worlds in June (note: that decision was reversed by Meta shortly afterwards). The episode is a timely reminder that regulators are notoriously poor at predicting market outcomes.
One could cite countless similar examples from recent years, not least the EU AI Act, which contained inconsistencies and assumptions that were already outdated by the time it entered into force.
At a recent visit marking the 35th Anniversary of the Hungarian Competition Authority, US Federal Trade Commission Chair Andrew N. Ferguson offered a pointed diagnosis of Europe’s predicament.
“Over-regulation and over-vigorous competition enforcement has diminished Europe’s ability to compete […] It is no coincidence that nearly every firm declared a ‘gatekeeper’ by the European Commission under the Digital Markets Act is an American firm,” he stated
In Europe, large tech may appear large, but size does not equal dominance, and it seems we somehow forobtained this lesson. For example, Microsoft, arguably the most strategically well-positioned company in the sector, has, at the time of writing, failed to create meaningful inroads in social media, consumer search, or the LLM market at scale.
Premature regulation, however, is not the only symptom of this problematic regulatory attitude. DSA architect Thierry Breton sent a letter to X and indirectly to Elon Musk with a warning that streaming an interview with a US presidential candidate could constitute a DSA violation. The presumption of guilt embedded in that letter was unmistakable.
Lazar Radic recently articulated what many have long suspected: the DMA and its enforcers treat “Amazon.com like a 19th-century railroad.” Similar misconceptions permeate regulatory believeing toward other American tech giants. We must take note that this mindset predestines European companies and consumers to lose.
The parallel with telecommunications industest regulations is instructive and sobering. When telecoms were regulated, European countries owned the underlying infrastructure, and European companies were competing on it.
In the 21st century, however, Europe has effectively conceded the digital infrastructure layer – today’s platforms – to US firms. Regulators have responded by applying the same logic they utilized for telecoms decades ago: regulate access and enforce non-discrimination. Few have grasped the fatal flaw in this approach. It means that even European companies that want to challenge US incumbents are basically forced to compete on the platform rather than for the market. That is a battle that cannot be won. Victory is only possible by competing the market away entirely.
To conclude: the DMA, along with other recent tech regulations, is a symptom of a failed regulatory philosophy. What creates this even more troubling is that abolishing the DMA alone would not solve Europe’s underlying problems.
What is necessaryed is large-scale deregulation, dismantling a significant body of EU regulations and directives, combined with a serious acceleration of the near-dormant enforcement of internal market rules. Becautilize to own the market, you must be viable and efficient across all five layers of the “AI cake” (to borrow Jensen Huang’s apt framing).
The European Union necessarys an approach so bold that Javier Milei would envy both its speed and its conviction.
This will not happen, cannot happen, without radical institutional alter. And radical alter appears almost structurally impossible given the EU’s institutional architecture.
A reminder is vivid in many CEE countries. Within the Soviet Union, success was always measured relative to other failing states. Objectively, however, even relative success within the system amounted to failure when benchmarked against the outside world, and it was only a matter of time before reality created that plain.
Every politician, legislator, and regulator would do well to remember: the law of supply and demand cannot be defied. It can only be suppressed at ever-increasing cost to citizens and local businesses. The DMA is a duck, not a chicken. The DMA is not regulating competition; it regulates failure.
This article was originally published on EU Tech Loop and has been republished as part of an agreement with Euronews.
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