Communications and Technology

Don’t Let the Biden Administration Undermine U.S. Leadership on Emerging Tech

The latest tech regulations out of the European Union are stifling innovation and placing American tech firms at a severe disadvantage. Rather than protect the United States on the global stage, the Biden Administration is quietly promoting these EU restrictions to fulfill the President’s policy goals.

The EU’s years-long legislative rampage against American “Big Tech” companies has worsened with the passage of two new laws: The Digital Markets Act (DMA) and Digital Services Act (DSA). For federal and state officials in the U.S., pushing back against these sweeping regulations – designed to damage successful American companies – should be a no-brainer.

Once the DMA is fully enacted in March 2024, companies classified as so-called “Gatekeepers” by the EU’s executive branch—the European Commission—will be subject to more than 20 stringent obligations and restrictions limiting their services. The law imposes prohibitions on the cross-use of personal data across platforms, creates restrictions on digital ads, and even jeopardizes user security with questionable interoperability and sideloading mandates.

Meanwhile, the DSA is basically an online speech regulation law that grants EU officials sweeping authority to police “the dissemination of illegal content” on social media platforms, online marketplaces, and even “intermediary services” like internet service providers that power vital network infrastructure. These new provisions will fully phase in across EU countries by February 2024.

Businesses failing to comply with the DMA and DSA face significant fines as high as 20% of their annual revenue, or even an outright ban from operating within the EU.

Although these sweeping regulations originated in Brussels, their spillover effects will have significant consequences on American consumers and entrepreneurs seeking to do business in Europe. This is a lose-lose situation for both American and European consumers as the EU government attempts to pick winners and losers in the digital economy.

The first batch of platforms and companies subjected to the EU’s new tech regime confirms a clear tilt against U.S. firms. In the case of the DMA, five of the six companies designated as “Gatekeepers” are U.S.-based, while 16 of the 19 online platforms regulated by the DSA are U.S.-owned.

In early 2022, President Biden and his cabinet urged European Commissioners to consider the “unintended adverse consequences” of these problematic policies. However, the President’s Federal Trade Commission (FTC) may have played a more significant role in collaborating with EU regulators than previously disclosed.

Top Republican lawmakers on the Senate Commerce and House Oversight and Accountability Committees recently demanded answers from FTC Chairwoman Lina Khan to determine the extent of her agency’s alleged role in “cooperating with the EU’s efforts to regulate U.S. businesses.”

Earlier this year, both the U.S. Department of Justice and the FTC announced “planned liaisons of agency experts […] to assist with implementation of the Digital Markets Act,” but the FTC failed to answer questions on the agency’s activity in Brussels at a recent congressional oversight hearing.

In Senator Ted Cruz’s words: “It is one thing for the EU to target U.S. businesses, however misguided such efforts may be. But it is altogether unthinkable that an agency of the U.S. government would actively help the EU do so.”

By shackling U.S. tech innovators with a host of new obligations, restrictions, and excessive fines under the DMA and DSA, EU regulators will chill innovation on the European continent and limit consumer software choice for their own constituents. At least two companies, the United States’ Amazon and Germany’s Zalando, are already contesting their DSA designation as “Very Large Online Platforms” in court.

To encourage robust competition in the digital marketplace, U.S. lawmakers should continue to embrace the light-touch, market-driven policies that produced our world-class tech economy in the first place. The free market is the most effective framework to reward innovation and allow competitors to fulfill the genuine needs of consumers.

President Biden should rein in his overeager FTC and end the willful outsourcing of U.S. tech policy to Brussels. As new technologies like artificial intelligence continue to gain steam, clear and decisive American leadership will be more important than ever as a signal to both our allies and geopolitical rivals eager to fill the void.