Misfire: How the Digital Markets Act Will Unwittingly Hurt European Small Businesses

On 16 December 2020, the European Commission released the Digital Markets Act proposal. This legislation is intended to prohibit monopolistic and abusively anticompetitive behaviour of digital “gatekeepers” — those that operate in numerous European countries, have substantial annual revenue or valuation, serve as important gateways for businesses to reach customers, and have or are likely to have persistent long-term market share. When these standards are met, the “gatekeepers” are subject to several regulatory limitations and obligations.

Not withstanding its broad and quite general definition of “gatekeeper,” the DMA is commonly believed to be aimed at a small number of very large companies, such as Amazon, Apple, Facebook, Google, and Microsoft. By punishing or regulating companies based on their size and success, and without any reference to monopolization or unlawful or abusive behavior, the DMA is an extraordinary reversal of many decades of legal and economic policy. One common perspective is that this policy revision and the DMA are due largely to the efforts of large, influential European companies such as Spotify, News Corporation, and Axel Springer that are levering the government to attack the world’s even larger technology companies.

However, tens of millions of SMEs work with and rely on gatekeeper software, media, advertising, and commerce tools. Importantly, these SMEs rely on gatekeeper platforms largely because of their size and scale, as these attributes help small businesses reach very large and also very targeted audiences. Thus, DMA impacts on the approximately 25 million European small businesses are inevitable and worrisome, and deserve policymakers’ attention.