In a recent interview with CNBC, EU antitrust chief Margrethe Vestager insisted that Europe has a “sparkling, vibrant innovation ecosystem.” I don’t want to knock Europe, and it’s certainly true that the continent is a hub for new and interesting ideas. The EU ranked as an ‘Innovation Champion’ in the Consumer Technology Association’s 2023 Global Innovation Scorecard, and thousands of European startups and global brands flock to CES in Las Vegas each year.
At the same time, it’s telling that despite a culture of innovation, European technology companies have made a relatively limited mark on the world stage. Of the fifty largest tech companies in the world, thirty-six are based in the United States and ten hail from east Asia. Only three are European. Europe hasn't produced a single $100 billion tech company in the past 30 years, and all of Europe's tech companies combined are worth 30% of just one of the U.S.’ largest four tech companies.
Why? It’s because, as Managing Director at Beacon Global Strategies Klon Kitchen told a group of tech industry leaders recently, Europeanlegislators “regulate first and ask questions later.” That strategy is abundantly clear in the EU’s approach to AI regulation, a sweeping set of new rules to regulate the development and use of AI that creates significant new compliance challenges for startups and other smaller innovators. But it’s not limited to AI. While many European companies have declared their desire to be world leaders in cutting edge tech sectors, they’re handicapped by a system of rules and regulations that make it hard for businesses to thrive and grow. Despite more than $150 billion in investments into a ‘Digital Decade’ strategy, Europe remains behind its targets and even Europe's own legislators have begun to express concerns about the impact of regulation and bureaucratic red tape.
While it’s sad to see America’s allies make bad choices, those choices have consequences beyond Europe’s borders. European leaders seem to have decided that, rather than building an innovation ecosystem that regularly produces technology leaders, they can simply strip the value out of American competitors. The Digital Markets Act (DMA), which went into force in March, is a prime example. Under the DMA, Europe has designated six companies – five of them American, one Chinese and, perhaps unsurprisingly, none European – as ‘gatekeepers’ to core platform services. If the European Commission determines that any of these companies is out of compliance, it can fine up to 10% of global revenue. Several investigations are already underway – including proceedings against Alphabet, Apple and Meta that could amount to tens of billions of dollars – and could deprive the companies of funds that might otherwise be used for R&D and job creation.
In attempting to kneecap American tech companies, the EU’s antitrust enforcement hasn’t just hurt ‘Big Tech’ – or the many Americans whose 401Ks and IRAs are fueled by their success. Earlier this year, Amazon abandoned a deal to acquire iRobot, maker of the popular Roomba robot vacuum. The deal would have provided iRobot, which essentially created the at-home robotic cleaning market, with the resources to scale and compete against Chinese competitors who benefit from directed state-level support. Instead, the company was forced to lay off nearly a third of its staff.
Will the EU ultimately conclude that their road to tech leadership relies on kneecapping some American companies and stripping value out of others? So far, I fear the answer may be yes. Even worse, it may be exporting that model. Countries across the globe, from Brazil and India to Korea and Japan, are considering similarly damaging legislation.
In this campaign, Europe’s leaders have also been aided and abetted by the Biden administration’s fixation on ‘reining in’ some of America’s world-leading technology companies. The problem is especially pronounced at the U.S. Federal Trade Commission, which has flown staff to Europe to collaborate with the EU on strategies to attack American companies – including assistance to tank Amazon’s attempted deal with iRobot.
That should scare all of us. If we want to protect American innovators, American leaders must call out the EU’s measures for what they are: discriminatory and predatory barriers to trade. Our leaders must stop pretending that American businesses are a greater threat to enduring American success and prosperity than European regulation, and return to calls for the free and open markets that have served us well for centuries.
