As the world grapples with how to effectively regulate the modern digital ecosystem, Europe has been the first to put sweeping legislation into effect. The European Union’s Digital Markets Act, signed into law in 2022, has spurred momentum across the globe for what — in many cases — are nearly identical proposals attempting to address concerns regulators have identified with the influence of global online platforms.
As the DMA is being replicated in legislative proposals around the world, non-European countries including the United States, Brazil, and Japan are now faced with the task of examining whether the EU’s solutions make sense for the current state of their own markets. Despite shared concerns regarding the ability for technology companies to compete with current market leaders in the global economy, the proposed solutions have been criticized for doing more harm than good. Critics argue that fostering an anti-innovation approach to regulation leaves serious concerns for consumer protection and the ability for any platforms to compete in the global market. It is for these reasons that the United States, when presented with the opportunity to pass similar legislation, did not bring the bills for a vote in Congress, functionally rejecting the proposals.
As such, it is important that global regulators recognize that Europe’s solution is not the only path forward for the regulation of digital markets, and in fact presents serious risk to the future growth of the technology sector and users of online platforms. The United States Congress largely determined that the approach of the Digital Markets Act does not align with the desired conditions for the U.S. tech sector and is thus exploring other ways to regulate the digital sector in ways that target specific harm. Taking an approach that identifies companies to target based on size, rather than calculations of market power or tangible harm, as is done by the DMA, risks the impediment of technological progress while failing to make a compelling case that such ex-ante regulation will spur the sort of competition which is desired as a result.
Now, what Brazil must do is assess whether EU-style regulation or the U.S. approach is better aligned with their own country’s goals, demographics, and current market structure. For the United States, there is a desire to sustain the job growth, productivity growth, and low inflationary market that the tech sector has proven to be over the past decade. In addition, there is a desire to participate in the global market, currently dominated by large American companies competing with large Chinese companies on an international scale. With the Brazilian information technology market valued at $46.2 billion in 2022, with an expected growth rate of over 8%, careful consideration must be given to what is needed for Brazilian companies to emerge as global competitors.
Here, we present the risks identified in the EU approach to tech regulation identified by the United States, and the differences in EU and U.S. market conditions which leave the EU-style proposals ill-fitted to the challenges of digital markets in the United States. As the Brazilian government deliberates the merits of similar legislation, namely draft bill 2768/2022, it is critical that solutions must be similarly assessed with respect to the goals for the future of the tech sector within the country.