In the latest episode of its digital tax craze, the EU forces Google to pay €890 million ($1 billion) under the Digital Markets Act (DMA). By targeting one of the world’s largest tech companies, Europe sends a message innovation is not welcome.
On July 23, the EU announced that Google had violated the DMA by giving preferential treatment to its own services. This meant that Google advertised its own services more frequently. Instead of Google’s fast, well-integrated hotels, flights, shopping, services, users will now be prompted utilize third-party products. Ironically, this results in higher prices for users. For example, when Google cannot display travel plans through Google Flights––directly linked to airline websites––users must navigate intermediaries that impose an extra fee on top of the flight ticket.
The EU also found that Google had violated “anti-steering” measures by not sufficiently informing users of alternative app stores on Google Play. To comply with the DMA, Google will have to devote significantly more content on its own app store to lower-quality alternatives with slower services. A similar rule limiting Google’s use of AI on Google Play lowers protections for consumers from malicious online activity.
The DMA limits large tech companies’ ability to innovate by allowing competitor products and services to operate with their devices. Since taking effect in 2023, this has taken a toll on Europe’s access to new technology. For example, Apple withheld the launch of Apple Intelligence in Europe over fears of the DMA’s interoperability requirements. While the rest of the world enjoyed cutting-edge tech, Europe was stuck with second-rate services.
The DMA is detrimental to Europe’s economic growth. The Computer and Communications Industry Association estimated that the Act would deprive the economy of €114 billion every year as a result of degraded personalization features and higher transaction costs.
The DMA is one part of Europe’s targeting of digital commerce. The other is the onslaught of digital services taxes (DST) that also fall disproportionately on U.S. companies, costing them nearly $3 billion per annum. By using high revenue threshold, these taxes only apply to American tech firms, such as Meta, Apple, and Microsoft. The Tholos Foundation confirmed that the vast majority of DST-paying firms in Spain and Tukey were American and that U.S. firms generated over 90% of the UK’s DST revenue.
These exorbitant costs are unlikely to remain with the targeted companies, though. Firms pass the burden onto consumers through higher marketplace fees, advertising charges, and app store commissions. In practice, this makes DSTs a hidden tax on digital activity and the consumers who rely on it, not just on corporate revenue.
As the saying goes, “American innovates, China imitates, and Europe regulates.” As long as EU lawmakers are focused on denying their people access to new technology, Europe’s economy will continue to plateau. The Trump Administration must act now to put an end to European looting of successful American companies.
