How European-Style Competition Laws Hurt Small Businesses
In today’s digital-first world, a strong online presence is crucial for small business survival.
Online search engines and customer reviews help consumers find top-rated cafes, hotels, and other local shops in local communities. Customer endorsements on online platforms play a pivotal role in decision-making for consumers – whether they’re choosing a coffee shop to work from or selecting a hotel for a family vacation.
Digital tools have empowered entrepreneurs by connecting their businesses to consumers in a way that we’ve never seen before. Small business owners have embraced these accessible online platforms, which are often free or very low cost, to expand their reach, grow their brand, and ultimately attract new customers. It’s a win/win for both parties.
In 2022, the European Union (EU) passed the Digital Markets Act (DMA), a first-of-its-kind law to rewrite the rules on the digital economy. The law went into effect in May 2023, and the early impacts of these new regulations have been disastrous for consumers and small businesses alike. Meanwhile, states like California, and some Members of Congress, advocate for European-style competition laws here in the U.S.
Convenience and Digital Accessibility
Tech companies like Google and Meta provide several tools and services that take entrepreneurship to the next level. Together, these platforms help shape a digital economy that levels the playing field for small business owners by keeping operational costs low and making it easier for potential customers to access up-to-date information.
The convenience consumers experience when searching for hotels, flights, or local restaurants has become a huge part of our daily lives. Unfortunately, accessibility to these digital tools is under attack as new restrictive policies seek to limit businesses’ online presence.
New Hurdles for Small Business
The DMA prohibits large technology companies from integrating products and services if other companies offer competing services. For example, Google Business Profile integrates several Google products – Search, Reviews, and Maps – and provides all the information consumers want to know about a business in the upper-right corner of the Google Search results page. This service is free, and businesses can edit their information and ensure it is accurate.
However, the DMA has forced Google to change how Google Business Profile works, and instead of including a link to a business’s Google Maps and easy one-click directions, there is now a static map and no directions. Consumers who need directions must now open the Maps application separately and input the desired business address next to their home address. These extra steps have frustrated potential customers and caused small businesses to lose revenue.
Consequently, there’s been a significant decrease in website traffic for various European businesses, including hotels, local merchants, and restaurants. Direct bookings for some hotels have been down as much as 30% since the DMA rules were implemented. This has been terrible for independent hotels, and great for aggregator sites like TripAdvisor and Booking.com, and the hospitality industry as a whole is now struggling.
A Warning for U.S. Policymakers
The DMA should serve as a warning, not a model, for the United States. Sens. Klobuchar (D-MN) and Grassley (R-IA), and the California Law Revision Commission must all take note of the consequences the DMA has brought to Europe. Small businesses cannot afford to be the collateral damage in the dispute between companies like TripAdvisor and Booking.com, and leading technology companies like Google and Meta.
U.S. policymakers must consider how changing the rules of the digital economy will impact America’s small businesses. Ignoring these lessons could lead to similar disastrous outcomes, severely hindering the growth and success of small businesses nationwide.
