The European Union’s Digital Markets Act (DMA) has emerged as one of the most consequential pieces of digital regulation in recent years. While officially presented as pro-competition legislation designed to ensure fair and open digital markets, mounting evidence suggests the DMA functions as a de facto digital tax on American technology companies. This analysis draws on insights from recent DMA workshops with the companies designated as “gatekeepers” by the EU Commission (detailed analysis available here) to reveal how the staggering gap between initial regulatory cost estimates and actual compliance burdens, combined with enforcement threats that go far beyond monetary fines, creates a regulatory regime that operates as a tax on and a protectionist industrial policy against successful U.S. companies.
The Reality Check: When Millions Become Billions
The European Commission’s original impact assessment for the DMA projected modest compliance costs—approximately €10 million annually across all designated gatekeepers combined, or less than €2 million per company. This figure now appears almost quaint when compared to the actual experiences of companies implementing DMA compliance.
During recent DMA workshops, Amazon revealed that its compliance costs have been “multiple orders of magnitude beyond that predicted amount.” This carefully chosen phrase suggests costs potentially reaching hundreds of millions of euros annually for Amazon alone. Meta representatives acknowledged that reality has dwarfed initial third-party estimates of $10-20 million per year. As one Meta representative noted, “we’re a long way north of that.”
The human resource allocation tells an equally striking story.
- Apple’s “engineers have spent hundreds of thousands of hours to bring everything to life, often on incredibly compressed timelines.” There are “thousands of employees at Apple involved in dealing with the impact of the DMA in engineering, design, operations, marketing, and more.”
- Meta has deployed over 11,000 employees working on DMA compliance design, build, and implementation—investing close to 600,000 engineering hours, equivalent to over six decades of engineering work compressed into a two-year period.
- Google assigned approximately 3,000 people, mostly engineers, working full-time for two years just on Article 5(2) compliance alone.
The Hidden Cost: Innovation Diverted to Compliance
Beyond the raw numbers lies a more subtle but equally significant cost: the diversion of resources from innovation to regulatory compliance. As Amazon’s representatives explained during the workshops, “any dollar that you spend or euro that you spend on work necessarily takes away that work from other areas that you could be innovating and providing benefits to customers in Europe.”
This resource diversion represents a hidden tax on digital services offered in Europe. The opportunity cost extends beyond financial resources to include the attention of top engineering talent, product development cycles, and strategic planning capacity—all redirected toward ensuring regulatory compliance rather than developing new features or improving existing services.
The administrative burden compounds these costs. Google reported conducting over 50 meetings with the Commission, responding to more than 55 requests for information, and making over 105 submissions in just one year—averaging one meeting, one request for information, and two submissions every single week. For Article 6(5) DMA compliance alone, Google held over 250 meetings and almost 30 workshops with business users while answering thousands of questions from industry participants.
Fragmentation Despite the Promise of Unity
The DMA was supposed to create a “single European rulebook” to avoid regulatory fragmentation, as Commissioner Vestager originally promised. Yet companies now face a double burden: complying with the DMA while simultaneously dealing with parallel national enforcement actions on the same issues.
Amazon’s experience with the German Federal Cartel Office (FCO) illustrates this challenge. Despite DMA compliance efforts, Amazon faces FCO actions “on matters squarely covered by the DMA,” including requirements to “promote higher-priced, independent, third-party seller offers”—an approach that potentially contradicts the unified regulatory framework the DMA was meant to establish. Giuseppe Colangelo covered this case recently on Truth on the Market (see also my 2023 text German Big Tech Actions Undermine the DMA).
This regulatory uncertainty multiplies compliance costs. As Apple noted during the workshops, “no two people agree on what the DMA’s substantive obligations mean.” Without clear compliance guidance, companies must over-invest in regulatory measures to minimize the risk of enforcement actions, further inflating the true cost of DMA compliance.
The Enforcement Paradox: Beyond Fines to Prohibitionist Interpretations
The Commission’s first DMA enforcement actions in April 2025 resulted in fines of €500 million for Apple and €200 million for Meta—substantial sums, but ones that pale in comparison to the ongoing compliance costs these companies have already incurred. Meta’s 600,000 engineering hours and 11,000-plus employees dedicated to DMA compliance represent investments that dwarf even these hundred-million-euro penalties.
However, the real enforcement threat extends far beyond monetary penalties. As I’ve argued in my analysis of the DMA’s “pay or consent” interpretations, the Commission’s approach reveals a prohibitionist tendency that effectively bans certain business models entirely. The DMA’s provision allowing penalties of up to 10% of worldwide annual turnover, or up to 20% for repeated infringements, combines with these extreme interpretations to create an existential threat. For companies like Apple or Amazon, this could translate not just to tens of billions of euros in potential fines, but to fundamental restrictions on how they can operate their businesses in Europe.
The Commission’s interpretations often go beyond what the legislative text requires, creating a moving target for compliance. This regulatory uncertainty, combined with the threat of massive fines and business model prohibitions, forces companies into defensive positions that prioritize avoiding enforcement over serving consumers effectively.
The View from Washington: Digital Regulation as Trade Barrier
Beyond the immediate impact on the American DMA-designated companies, the regulation’s impact has resonated across the Atlantic, drawing significant attention from the U.S. administration. The U.S. administration has increasingly framed EU digital regulations as protectionist measures disguised as consumer protection. In February 2025, Vice President J.D. Vance pushed back against European efforts to tighten AI oversight at a Paris summit, emphasizing that the United States intends to remain the “gold standard” in AI technology while advocating for innovation-driven approaches over prescriptive regulation.
This perspective aligns with the administration’s “Fair and Reciprocal Plan,” which directs U.S. government agencies to act against trading partners imposing what it views as discriminatory barriers on American goods and services. As Eric Fruits notes, non-tariff barriers like the DMA represent regulatory measures that governments use to influence trade flows without direct tariffs, often driven by protectionist goals despite ostensibly addressing legitimate public policy objectives.
The comparison to traditional trade barriers gains credibility when considering Mario Draghi’s acknowledgment that Europe’s internal barriers are equivalent to a tariff of 45% for manufacturing and 110% for services. This framing helps policymakers understand digital regulations in economic terms—as barriers imposing real costs on foreign competitors while protecting domestic industries.
Digital Sovereignty or Digital Protectionism?
In 2019, Dirk Auer and Geoffrey Manne argued that it was not then obvious whether EU’s competition enforcement against U.S. companies was motivated by protectionism. But they also noted that “[i]t is hard to argue that a competition regime that fines US companies nine times more than EU ones (excluding cartels) is not somehow skewed against US businesses — if not in intention, then at least in effect.”
Today, the EU openly frames its digital regulations as necessary for achieving “digital sovereignty,” but critics see this as industrial policy designed to advantage European firms at the expense of more competitive American companies. EU Commission President Ursula von der Leyen’s statement that Europe “must now lead the way on digital—or it will have to follow the way of others” reveals the industrial policy motivations underlying these sovereignty claims.
The economic costs of this approach extend beyond compliance burdens. By limiting foreign investment and expertise in European tech businesses, particularly from experienced U.S. venture capitalists, Europe deprives itself of crucial knowledge and capital. As Kristian Stout and I argue, American investors bring not just money but experience that European investors often lack, particularly in deep tech sectors.
The Draghi Report’s acknowledgment that Europe now has around 100 tech-focused laws and over 270 regulators active in digital networks across all Member States underscores how regulatory complexity itself becomes a barrier to innovation. This regulatory maze creates compliance costs that deter companies from operating across EU borders, ironically fragmenting the very single market the regulations claim to protect.
The Uncertain Benefits: Costs Without Clear Gains
Despite imposing billions in compliance costs and operational restrictions on U.S. technology companies, it remains far from clear whether the DMA will deliver net benefits to European businesses or consumers. The evidence from the workshops suggests that the regulation’s primary achievement may be imposing costs rather than creating value.
European consumers face the prospect of delayed or withheld innovations, with Google explicitly acknowledging the “withholding of innovations from Europe” as a consequence of regulatory uncertainty. Microsoft’s compliance approach, which requires building features “to the best of our judgment and ability to be compliant with the DMA” from day one, inevitably slows the pace at which new capabilities reach European users. Rather than empowering consumers with more choices, the DMA may be creating a digital divide where Europeans become second-class digital citizens.
The promised benefits for European businesses also remain elusive. Small and medium enterprises (SMEs) risk losing access to effective advertising tools that help them reach customers efficiently. Meta’s workshop testimony revealed that EU SMEs now struggle with less effective marketing options while consumers receive less relevant advertisements—hardly the pro-competitive outcome the DMA promised.
Perhaps most concerning are the security implications. Apple reports that “third parties are exploiting interoperability requirements for data harvesting,” with some requesting capabilities to “read the contents from each and every message and email on the user’s device.” These mandated vulnerabilities create real risks for European users while the corresponding benefits remain theoretical at best. I wrote more about the privacy and security aspects of the workshop discussions on EUTechReg.com.
Conclusion: Recognizing the DMA’s True Nature
The evidence from DMA implementation, particularly as revealed in the recent workshops with designated gatekeepers, demonstrates a regulation that functions less as consumer protection and more as an economic instrument affecting the competitive landscape between U.S. and EU technology sectors. With compliance costs reaching billions annually across affected companies—far exceeding any traditional regulatory compliance regime—the DMA operates as a substantial wealth transfer mechanism.
The fragmentation of enforcement despite promises of a single rulebook, combined with the existential threat of percentage-of-turnover fines, creates a regulatory environment where compliance becomes not just a legal obligation but a massive economic burden. As Mario Zúñiga argues, the Draghi report should serve as a warning to other jurisdictions against following the EU’s approach to digital markets regulation, given Europe’s own acknowledgment of its innovation failures.
The DMA represents not merely technical regulation but economic policy with significant implications for transatlantic digital commerce. Whether through fundamental reform of the DMA itself or through U.S. trade policy responses, addressing this reality becomes essential for maintaining both innovation and fair competition in global digital markets.
