The European Commission’s just-published decision against Meta reveals a fundamental tension in EU digital regulation. In it, the Commission explicitly states it will pay no attention to the economic consequences of DMA enforcement on gatekeepers. This admission has profound implications not just for Meta, but also for other designated gatekeepers.
It is a sign of a fundamental flaw in the Commission’s approach—the failure to seriously and credibly consider the effects of their actions. In effect, the Commission appears not to care if it destroys more market contestability than it purports to create. In a striking example, the Commission even disregards the potential impact of its strategy on smaller EU businesses that rely on targeted digital advertising to compete with larger competitors.
Economic Viability as an Afterthought
Paragraph 154 of the decision lays bare the Commission’s regulatory philosophy:
[The DMA] does not safeguard [gatekeepers’] business models from any constraint it mandates, nor is complying with that Regulation conditional upon preserving the profits gatekeepers generated prior to its adoption.
The decision clarifies that concerns about economic viability can only be raised through Article 9(1) applications, where gatekeepers must prove that “exceptional circumstances beyond [their] control threaten the economic viability of [their] EU operations.” In other words, the Commission won’t even consider whether its interpretations might be economically destructive until after imposing them—and only then, solely where a gatekeeper can meet what the Commission will undoubtedly set as an exceptionally high burden of proof.
This framework puts digital platforms in a worse position than traditional regulated utilities. When regulating electricity or water companies, economic viability is baked into the framework from the start. Here, the Commission treats sustainability as an exceptional circumstance, rather than a baseline requirement for functioning markets. In other words, it pursues a controversial and quite literal reading of one EU regulation with very little evidence of serious economic thought and systemic consideration for the EU’s aims.
Destroying Contestability While Claiming to Protect It
Perhaps most damning is the Commission’s complete failure to consider third-party effects. While claiming to promote contestability, the decision shows no analysis of how degrading Meta’s advertising effectiveness would impact the many EU SMEs that depend on targeted advertising to compete.
In Paragraph 262, the Commission acknowledges that “behavioural advertising may create value to some end users and businesses under certain circumstances.” Yet it immediately dismisses this consideration as irrelevant to its legal analysis. The decision contains no examination—not even a cursory one—of potential harm to EU businesses that advertise on Meta’s platforms.
This represents a fundamental analytical failure. The Commission focuses solely on constraining Meta, while ignoring that:
- EU SMEs rely on Facebook and Instagram’s targeted advertising to reach customers cost-effectively, often spending a fraction of what traditional advertising would require;
- Without effective digital-advertising channels, small businesses cannot compete with larger companies that have established brand recognition and distribution networks; and
- Platforms like Facebook and Instagram are themselves a massive source of contestability in traditional markets, allowing new entrants to challenge incumbents.
The Commission’s willful blindness to economic consequences isn’t theoretical—we’ve already seen it harm an entire European industry. When the DMA was enforced against Google’s hotel search features, the results demonstrated precisely how the Commission’s approach can undermine the businesses it claims to protect.
Independent studies documented significant negative impacts: European hotels experienced a 30% drop in direct booking traffic and a 36% decline in direct bookings. Most notably, the primary beneficiaries were large American online travel agencies like Booking.com and Expedia, which captured the market share the hotels lost.
HOTREC, representing more than 2 million European hospitality businesses, called the outcome “paradoxical”—a well-intentioned EU law that ended up benefiting large U.S, corporations while harming EU small businesses. Hotels that had used Google’s features to compete with dominant intermediaries suddenly found themselves more dependent on those very intermediaries, paying higher commissions and losing direct customer relationships.
Regulatory Philosophy Unmoored from Economic Reality
The decision reveals a Commission that views its mandate through such a narrow legal lens that it cannot see the economic forest for the regulatory trees. By dismissing third-party effects and explicitly refusing to consider business-model impacts until faced with an “exceptional circumstances” claim, the Commission adopts a “regulate first, ask questions later” approach that would be unthinkable in any other area of economic regulation.
This approach transforms the DMA from a tool for market improvement into a blunt instrument that may destroy more contestability than it creates. The Commission’s own words reveal that it knows there will be casualties—it states plainly that implementing DMA obligations “will inevitably impact the business models that gatekeepers choose.” Yet it refuses to examine what those impacts might be or who else might be harmed in the process.
The decision’s treatment of Meta’s “pay or consent” model illustrates this perfectly. The Commission fixates on whether users face a “real choice,” while completely ignoring whether threatening the removal of targeted advertising as a viable business model offers any choice at all to the SMEs that depend on it.
The Path Forward: Regulation with Eyes Wide Open
The Commission’s approach represents a dangerous precedent. By explicitly divorcing regulatory enforcement from economic analysis, it risks creating a compliance regime that succeeds on paper, while failing catastrophically in practice. Worse, by ignoring third-party effects, it may destroy more market contestability than it creates—harming the very EU businesses and consumers it claims to protect.
Effective regulation requires balancing multiple objectives and considering systemic effects. The Commission’s admitted refusal to do so isn’t regulatory courage—it’s regulatory negligence.
Policymakers must ask themselves: is the goal to punish successful platforms, or to create genuinely contestable markets that benefit all participants? The answer will determine whether the DMA becomes a tool for market improvement or a monument to regulatory myopia.
