The EU’s Digital Markets Act (DMA) exemplifies the “Brussels Effect,” extending the EU’s regulatory influence beyond its borders and shaping global digital competition policies. While intended to curb the market power of large technology platforms and promote fair competition, its broad, rigid, and pre-emptive approach risks stifling technological development, deterring investment, and creating legal uncertainty, particularly in emerging markets still building digital infrastructure and seeking to attract foreign investment.
Large technology firms play a pivotal role in global economic development, driving innovation, infrastructure upgrading, and consumer welfare. However, increasing regulatory scrutiny, particularly under DMA-like frameworks, could inadvertently harm the very markets they help grow by imposing compliance burdens that hinder business expansion and technology diffusion. Countries with weaker institutions and regulatory capacity – such as India, Brazil, South Africa, and other emerging market and developing economies (EMDEs) like Indonesia – could face greater risks of regulatory capture, corruption, and enforcement challenges if they replicate the EU’s approach without adapting it to their economic realities.
A key concern with the DMA is the departure from traditional case-by-case enforcement in competition policy, instead relying on broad, pre-emptive obligations based on ambiguous concepts such as fairness and contestability. This shift reduces legal certainty, increases the risk of inconsistent enforcement, and may inhibit dynamic competition, which is essential for innovation-driven sectors like fintech, e-commerce, ICT, and edtech. By prioritising static over dynamic competition, the DMA could impede technological progress, limiting consumer choice and long-term economic benefits.
The global adoption of DMA-like regulations risks further regulatory fragmentation and may create unintended consequences, particularly in emerging economies where regulatory frameworks, institutional quality, and market structures differ significantly from the EU. Broad prohibitions on business practices, such as self-preferencing and data-sharing, could limit opportunities for local firms to scale internationally, weaken cybersecurity protections, and reduce incentives for large technology firms to invest in these regions.
To ensure proportionate and effective competition enforcement, governments outside the EU should prioritise regulatory flexibility and case-by-case assessments over broad, static restrictions. OECD best practices on competition policy emphasise clear objectives, legal certainty, and regulatory proportionality, ensuring that competition enforcement supports, rather than stifles, innovation and investment.
Moreover, the risks of corruption and regulatory overreach in developing countries make broad ex-ante regulations especially problematic. Excessive discretionary power granted to local authorities could increase the risk of politically motivated enforcement, deter foreign investment, and undermine long-term economic growth. A more effective approach would be to strengthen institutional frameworks, enhance transparency, and adopt supply-side policies that support technology neutrality, free trade, and economic freedom.
Key Policy Recommendations
To mitigate these risks, a smarter approach to digital market regulation is needed, balancing competition enforcement with innovation incentives.
- EU regulators should reassess the DMA’s rigid approach, reverting to case-by-case competition enforcement and aligning with OECD best practices to avoid legal uncertainty and overregulation.
- Globally, “outside-of-EU” regulators should adapt regulations to local market conditions, avoiding one-size-fits-all EU-style competition policies that may be ill-suited to emerging economies with different enforcement capabilities.
- Businesses should proactively engage in policy debates, highlighting their role in fostering innovation, economic growth, and technology diffusion while advocating for evidence-based competition policies.
- Civil society should promote regulatory transparency, supporting consumer welfare-driven policies and helping governments navigate competition enforcement without stifling market innovation. Civil society organisations should assist competition authorities by providing market knowledge, empirical research on consumer harm, and expert insights to improve regulatory decision-making.
By maintaining proportionate, targeted, and innovation-friendly competition policies, competition regulators can foster dynamic competition, ensure technological progress, and create a digital economy that benefits both businesses, consumers, and overall economic development.
ECI_25_PolicyBrief_08-2025_LY03
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