Europe’s Tech Problems Are Self-Imposed

From its seat in Brussels, the European Union (EU) regularly introduces, enacts, and enforces legislation targeting American tech companies. The argument is always the same: U.S. platforms extract enormous value from European markets, pay too little for the privilege, and enjoy advantages of scale no European competitor can match.

Each new instrument — data protection, gatekeeper rules, digital levies, minimum taxes — dares to close that gap. Each has failed.

Some of this stems from broad, structural issues. The EU’s promise was a single European market: 450 million consumers under one regulatory framework. What exists now is a flat minimum tax with ​27 individual systems, and subsequently, 27 individual tax markets, each uniquely complicated and burdensome.  

On the tech front, research consistently finds that these policies, designed to blunt the American advantage, disproportionately burden small European firms. A salient example: after the enactment of the General Data Protection Regulation (GDPR), Europe’s adtech vendor market shrank 15% while its concentration rose 17%. Publishers dropped the small vendors and kept Google, which proved most capable at absorbing consent-management and compliance costs.  

Small sites lost almost twice the revenue large ones did.  The regulations intended as a check on Big Tech only strengthened it: a compliance regime that costs the same in absolute terms for a company of ten as for a company of ten thousand is, whatever its intent, an industrial policy in favor of scale.  

European firms face the costs of harmonization but enjoy none of its efficiencies, and thus scale more slowly than their American counterparts. This stifles the innovative economy the EU is diligently trying to create — no EU company worth over €100 billion has been founded in fifty years.

Brussels likes to target the core elements of American scale and prosperity— our data collection practices, gatekeeping, tax efficiency, and advertising revenue. Yet none of the legislation passed by the EU has addressed the real causes of European non-scale: 27 insolvency codes and company-law regimes, fragmented capital markets, thin late-stage venture funding, no continental equity culture, no unified filing calendar, and a services market with tariff-equivalent internal barriers north of 100 percent.

So, what can we take from the EU’s actions?  

Taxing the winner does not create a challenger. If Europe wants a European Google, the binding constraint was never that Google paid too little tax in France. It was that Europe never built a market in which a European company could scale as a single entity. Instead, Brussels has spent fifteen years antagonizing its largest trading partner to no competitive gain — or end — burdening its own firms in the process. It is a policy with two victims and no beneficiaries.  

Unless the EU changes its course, this sovereignty agenda will keep producing the same result: a rulebook that Washington resents, European businesses pay for, and American tech giants trudge through. It is clear now that EU lawmakers need a new approach — one that serves their people, their businesses, and the broader European economy.

About the Author: Lily Haak is a Non-Resident Fellow with the Lexington Institute. She is an M.A. candidate in Economics at the University of Florida and the Student Director of the Digital Markets Initiative, a research group dedicated to competitive technological studies. Her works have also been published by the Stanford Economic Review, the Florida Undergraduate Law Review, and Harvard’s Undergraduate Foreign Policy Review.