At first glance, the European Union’s new Digital Markets Act seems to have little connection to the 1968 US Department of Justice Merger Guidelines. Continents and decades separate the two instruments. One oversaw merger control in mid-20^th century industrial America; the other regulates digital gatekeepers in a 21^st century data-driven economy.  

But beneath these obvious differences lies a striking commonality: rising concern about a few large companies’ unchecked market power. 

Both the DMA and the US merger guidelines target firms over a certain size, scope and market dominance. Both are built on the fears that these “conglomerates” or “gatekeepers” can entrench economic power and distort competition, even in the absence of direct, short-term consumer harm. The DMA may be new legislation – but it carries the familiar logic of a bygone pre-digital era. It is, in many ways, old wine in a new bottle. 

The intellectual links are important. The Trump Administration accuses the DMA of being a “tax” or “tariff” targeting US companies. The EU retorts that it applies antitrust law without discrimination and that US companies receive the most attention because they dominate the expanding digital economy. So far, too, the Trump Administration has continued to pursue antitrust cases against Google, Amazon, Apple, and Meta, the same companies targeted by Europe.  

During the 1965-1975 “conglomerate merger wave,” American industry consolidated at a rapid pace. More than 4,000 mergers took place in 1969. Giant multinational conglomerates such as Procter & Gamble, Ling -Temco-Vought, ITT Corp, and Litton Industries emerged. Just like Europe’s DMA, the 1968 US merger guideline adopted a strong prediction and presumptions-based approach: certain mergers were presumed illegal based not on their proven anticompetitive effects, but because of their potential future impact.   

In response to the conglomerate boom, US regulators developed several revolutionary theories. The 1968 merger guideline defined “potential competition” as the “threat of entry either through internal expansion or through acquisition and expansion of a small firm, by firms not already or only marginally in the market. A “sufficient degree of market power” existed if a company held 25% or more of the market, if it was one of the two or four largest firms in the market, or if it was among the eight largest firms in a market whose combined market shares totaled approximately 75% or more. Conglomerate or vertical mergers, where the acquiring company held around 20 % market share, could be blocked if the target was a related company in the supply chain. 

Notably, the US guidelines did not require dominant market shares nor proof of harm to the consumer. Rather, regulators scrutinized conglomerate mergers because of the potential to reshape the market structure through cross-market acquisitions. The Supreme Court upheld these novel theories of harm on conglomerates. In the 1967 case FTC v. Procter & Gamble Co., the Supreme Court prohibited leading, multinational Procter & Gamble from acquiring household liquid bleach manufacturer Clorox. The judges followed the 1968 merger guidelines and ruled that the acquisition could entrench or increase Clorox’s market power and raise barriers to entry – even though Clorox was relatively small. In modern terms, this is akin to blocking a tech giant from buying a startup that isn’t a direct competitor, but could someday be a rival if left independent.  

Europe’s DMA relies on formalized “designations,” naming companies operating certain core platform services and having reached a certain size as gatekeepers. Both the DMA and 1968 US Merger Guideline emphasize size and market power. Both focus on identifying firms that are the “largest in their group” and rely on relatively strict quantitative thresholds. DMA designates gatekeepers if they generate an annual turnover above €7.5 billion in each of the last three financial years, enjoy a fair market capitalization of at least €75 billion, and if they provide a core platform service in at least three EU member state. Gatekeepers must serve more than 45 million consumers and 10,000 European business users. All the conditions must be met in the three preceding financial years. 

Designated gatekeepers need to adhere to certain obligations, which resemble the identified harms of conglomerates in the 1960’s America. The 1968 US guidelines blocked mergers that eliminated a firm that could have otherwise entered the market independently. Similarly, a DMA gatekeeper may not treat its own services and products more favorably than similar services or products offered by third parties (Art. 6 (5) DMA; self-preferencing) or prevent consumers from linking up to businesses outside their platforms (Art. 5 (8); bundling prohibition). Both regimes, though different in form, share a forward-looking approach: they seek to prevent dominant firms from entrenching their positions by foreclosing opportunities for new or emerging competitors. 

Just as the 1960s US merger guidelines condemned reciprocal buying, the DMA prohibits gatekeepers from conditioning access to one service on the use of another. The US Supreme Court in FTC v. Consolidated Food Corp prohibited reciprocity as “an economically unjustified business practice which confers a competitive advantage on the favored firm unrelated to the merits of its products.”  

Admittedly, the DMA and US merger guidelines are not exact copies. The US regulations kicked in only when companies attempted takeovers of rivals. Europe’s DMA regulates behavior outside of potential acquisitions complementing competition law. The DMA is a binding EU regulation, whereas the 1968 US merger guidelines were non-binding guidelines. While the US rules applied across all industries, the DMA targets only core digital platforms.  

Critics point out that the DMA and the US merger guidelines ignore potential efficiency benefits. When the US blocked multinational Procter & Gamble from acquiring the leading manufacturer of household liquid bleach Clorox, the US Supreme Court ruled in 1967 that this acquisition had harmed competition even though it reduced the price of household liquid bleach. “A new entrant would be much more reluctant to face the giant Procter than it would have been to face the smaller Clorox,” the court ruled.  Since the DMA does not require an anti-competitive analysis, it also ignores possible efficiencies brought forward by the accused firms and critics worry the DMA might impose burdens that could inadvertently chill some beneficial conduct or investment by big platforms.  

Finding the right balance between enforcement and innovation remains a challenge. Both the US guidelines and Europe’s DMA represent moments where enforcers chose to err on the side of competition preservation.  Like today, a conglomerate boom marked the 1960s and the public became hostile towards large firms. From 1964 to 1977, US regulators challenged 33 such mergers. Once again, the US government is bringing cases against the largest tech companies, from Alphabet to Meta. It seems European regulators share many of the same concerns as their US colleagues. 

Paul Friederiszick is a doctoral researcher at Fordham University School of Law in New York. His research focuses on Antitrust Law, with a particular emphasis on market power and innovation. He is a fully qualified attorney in Germany, where he studied law at Ludwig Maximilian University of Munich. He holds an LL.M. degree from the University of California, Los Angeles (UCLA), where he was awarded the Dean’s Scholarship. Paul has several years of professional experience working with leading law firms, competition authorities, and an economic consultancy in the field of antitrust law. 

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.

The post DMA: Old American Wine in New European Bottles  appeared first on CEPA.