Frances Townsend Condemns AICOA, OAMA as Competitive Handcuffs for U.S. Companies

Frances Townsend, former homeland security adviser to President George W. Bush from 2004 through 2008, sees peril in the United States allowing two bills to pass that echo the European Union’s Digital Markets Act and Digital Services Act, two laws that Townsend said cripple American companies while crushing innovation and opening up security risks for the U.S. and its EU allies.

In a pointed op-ed for The Hill, Frances Townsend said that two bills currently in process in the U.S., the American Innovation and Choice Online Act (AICOA or S.2992) and the Open App Markets Act (OAMA or S.2710), replicate the worst of their European counterparts.

“These policies would be a self-inflicted wound that threatens the national security of the United States and its extensive network of European allies,” Townsend wrote in the Aug. 18 opinion piece. “Policymakers in the U.S. (and the United Kingdom) should treat the EU’s approach as a cautionary tale, not as a model to emulate.”

In order to understand Townsend’s apprehension around the U.S. bills, one must first understand the European bills they are modeled after.

The DMA is positioned as a way for the EU to “ban certain practices used by large platforms acting as ‘gatekeepers’ and enable the commission to carry out market investigations and sanction noncompliant behavior.”

But what Townsend sees is a check against U.S. innovation, as the bill only takes notice of the largest platform companies, such as Google, Facebook, and Apple, all of which happen to be U.S.-based.

“European leaders insist these bills will boost competition in digital markets, but that claim ignores the numerous headlines, corporate earnings reports, and shifts in market share that are testament to the fierce multinational competition that exists in the digital space,” Townsend wrote.

The bill specifically targets companies with “a market capitalization of at least 75 billion euros [approximately $75 billion] or an annual turnover of 7.5 billion” and that these companies must also provide “certain services such as browsers, messengers, or social media, which have at least 45 million monthly end users in the EU and 10,000 annual business users.”

In other words: Big Tech.

The DMA’s counterpart, the DSA, is supposedly going to “set clear obligations for digital service providers, such as social media or marketplaces, to tackle the spread of illegal content, online disinformation, and other societal risks” and that these “requirements are proportionate to the size and risks platforms pose to society.”

Once again, the largest and most influential companies, once again almost exclusively American, seem to be the targets of the law.

Frances Townsend pulled no punches in suggesting that perhaps the EU’s model is not appropriate for the U.S.

“Given Europe’s poor track record of building its own Silicon Valley and venture capital industry, it makes little sense for the United States to take a page from its playbook when it comes to regulating an industry as vitally important to our national security and economic prosperity as technology,” she wrote.

But, according to Townsend, that’s precisely what Congress is doing by furthering the AICOA and OAMA.

Townsend said the bills “discriminate against specific U.S. tech companies to the benefit of our adversaries, crack down on so-called ‘self-preferencing’ practices without imposing the same restrictions on European and Chinese companies.”

The twin U.S. bills are meant, in theory, to “prohibit certain large online platforms from engaging in specified acts, including giving preference to their own products on the platform, unfairly limiting the availability on the platform of competing products from another business, or discriminating in the application or enforcement of the platform’s terms of service among similarly situated users.”

In practice, they create more problems than they solve, Townsend said. And she isn’t alone in this assessment.

As Frances Townsend notes in her op-ed, in a leaked memo, the White House’s National Security Council stated that “there is a concern that the DMA may override existing protections for intellectual property rights, including protection for trade secrets.”

While economic concerns, especially as they pertain to China, are always at the forefront of antitrust-driven legislation, Townsend’s more immediate and pressing concern is what these regulations, applied only to U.S. companies, would do to the U.S. national security apparatus.

Townsend said that the AICOA and OAMA would “restrict American tech companies in many critical areas, including search results they can show, [but] foreign adversaries would not be held to the same standards.”

She said that not applying those same restrictions to Russian and Chinese companies would allow for “rampant propaganda” from the two powers.

Townsend has previously noted dangers in the misinformation campaigns waged by both China and Russia with regard to Russia’s invasion of Ukraine.

“China has allowed Russia to use their platforms and put out disinformation and they have denied the ability for those who want to put information and pictures up about what is really going on. They block them,” Townsend said during a recent video interview with the Center for the National Interest, a Washington-based public policy think tank.

As things stand now, the AICOA was advanced by the Senate Judiciary Committee on Jan. 20 of this year, passing with a 16-6 vote. A Senate floor vote, which had been expected before the August recess, will now likely take place in September.

The OAMA passed the same committee in early February of this year via a 20-2 vote and is also due for a September vote.

Big Tech companies targeted by the bills, including Apple and Google, have publicly opposed the legislation, with Google Vice President Mark Isakowitz saying the bill would “destroy many consumer benefits that current payment systems provide and distort competition by exempting gaming platforms, which amounts to Congress trying to artificially pick winners and losers in a highly competitive marketplace.”

Tim Cook, CEO of Apple, took a different path, saying the legislation would not only not improve the consumer experience, but that it would compromise user security.

Frances Townsend wrapped her op-ed by distilling the situation to a zero-sum game of haves and have-nots should the bills pass.

“If America follows in Europe’s footsteps … the winners will be China and Russia, who will not hesitate to exploit the loopholes created by the legislation at a moment of acute competition between our economies.”

This article does not necessarily reflect the opinions of the editors or management of EconoTimes