Letters request answers on extraordinary effort by FTC to use foreign regulators to weaken U.S. firms’ competitiveness

WASHINGTON, D.C. – U.S. Senate Commerce Committee Ranking Member Ted Cruz (R-Texas) today sent letters to Federal Trade Commission (FTC) Chairwoman Lina Khan and the head of the European Union’s San Francisco office, demanding answers regarding the degree of coordination between the FTC and the EU to enforce the EU’s Digital Services Act (“DSA”) and Digital Markets Act (“DMA”) on U.S. soil. Both foreign laws were written to weaken American tech companies, particularly in Europe. There are no corollary federal laws to the DSA and DMA, making the FTC’s efforts to conspire with foreign regulators against U.S. businesses unprecedented.

The FTC announced in March that it was sending agency officials to Brussels to assist the EU in implementing these laws, while the EU opened a San Francisco office to pressure U.S tech companies to comply with them.

As Sen. Cruz wrote to Chairwoman Khan:

I write regarding the Federal Trade Commission’s (“FTC”) use of taxpayer resources to directly coordinate with foreign lawmakers to create new regulations in overseas jurisdictions that target American businesses.  Your agency’s collusion with foreign governments not only undermines U.S. sovereignty and Congress’s constitutional lawmaking authority, but also damages the competitiveness of U.S. firms and could negatively affect the savings of millions of Americans who hold stock in those companies via retirement savings accounts and pension plans.  

As you know, the European Union (“EU”) recently approved two laws expressly designed to weaken American companies and boost the EU’s revenue under the guise of consumer protection and competition.  First, the EU passed the Digital Markets Act (“DMA”), which requires certain “gatekeeper” companies to comply with extremely prescriptive obligations, like sharing customer data with third parties, or else risk a fine of up to twenty percent of their annual global revenue.  By virtue of how the law defines “gatekeeper” companies, the DMA targets American firms; European and Chinese companies can for the most part operate as usual, if not better, with their competition effectively weakened.  Second, the EU approved the Digital Services Act (“DSA”), which imposes certain requirements on all online service platforms […] Again, non-U.S. companies are largely off the hook.   

Taken together, the DMA and DSA objectively discriminate against U.S. companies by imposing enormous regulatory compliance costs and penalties on them, while handing companies from other countries—especially China—a competitive edge.  These concerns are real: a recent study determined that “new compliance and operational costs” resulting from the DMA on U.S. companies could range from $22 billion to $50 billion.5  It also found that 16 percent of European companies surveyed would switch from an American tech provider to a Chinese tech provider because of those anticipated costs.

It is one thing for the EU to target U.S. businesses, however misguided such efforts may be.  But it is altogether unthinkable that an agency of the U.S. government would actively help the EU do so.  Even the Biden administration has “been clear” that the U.S. government “opposes efforts specifically designed to target only U.S. companies,” like the DMA and DSA.

Sen. Cruz has requested information, including a full accounting of taxpayer funds used by FTC employees to travel to Brussels and to the EU’s office in San Francisco, as well as documents and communications between FTC and EU officials.

In his letter to Gerard de Graaf, the head of the EU’s San Francisco office, Sen. Cruz wrote:

Last fall, the EU opened the San Francisco office—the only secondary office the EU has ever opened in a country where it already had a delegation—stating that it was necessary “to strengthen transatlantic technological cooperation and to drive the global digital transformation based on democratic values and standards.”  The timing of the office’s establishment, however, suggests more is at play.  The EU’s San Francisco office opened its doors six weeks after the European Council approved the Digital Markets Act (“DMA”) and four weeks before the European Council approved the Digital Services Act (“DSA”).  Those two laws will impose unprecedented, sweeping regulations on certain large technology companies—almost all of which are based in the United States.  Moreover, members of the EU parliament visited nearby Silicon Valley to discuss the DMA and DSA just months before the San Francisco office opened.  Evidently, before the EU recently focused its regulatory efforts on U.S. technology companies, “transatlantic technological cooperation” did not require that EU officials have an office on the West Coast. 

Additional facts indicate that the EU likely opened the San Francisco office to ensure that U.S. businesses comply with its new draconian regulations.  Most obvious is your selection as the head of the EU San Francisco office and “Senior Envoy for Digital to the U.S.” given your previous roles as the DMA’s and DSA’s chief architect and head cheerleader.  And although the EU’s press team has repeatedly claimed the office will “reinforce the EU’s cooperation with the United States on digital diplomacy,” this office will be staffed not with experienced diplomats, but rather young Europeans who are “passionate about digital policies and tech regulation.”  At the least, the office is serving its announced purpose of “promot[ing] EU standards and technologies, digital policies and regulations and governance models” on foreign soil.  For example, less than two months after opening, the office hosted a “briefing” on the DMA.  What is more, members of the EU’s San Francisco office are reportedly having policy meetings with lawmakers from liberal, regulation-happy states like California and Washington, because they recognize that the U.S. Congress does not support replicating Europe’s misguided policies.    

But as the head of the EU San Francisco office, you may have let the cat out of the bag—as we say in the U.S.—before the office even opened.  In July 2022, in response to the European Council’s announcement of the forthcoming San Francisco office, you explained that the EU’s “role is to try and facilitate the implementation and the compliance” with European regulations of U.S. companies, like the DMA and DSA.

Sen. Cruz is seeking information regarding the actions taken by the EU to implement its laws on U.S. soil, including an account of visits to the EU’s San Francisco office by representatives of government entities or companies based in the U.S., as well as communications between the office and Americans pertaining to the EU’s new laws.

The full text of the letter to the FTC is available HERE. The full text of the letter to the EU’s San Francisco office is available HERE.

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