Washington, D.C. — A new analysis warns that California’s SB 1074 (the BASED Act), which is modeled on the European Union’s Digital Markets Act (DMA), could raise costs for businesses and reduce quality for users without delivering meaningful competitive benefits. The report looks at two years of impacts under the EU’s DMA and finds that the law has been far more costly than expected while providing few benefits for consumers or business users. SB 1074 is slated for a hearing by the California Senate Committee on the Judiciary on April 14th.
Higher Costs, Lower Quality
Digital services in Europe now spend about $1 billion per year to comply with the DMA—far more than originally estimated (~$10 million). Despite these costs, there is little evidence of improved competition or better consumer outcomes. Instead, European users report that digital services have become less convenient and harder to use, with 59% of Europeans willing to pay an average of ~$300 per user per year to restore pre-DMA digital service features. Business users report lost traffic and having to pay more to attract consumers.
Risks for California
The analysis finds that California’s SB 1074 could cost the state $200-$400 million in its central scenario each year. In addition to requirements modeled on the DMA, the bill would allow treble damages and lawsuits from private parties and class actions. These changes could significantly increase total costs, up to $2.7 billion if test cases result in large plaintiff victories.
The following quote may be attributed to the report’s author, Trevor Wagener, who serves as CCIA’s Chief Economist and Director of the CCIA Research Center:
“The BASED Act risks importing the high costs of Europe’s Digital Markets Act for consumers, business users, and leading California employers, and adding on enormous litigation risks that jeopardize the digital services that employ a million Californians.”
