Who Really Pays for the Bill? Startups, SMEs, and the Collateral Cost of Brazil's Digital Markets Regulation

Brazil's Digital Markets Bill targets Big Tech. But the evidence from Europe suggests that the companies most exposed to its collateral effects may be the smallest ones.

When Brazil's government introduced Bill 4,675/2025, the public debate quickly centered on a familiar cast of characters: Alphabet (Google), Apple, Meta, Amazon, Microsoft. The political framing was unmistakable; this was regulation designed to rein in global digital giants. 

Yet a closer look at how similar regimes have played out in Europe and the United Kingdom tells a more complicated story. When regulators move against large digital service providers, the companies that often absorb the greatest indirect costs are not the providers themselves. They are the startups building on top of them, the small businesses that depend on their advertising tools, and the independent operators whose digital existence is mediated by the very providers being regulated.

Brazil is not Europe, and its digital economy is structured differently. But the mechanisms that generate spillover effects are not unique to any jurisdiction. They follow from the logic of platform-dependent markets – and Brazil has plenty of those.

A Law Built Around a Foreign Problem

The European Union's Digital Markets Act (DMA) was designed with a specific diagnosis in mind. The EU's original impact assessment framed the entire proposal around this narrow set of firms, explicitly targeting large digital service providers acting as important gateways for business users and end users. The UK's Digital Markets Competition and Consumer Act (DMCCA) followed the same logic, explicitly restricting its regime to companies that hold what British regulators called "strategic market status".

Brazil's Bill 4,675/2025 is built in their image. Its political motivation, its institutional design, and the discourse that surrounds it all orbit around the same diagnosis: large, systemically relevant digital providers whose power must be checked. And yet, as comparative evidence increasingly demonstrates, the assumption that these regimes affect only their designated targets has turned out to be wrong. Three years after the DMA entered into force, the European Commission launched a formal review process specifically gathering feedback by business users (especially SMEs) and end users on the on the effectiveness of the DMA so far in achieving its objectives of ensuring contestable and fair digital markets.^[1] That alone signals that indirect effects were not a side issue, but a central component of the regulatory process.

Brazil's digital landscape is not composed only of major global providers. Its digital economy includes a vibrant layer of domestic apps, startups, and small and medium-sized enterprises (SMEs) that use larger providers as their primary commercial infrastructure. Understanding what happens to these actors is not a secondary concern. It should be a major focus for legislators as they debate this bill.

How Regulation Travels Downstream

The mechanism behind spillover effects is straightforward: when regulation changes how a major provider operates, it can change how customers of those providers interact with their customers. Product redesigns, altered algorithms, new data access regimes, and restructured commercial terms do not stay within the four walls of the designated firm. They ripple outward to affect many other companies that work with those firms. 

The EU experience has documented this across several channels. Compliance requirements imposed on gatekeepers have increased legal uncertainty for non-gatekeeper that operate alongside them.^{[2] [3]} The proliferation of app stores mandated by the DMA has multiplied the number of integrations, review processes, and security responsibilities that developers must manage (and those costs scale disproportionately for small teams).^[4] Changes to data-sharing rules have disrupted the advertising infrastructure that countless SMEs rely on to acquire customers.^[4] [5]

Analysis of the DMA's implementation has found that compliance costs for gatekeepers and their business users were substantially underestimated in the EU's original impact assessment.^[6] Brazil's Bill 4,675/2025 has yet to produce any Regulatory Impact Assessment at all, a gap that becomes considerably more alarming once the scale of these indirect effects is taken seriously.

Three Cases, Three Lessons

The comparative record offers three instructive case studies. Each involves a different platform, a different obligation, and a different set of collateral victims.

(i) Google, hotels, and the paradox of search neutrality.

When the DMA required Google to restructure its hotel search results to prevent self-preferencing, the intent was clear: give independent hotels and smaller booking platforms a fairer shot at visibility. The outcome was different. Google Hotel clicks dropped by as much as 17% in the EU, affecting the clicks and bookings to the direct channel.^{[7] [8]} Traffic did not flow to independent hotels, it flowed to Booking.com, which holds roughly 71% of the European online travel agency market.^[9]

Booking.com, which was not yet designated as a gatekeeper when Google implemented these changes, appears to have captured a significant share of the upside without bearing the corresponding obligations. Rather than expanding visibility for independent hotels and smaller European rivals, the new design seems to have reinforced the position of another large intermediary. For the smallest hotels, especially those with limited direct-booking infrastructure, the result was not disintermediation, but continued vulnerability to third-party dependence.

(ii) Apple, delayed functionality, and the downstream cost to smaller firms...

Rather than expanding innovation opportunities, the DMA’s interoperability and alternative distribution requirements appear, in some cases, to have introduced compliance and security frictions that delayed or limited the rollout of new digital and AI tools in the EU. Apple, for example, delayed the release of Apple Intelligence in the region, citing regulatory and security concerns, while features such as iPhone Mirroring and SharePlay Screen Sharing enhancements remain unavailable there.^[10] 

Survey evidence from small technology firms in Europe also suggests that such delays may have tangible economic effects, including slower access to AI tools, slower product development, and higher costs tied to restricted or postponed access to advanced technologies.^[11] These frictions are not borne evenly: large firms are generally better positioned to absorb delayed or downgraded rollouts, while smaller developers and SMEs face greater opportunity costs and less room to adapt.

(iii) Meta, advertising degradation, and the SME customer acquisition collapse.

The DMA required Meta to obtain GDPR-standard consent before using personal data for ad targeting. Meta responded by launching Less Personalized Ads in November 2024. The performance numbers are stark: Less Personalized Ads deliver roughly 70% fewer on-site conversions and 61% fewer off-site conversions compared to personalized advertising, with reports of an approximately 800% increase in ads dismissed as irrelevant or repetitive by users.^[12]

The distributional impact appears highly asymmetric. A study suggests that SMEs, especially those relying on direct-to-consumer models, may be disproportionately harmed, while larger players with direct access to consumer data and larger user bases are better positioned to sustain advertising effectiveness.^[13] For them, Less Personalized Ads did not reduce the cost — it dismantled a business model.

Brazil is a particularly important context for assessing these downstream effects. For many  SMEs in retail, food, beauty, and services, WhatsApp and Instagram are not the only ways to reach customers, but they are among the most accessible and cost-effective tools for discovery, engagement and conversion. Their value lies precisely in lowering customer acquisition costs and generating measurable returns for firms with limited marketing budgets. In that setting, changes to Meta’s advertising and commercial functionalities would not simply affect a large platform. They could also raise acquisition frictions for smaller businesses that rely on these tools because they are efficient, scalable and commercially viable.

The Unnamed Stakeholders

None of the cases above are hypothetical. In each case, the stated target was a dominant platform. In each case, the practical cost was partly absorbed by smaller actors who were never mentioned in the legislative debate.

This does not mean that regulating large digital service providers is inherently wrong, or that the problems motivating Bill 4,675/2025 are not real. It means that the legislative process has so far asked the wrong questions.

As previously noted in this series, Bill 4,675/2025 advances without any Regulatory Impact Assessment, without budgetary provisions, and without a staffing plan for the new Digital Markets Superintendency it proposes to create. To this list of omissions, a third dimension must now be added: the Bill also proceeds without any analysis of its spillover effects on smaller enterprises, startups, or consumers.

Brazil's legislature faces a genuine choice. The European Commission is conducting that review now, two years in, with a mixture of regret and urgency. Brazil has the opportunity to do it first.

References

[1] EUROPEAN COMMISSION. Consultation on the first review of the Digital Markets Act. Digital Markets Act (DMA), 2025. Available at: https://digital-markets-act.ec.europa.eu/consultation-first-review-digital-markets-act_en. Accessed on: April 10, 2026. 

[2] PROJECT DISCO. ICYMI: Does the Digital Markets Act Increase Legal Risks for Non-Gatekeeper Platforms? Disruptive Competition Project, Feb. 25, 2022. Available at: https://project-disco.org/european-union/022522-icymi-does-the-digital-markets-act-increase-legal-risks-for-non-gatekeeper-platforms/. Accessed on: April 10, 2026.

[3] NĂSULEA, Diana; NĂSULEA, Christian. Rethinking the DMA: Innovation, Competition, and the Risks of Overregulation. Brussels: European Policy Information Center, June 25, 2025. Available at: https://www.epicenternetwork.eu/briefings/rethinking-the-dma-innovation-competition-and-the-risks-of-overregulation/. Accessed on: April 10, 2026.

[4] BROADBENT, Meredith. Implications of the Digital Markets Act for Transatlantic Cooperation. Washington, DC: Center for Strategic and International Studies, September 15, 2021. Available at: https://www.csis.org/analysis/implications-digital-markets-act-transatlantic-cooperation. Accessed on: April 11,  2026.

[5] CENNAMO, Carmelo; SANTALÓ, Juan. Potential risks and unintended effects of the new EU Digital Markets Act. Feb. 16, 2023. Available at: https://www.esade.edu/ecpol/en/publications/potential-risks-and-unintended-effects-of-the-new-eu-digital-markets-act/. Accessed on: April 13, 2026.

[6] DE STREEL, Alexandre. Preparing the Evaluation of the DMA. Brussels: Centre on Regulation in Europe (CERRE), Mar. 2025. Available at: https://cerre.eu/wp-content/uploads/2025/03/DMA-Evaluation_FINAL.pdf. Accessed on: April 10, 2026.

[7] DELGADO, Pablo. Who are the winners and losers of Google’s implementation of the DMA?. Mirai, June 11, 2024. Available at: https://www.mirai.com/blog/who-are-the-winners-and-losers-of-googles-implementation-of-the-dma/. Accessed on: April 10, 2026.

[8] DELGADO, Javier. DMA implementation sinks 30% of clicks and bookings on Google Hotel Ads. Mirai, May 7, 2024. Available at: https://www.mirai.com/blog/dma-implementation-sinks-30-of-clicks-and-bookings-on-google-hotel-ads/. Accessed on: April 13, 2026.

[9] SCHEGG, Roland. European Hotel Distribution Study 2024: Results for the Reference Year 2023. June 2024. In: Hotel Distribution Study: Digital Trends in Accommodation: Hotels, Booking.com and DMA. Available at: https://hotel.report/technology/2024-hotel-distribution-study-digital-trends-in-accommodation-hotels-booking.com-and-dma. Access on: April 9, 2026. 

[10] CHEE, Foo Yun. Apple to delay launch of AI-powered features in Europe, blames EU tech rules. Reuters, June 21, 2024. Available at: https://www.reuters.com/technology/artificial-intelligence/apple-delay-launch-ai-powered-features-europe-blames-eu-tech-rules-2024-06-21/. Accessed on: April 11, 2026.

[11] ACT THE APP ASSOCIATION. The hidden cost of AI regulations: A survey of EU, UK, and U.S. companies. Washington, DC: ACT The App Association, 2025. Available at: https://actonline.org/the-hidden-cost-of-ai-regulations-a-survey-of-eu-uk-and-u-s-companies/.  Accessed on: April 13, 2026.

[12] META. Why the Commission’s Decision Undermines the Goals of the DMA. Meta Newsroom, July 2, 2025. Available at: https://about.fb.com/news/2025/07/why-the-commissions-decision-undermines-the-goals-of-the-dma/. Accessed on: April 11, 2026. 

[13] RADIĆ, Lazar; AUER, Dirk. A Europe Fit for the Age of Startups: Rhetoric and Reality in the EU’s Digital Package. ICLE White Paper. Portland: International Center for Law & Economics, Aug. 1, 2025. Available at: https://laweconcenter.org/resources/a-europe-fit-for-the-age-of-startups-rhetoric-and-reality-in-the-eus-digital-package/. Accessed on: April 9, 2026.