In this area, we have no idea which overheads are actually going to prove justified and which are just throwing money away. That's one of my main points here. As I've argued several times on HN recently, a big part of the problem is that if you're running a small business that isn't handling large amounts of personal data but obviously is going to be subject to the GDPR like everyone else, there is no clear indication of what you have to do to be considered reasonably compliant.

The GDPR itself is very heavy and has little in the way of moderation for small-scale data controllers/processors, so in practice it's going to come down to interpretation by regulators (and potentially anyone who has rights under the GDPR and wants to make trouble, as in the example we're discussing). If you don't do enough, you potentially face even greater overheads due to formal audits, financial penalties, etc. If you do too much, then as you rightly point out, you leave yourself at a disadvantage compared to competition who don't do as much (and this remains the case even if that competition is knowingly breaking the law as a result, and that in turn doesn't matter if they face no meaningful penalties for it).