Bi-partisan congressional anti-tech crusade continues
Congress’ continued anti-tech crusade is a clear example of the misguided, bipartisan adventures that I am referencing, and one measure in particular has enjoyed some momentum. Sen. Amy Klobuchar’s (D-Minn.) S.2992—The American Innovation and Choice Online Act (AICOA)—passed out of committee by a wide margin, and awaits action from the Senate.
Filed in late 2021, Klobuchar’s bill aims to expand the federal government’s anti-trust laws and increase regulation on large tech outfits. “As dominant digital platforms—some of the biggest companies our world has ever seen—increasingly give preference to their own products and services,” Klobuchar announced, “we must put policies in place to ensure small businesses and entrepreneurs still have the opportunity to succeed in the digital marketplace.”
While it is important to foster competition and protect small businesses from unfair practices, the AICOA is critically flawed and would create more problems than solutions, but like many pieces of legislation, the devil is in the details.
For starters, the AICOA is carefully crafted in such a way that it would only target companies that have a market cap of $550 billion and either have 50,000,000 monthly general users or 100,000 business users. This is a legally arbitrary threshold. Why would AICOA be appropriate for businesses with a $550 billion market cap but not for those with a $549 billion market cap? Or any other amount for that matter?
The bill’s authors don’t have a good explanation other than they apparently wanted to ensure that Google, Amazon, Apple, Meta and possibly Microsoft would fall in their crosshairs. However, other smaller—but still massive—companies wouldn’t qualify, like Wal-Mart, Target and Costco.
As drafted, the AICOA would ban particular tech companies from engaging in a host of activities. “These newly illegal business practices include treating one’s own products preferentially to those of competitors on a platform the company owns,” as my colleague Josh Withrow recently wrote.
Well-intentioned or not, the AICOA has raised some alarms. Sen. Mike Lee (R-Utah) said “I worry a lot about the broad scope and the vague language that it contains that I believe would lead to an untold number of unintended and unforeseen consequences, like harming many of the very same consumers that we are trying to protect.”
Even if the AICOA wasn’t drafted to discriminate against large tech companies, its provisions would still be cause for concern. It would prohibit the common business practice of self-preferencing, which means tech giants wouldn’t be able to easily direct consumers to their own products and services.
Amazon wouldn’t be permitted to highlight its Basics products line by ensuring they appeared higher in searches, and they worry that they’d be forced to let other shipping companies fulfill their orders—imacting their two-day Prime shipping. Similarly, Google wouldn’t be able to easily guide consumers to some of its products, like Maps or Gmail, and Apple wouldn’t be allowed to encourage the use of its apps.
The AICOA’s provisions are allegedly designed to encourage competition, which is a noble goal. Yet, permitting companies to feature their own products isn’t anti-competitive; it’s smart. Why wouldn’t a company want to promote the sale and use of its own products? That’s how business and competition works.
Nevertheless, if enacted, the AICOA would disrupt vertically integrated business models that save consumers money, making product access and services more difficult. It simultaneously would permit smaller online companies and even large brick and mortar stores to continue self-preferencing practices.
Some Democratic stalwarts have been critical of the proposal. “The bill causes some very significant security concerns,” exclaimed Sen. Dianne Feinstein (D-Calif). In fact, there are fears within the industry that the bill would require online app stores to host unvetted apps, which could result in app stores being flooded with malware—creating a haven for hackers to target unsuspecting consumers.
If the AICOA becomes law, failure to comply with its provisions would become catastrophic—costing companies up to 10 percent of their domestic revenue as a penalty—for behaving in ways that are legally permissible for smaller companies.
This proposal is just one of the latest salvos in a series of problematic policies targeting large technology companies, which elected officials—Republican and Democrat alike—increasingly view as public enemy number one. After years of gridlock, I suppose it is encouraging to see both parties finding common ground. I just wish they’d focus on better policies.