Senators Amy Klobuchar (D-MN) and Chuck Grassley (R-IA) are set to introduce companion legislation to Representative David Cicilline’s (D-RI) self-preferencing bill, the American Choice and Innovation Online Act, that passed out of Committee earlier this year as part of a sweeping antitrust legislative package. This legislation has stalled in the House as Majority Leader Steny Hoyer (D-MD) conceded the proposal was not ready for the House floor. Unfortunately, rather than focus on legislation consumers actually want, the Senate companion bill rehashes the punitive regulations that would make consumer technology worse.
According to reports, the Senate version of the American Choice and Innovation Online Act would apply to “covered platforms” with 50 million U.S.-based monthly users (or 100,000 U.S.-based active business users) and a market cap in excess of $550 billion. These covered platforms would be prohibited from “self-preferencing” their own products or services, meaning platforms can’t privilege the platform owner’s own products in search results or featuring them in a preferential way.
These radical changes would functionally make the internet worse and prohibit the technology and innovations that consumers enjoy. Under this legislation:
- Google Maps could not appear in Google search results;
- Amazon couldn’t sell Amazon Basics products or offer free delivery through an Amazon Prime membership; and
- Consumers would not be able to use iPhones out of the box because preloaded apps would be banned.
If a “self-preferencing” ban was to be imposed holistically, and not confined to just a handful of companies, it would mean Costco would be prohibited from selling Kirkland coffee and Target wouldn’t be able to sell any of their 48 private labels. Lawmakers want consumers to believe because you type your credit card information into a browser to make a purchase rather than swiping your card at a brick-and-mortar store, this business practice suddenly becomes anticompetitive. This arbitrary division of “digital” and “physical” stores overlooks that these companies are competing with each other, like Walmart’s 80 percent e-commerce growth over the past year and launch of their own subscription service. A ban on self-preferencing for just a handful of technology companies would be welcome news to competitors, but it would limit consumers’ options and stifle competition.
Senator Klobuchar also erroneously tweeted that these changes are necessary because a platform can raise prices on consumers. Private label goods sold alongside competitors do the opposite. Consumers regularly experience this at grocery stores, where generic brands are generally sold at a lower price than name brands. This both gives consumers, especially low-income consumers, a better deal and also helps keep prices low for other products. The argument that more choices at lower prices is harming consumers does not hold water.
“Anti-Big Tech” legislation, like this one, grabs headlines but is divorced from real issues facing consumers and small businesses. Lawmakers’ time would be better spent focusing on what is best for consumers. For example, despite the hand wringing on how to protect consumers’ data, legislative proposals aimed at solving this problem have paled in comparison to the number of bills simply aimed at harming America’s technology sector.
California, Virginia, and Colorado have already enacted data privacy laws. However, this variation in standards across state borders creates an unworkable patchwork. Small businesses are disproportionately harmed by this patchwork of laws since they generally do not have teams of lawyers to help them understand each state’s standards. Similarly, the nature of online business makes it difficult for a small company to comply with laws that differ depending on where the consumer is located. As more states take it upon themselves to create data privacy legislation, the problem will worsen. Congressional action is now needed to simplify the standards for businesses and protect consumers.
Senator Klobuchar blames lobbyists for a lack of federal data privacy legislation, but this is a paper-thin argument. The responsibility rests squarely at the feet of those elected to serve their constituents in Washington. The truth of the matter is that a federal data privacy standard would be complex and require good-faith engagement with academics, the private sector, consumer advocates, and others. Legislation, including Senator Klobuchar’s, that mandates interoperability standards also reinforce the need for federal data privacy standards to ensure consumer data is being protected. However, throwing together punitive regulations for a handful of companies only requires an understanding of the companies’ business models. Congress’ hands are not tied here, and it would be better for consumers if lawmakers abandoned punitive regulations and worked to solve real issues in the technology sector.
To avoid creating a federal data privacy standard themselves, some in Congress have proposed outsourcing this difficult assignment to unelected regulators at the Federal Trade Commission (FTC). It is not in the best interest of taxpayers to have a data privacy standard created by proxy through FTC regulation. It is Congress’ role to craft legislation, even when the topic is complicated and contentious. Similarly, the partisan actions at the FTC over the past year under Chair Lina Khan should give lawmakers pause over whether the agency should have the discretion to implement such regulations.
The Senate version of the American Choice and Innovation Online Act offers some variation from the House version, but is far from a pro-consumer bill. These heavy-handed regulations offer little in the way of promoting consumer welfare. Instead, the focus continues to be on how to punish technology companies for being “big.” Unfortunately, while lawmakers continue to churn out punitive regulations for a few technology companies, real issues facing small businesses and consumers remain unaddressed.