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Antitrust 10/19/2021

Consumers And Small Businesses Would Be The Ones Punished By New Senate Antitrust Proposal

Jennifer Huddleston
Jennifer Huddleston Policy Counsel

Thursday, Sen. Amy Klobuchar (D-MN) and four of her colleagues announced their intent to introduce legislation prohibiting a handful of America’s leading technology businesses from choosing how they offer their products and services. This proposal is a companion to the “American Choice and Innovation Online Act” and other antitrust proposals that emerged from the House Judiciary Committee earlier this year. Far from being a moderate reform that would improve enforcement of objective competition policy, this legislation targets a handful of disfavored firms and would have a profoundly negative impact on consumers and small businesses alike.

Much like the House bill package, this legislation focuses on claims of “self-preferencing” and discrimination. Critics of America’s leading technology businesses claim companies like Amazon, Apple, Google, and Facebook distort the way they present information to consumers. But eliminating the ability to choose what to offer in their own products and services or prohibiting them from “discriminating” in how they do so would be a dramatic change that would ultimately make leading online services much worse for consumers.

Consumers enjoy the convenient nature of modern technology, but antitrust proposals that eliminate self-preferencing could put these services in jeopardy. Rep. David Cicilline admitted his House Companion would prevent Apple from pre-installing basic apps for email, photos, or web-browsing. The Senate version would similarly have negative impacts on consumers’ technology preferences by preventing the discounted bundling of popular services or requiring covered companies to turn over personal data to potential bad actors or less secure services. 

While some of these popular products may still be available in a less desirable form, this legislation would prohibit many of the ways they make the consumer experience better—punishing consumers as much as the tech companies these bills seek to target.

The bill’s proponents argue it is needed to protect small businesses, but if enacted, small businesses would actually lose out. Many small businesses benefit from how easily they can connect and leverage consumers through online services. In fact, in 2019, Amazon’s Small Business Impact Report found that over 1.9 million U.S.-based small sellers had generated over $160 billion in sales, with an average of $90,000 a year per business. Small businesses may now find new customers globally that they could not with just a local storefront. Small businesses also get to promote themselves for pennies on the dollar, thanks to lower advertising costs online. Small businesses have an incredible potential for innovation and an ability to offer products to targeted clientele. But breaking up or regulating the online services small businesses rely on would not help small businesses excel, it would actually harm them.

This proposal’s impact wouldn’t be limited to just the tech sector, it will affect entire swaths of the economy. Self-preferencing and diversification is a common, innocuous practice that has been going on in more traditional offline businesses for decades. 

The American Innovation and Choice Act seeks to control how stores stock their shelves, what products they choose to carry, and if they can promote their store brand, despite traditional retailers doing the same for decades. While the bill seeks to target only tech companies, the definitions used could easily apply to those traditional retail giants like Home Depot, Visa, or Walmart. There is little in the proposed legislation to prevent their use in regulating other industries outside of the tech space should they cross the defined market caps and Senator Klobuchar has made clear she believes antitrust changes are needed in many industries other than tech. 

Additionally, this kind of proposal would not address the content moderation bias that many conservatives complain about. Antitrust is a poor tool to address concerns related to content moderation and the reforms being considered would do nothing to resolve such concerns.

This newest legislative proposal is another misguided attempt to diverge from the objective consumer welfare standard in favor of untethered government regulation that could eliminate products and services that consumers enjoy. Competition policy should focus on the welfare of consumers and not personal policy beliefs that unnecessarily interfere in competitive markets. 

Existing antitrust standards are adaptive enough to tackle a range of industries, including the technology sector when appropriate. Congress should focus on continuing to foster the innovation and entrepreneurship that supercharged American leadership in the technology sector, not on saving consumers from “harms” like free 2-day shipping, product comparisons, and easily accessible reviews.

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