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Sen. Amy Klobuchar’s American Innovation and Choice Online Act was voted out of Committee

Transcript: The New England Take with Carl Szabo

AJ Kierstead: Welcome to the New England Take WKXL 1450 am 103.9 FM Concord 101.9 FM Manchester I’m your host AJ Kierstead. I’m excited to have Carl Szabo on the show today he’s vice president general counsel for NetChoice. How’s it going?

Carl Szabo: It’s going great. Thanks. Thanks for having me on.

AJ Kierstead: So having you on specifically talk about the American innovation and Chip choice online Act, which was sponsored by Senator Amy Klobuchar, and successfully made it through committee. What’s the overall goal of this act?

Carl Szabo: Well, you know, they called the American innovation and choice online act, what is actually doing is removing choices from consumers.  Top lines, if you go into Costco, what do they put at the edge of the counter? You see Kirkland brands, this will basically make it impossible for Amazon to sell Amazon Basics alongside Duracell. What does that mean for consumers? It means less choice when you go to shop online. What does that mean higher prices for the stuff you’re paying today. So at the end of the day, it means less choice, higher prices, and when you are able to get less stuff for more money, what do we call that? We call that inflation. So this is just a bad bill for American consumers and who’s it designed to protect? It’s designed to protect corporate competitors like Target and Best Buy.

AJ Kierstead: Yeah, I mean, is this primarily targeted at Amazon or are there some other large companies that she’s trying to aim this at?

Carl Szabo: I mean, this is a fundamental shift in the whole way that we look at the marketplace today. In the US, success is the goal, right? The goal is to be the best. I mean, heck, New England. You want the patriots to keep winning even though they’ve been winning long enough.  So we cherish, we embrace, we encourage success. What this is saying now is success is bad. In America, anyone can make it so long as you don’t make too much. And that’s not the way that we operate as a nation. That’s not the way we’ve operated since our foundation.

We’ve always, for the past 40 years, when it comes to issues of market control market domination, look to see one thing in particular, does it harm consumers? Do you have market power? Do you abuse that market power? Does it harm consumers?  Well, what we’re trying to see with the efforts from Senator Klobuchar is to throw away the focus on consumers and instead focus on corporations. Do your corporate activities harm competition? Well, yeah, every business who tries to make their services better, cheaper and faster, are gonna hurt competitors, who just aren’t as good.

That’s we want—robust competition—but Senator Klobuchar has decided, well, I guess that’s not what I want. I have decided that even though consumers are better off than they were previously, we’re just going to make sure that the competitors are not better off or not worse off, and that just doesn’t make any sense.  What does that mean for me as a consumer, that means you have to see less competition in the marketplace. It’s going to encourage bad competitors to be able to compete better and what does that mean? That means higher prices, that means higher inflation means less choice, less innovation. So it’s actually the exact opposite of what this bill pretends to be.

AJ Kierstead: I feel like we’re in a weird place when it comes to these large technology companies. Where they’re just so everywhere. I mean, you look at Amazon, they have their prime TV, but they also rent out programs and you can buy programs they have their overall platform was originally based around selling books, so they sell books, but they also sell their Kindle versions of the books so they have their own ecosystem for that. When it comes to general household goods and clothing they have their the big, you can buy tide, or you can probably buy an Amazon Basics laundry detergent, for example. I don’t think they sell a laundry detergent, but you know what I mean.  I mean where I I’m conflicted on how exactly this should be dealt with at some point because we have a limit to how far we want to go down. We’re totally just going with large corporatist mindset where Randian where we’re just letting the companies do what they got to do in the market will sort it out versus these companies are so large, they buy up so many, so much of the competition, that it makes it hard for other companies to really grow a real presence. Where do you feel like the bumpers should be or do the bumpers already exist with what we already have?

Carl Szabo: So we tried once upon a time back in the early 1900s. The idea of I know it when I see it for antitrust enforcement, antitrust is kind of the tool that we as American use.

AJ Kierstead: Porn and antitrust. Yeah, exactly.

Carl Szabo: That’s exactly it. You can see how tough it is to define and so antitrust kind of the tool we use to address when a business is too big and abusing their power to harm competition away that ultimately arms America. So used to be we I know when I see it. And what does that do? That means it’s at the whim of whomever is in office. It creates no standard for business. And imagine if we had our legal system operating that way. Oh, murder is I know when I see it, not when somebody actually murdered somebody else. We have clear rules for that.

So in the 1970s, we actually went to something called the consumer welfare model. And this has been the model and standard that we’ve been using in the United States for the past 40-50 years. It’s been supported by every Supreme Court Justice, including the sitting ones today. So across the political spectrum, and what it ultimately says it creates an objective standard, it says we will look to see if somebody has the three things: one market power, that means you control about 75% of the market, two you abuse that market power, and three it results in consumer harm, harm to consumers.

So using your example the Amazon, Amazon, funnily enough, is actually not the largest retailer in the world. That’s Walmart, Amazon’s actually about half the size of Walmart when it comes to US retail or world retail sales. But let’s let’s pick on Amazon anyways.  So they don’t have market power, but let’s assume they did. Well. What are they doing? They are providing more competition and ultimately lower prices for consumers. Now the fact that Energizer can’t charge me more for batteries because they have to compete with Amazon Basics. That’s good for me as a consumer. That’s good for my pocketbook. Does it suck if you’re Energizer? Yeah, that means you can extort more money out of customers. But that’s not how we look at antitrust law. We are focused on the consumer.

But that’s not what Senator Klobuchar wants to she wants to protect Energizer. She decided that energizer’s not making enough money on their batteries because they have to compete with Amazon. And that’s not fair to Energizer. And what we end up seeing is a move away from the focus on protecting consumers making sure that we’re paying as little as possible and getting as much for our money and instead looking to make sure that Energizer is getting as much profit as it is because Amy Klobuchar decided, well, they’re a good Corporation Amazon bad Corporation. That’s not how we want our legal system operate. That’s not how we want our lawmakers to operate. I want them to apply the law equally and fairly. And in a way when it comes to antitrust law the best protects American consumers.

AJ Kierstead: In continuing our battery metaphor, or example, you say, I mean well, but it plays out perfectly. When I consider I go to market basket, my groceries, there’s there is Duracell and Energizer and then right beneath his market basket brand in quotes, whatever. They source it from somewhere else the same way Amazon is sourcing from somewhere else, and they’re literally half the cost. I mean, that’s it this really seems inconsistent from a policy perspective.

Carl Szabo: Well, absolutely. So Senator Klobuchar knew knows that if she applied this, you can’t sell your own brand next to somebody else’s brand to every business if she truly thinks that that’s a bad thing, then to your exact example. You go into CVS, you can’t see a CVS brand. You go into Costco, you can’t see Kirkland brand. You go into Sam’s Club, you can’t see Sam’s brand. Americans just wouldn’t accept it.  So what does she instead do? She tries to leverage a frustration with some tech businesses and just write a law specifically designed to attack them. Interestingly enough, simultaneously, our Constitution prohibits these types of laws they’re called basically you cannot criminalize a person you can criminalize an action you can’t criminalize an individual and they’re called bills of attainder.

And that’s essentially what you’re seeing here. But ultimately, when I as an American when I as a customer want to buy the generic brand, I should be able to buy the generic brand. And what she’s trying to do is outlaw it on things like Amazon.

AJ Kierstead: And for an Amazon’s, quote, defense, I wouldn’t necessarily say it’s defense, I feel like they’ve kind of built I can’t tell whether it’s intentional or not. They have this weird ecosystem when it comes to how they sell things in general, because you have your Amazon Prime things, which if you’re smart, and you know what you’re doing, you’re just immediately hitting the amazon prime thing because it’s not necessarily all Amazon products, it’s they may, they may let the algorithm kind of put the Amazon products at the top, whatever, we’re not diving into that specifically say that maybe there may be a case to be made for some, a little more equal competition when it comes how algorithms are created, but that’s a whole other subject entirely I think, which probably disagree with.  When it comes to their ecosystem, they have they have their Amazon brand. They have the Fulfilled by Amazon where for the most part their products, they exist in their warehouses.

So some of the times its products they bought they they wholesale buy and resell and then they have some other items were in that fulfilled by Amazon were other retailers will put things in their warehouse for Amazon to sell. Those are basically your best bets in order to do it. And Walmart has a very similar ecosystem on their website which makes their way their websites a lot worse when it comes to actually finding anything terrible.  But then they also underneath that have this third level that no one understands where you can just go in and sell whatever you want on Amazon or Walmart. If you’re one of their approved retailers. A lot of them are sketchy. It’s a lot of garbage that comes from China that is just going to break on you may never work.

I mean, this seems like the low hanging fruit to see that they should try and do something to do to do something better whether it’s from a government perspective, whether it’s the company wanting to keep the government off their back I mean do you do you guys at NetChoice have any opinion on how that stuff is handled?

Carl Szabo: So to your to your point there there’s two fundamental differences there is Amazon seller of record and Amazon third party intermediary and seller of record means that Amazon just like a grocery store, buys the products from the supplier, hosts them, and sells them directly to computer *consumers. So they actually become this what is called the seller record they actually buy the goods and sell the goods.  There is the other opportunity where they become kind of the platform for a business to sell its good.

And the nice thing about the ladder is Amazon itself is not going to take a risk on a certain product unless the profit margin is big enough for them to make it worth their while to actually buy, store, and ship to the consumer. By opening it up to third party sellers directly, third party sellers get the benefit of the eyeballs and the brand of but then we’re able to reach customers who otherwise might not know about the product or Amazon has no interest in actually buying and selling that product because it’s just not cost effective for them.

So what this does is it actually opens up a lot of opportunity for small businesses to reach more customers and you got to think about the small town, think about a Main Street store in Concord, right? You open a niche brand you got to pray like heck that the right person happens to walk past your store, which in COVID is even less these days, and then sees a product they want in your window and walks in. Now you can have your niche brand on And you’re much more likely to find a customer through that.  Now to your point about risk of bad goods. There are like Buyer Protection Systems and Amazon does have to do some business vetting because at the end of the day, if I buy a product from and it sucks, I’m not going to go after that third party seller. I probably don’t know who the heck it is. But what am I going to do? I’m going to tell all my friends I bought this product that and it broke and it was terrible. And what does that do for Amazon’s brand? It hurts their brand.  So they have a financial interest in making sure that customers are happy. The customers receive goods that are quality.

And frankly, I would say this regardless of anything Amazon’s return policies is fantastic. I call them up and I’ll say, hey, this product broke on me and they’ll apologize and they’ll almost fall over themselves to make it whole and they do that because they want to protect their brand. And that’s the type of customer service this type of reaction you see when there is robust competition in the marketplace. When they know that I could just as easily go to a,, or I can drive down the road to the shopping mall. So to address the third party seller problem, they have a financial incentive to do so. But by the same token by allowing third party sellers to be on their platform, you are empowering small businesses to reach customers they never would have otherwise reached before.

AJ Kierstead: The success story I’d say is like ANKER for example. It’s ANKER of South Korean electronics manufacturer that’s just blowing up I mean they they’re all over the place. They’ve were very quiet for a long time they slowly worked up to getting a lot of tech YouTubers to kind of sign off on the products and actually review them and now they’re the place if you want to get a an external battery to charge your phone and because all the rest of them are just the scary devices that came from China and it seems a little bit like South Korea has really been able to capitalize on this Amazon ecosystem.

Carl Szabo: Yeah, I used an ANKER device just yesterday, charging up my phone. And one of the things that that I really appreciate about a lot of the businesses that are covered by Senator Klobuchar’s bill, she tries to demonize them, is all the good they do. So even if I’m going to go buy something, today, I’m going to go pick up a TV let’s say from Best Buy, I will go to, find the TV, read the reviews, check out all the user ratings and then go buy from

For that Amazon doesn’t click to nickel and instead all the business goes to Best Buy. Best Buy gets all the benefit of the user reviews on Amazon. So it’s it’s almost like a check, check it out online and then go buy it in store where Amazon is actually the loser of the transaction.  So it’s really opened up a lot and we’re not just talking about Amazon with these bills we’re talking about one of the impacts of Senator Klobuchar is bill is and I did this test the other day.

There’s an old search engine I used to use (because I’m getting up in my years) called And I did a search for hospital direction to hospital near me. And it gave me a laundry list of links to things like Mapquest and stuff like that. And instead, I went to Google and I said, direction to hospital near me, and what’s the first thing? I see I see a map with, here’s your location, here’s the hospital, here’s the fastest route to get there.  That type of service that map functionality would not be allowed in Senator club shorts bill, because Google would be forbidden from showing me their maps ahead of anyone else’s maps. So instead of seeing here’s the directions to get my kid to the hospital to go get a COVID test. I would instead see a bunch of links to other websites that may or may not have good directions and may or may not take me to the nearest hospital.

So that’s the type of functionality we’d be losing or my toilet was overflowing the other day and I do a quick search on Google of how to fix a broken toilet. I see a quick YouTube video at the top hit right. Google can’t do that because that would be them preferencing their own video service. So instead, I would get a bunch of here’s how to fix your toilet links. Guess what? My toilets overflowing now. I need that video now. So what we’re doing is we’re undermining the functionality, the benefit and the features that we all enjoy when it comes to the internet.

Last thing I’ll say and then I’ll let you jump in, but Microsoft Teams is a good example of this. So one of the things that becomes illegal under Senator Klobuchar is Bill is what’s called bundling of services. So you know how when you have Amazon Prime, you get Amazon Prime Video free. Microsoft, you sign up and you buy Microsoft wind word, you get Excel and PowerPoint and teams included in that bundle. That packaging of services becomes illegal under this bill. So what does that mean? I as a consumer are now going to lose out on services I enjoy at no cost today, so it’s really not good for anyone.

AJ Kierstead: Yeah, another another example that would be I’d imagine wouldn’t be possible anymore is the likes of Hulu or they’re able to tie in ESPN and Disney for example or What’s another example that yeah stuff like that. I mean oh yeah another one I’d imagine probably be problematic is cell phone providers are beginning to tie in services like Tidal, like Tidal wouldn’t exist anymore if it wasn’t bundled in with services.

Carl Szabo: I mean, that’s, but that’s the thing. There’s this arbitrary number that gets thrown in it’s it’s expanded significantly since last time to about 30 billion if your privately held companies like Piggly Wiggly is now covered, but it’s just an arbitrary number. So for example, Disney. Magically, they’re not included. Why Senator Klobuchar did one Disney’s lobbyists knocking down her door and instead wanted Disney’s lobbyists to support the legislation.

AJ Kierstead: There’s I mean, people that were giving DeSantis crap for not including Disney and his internet bill that he put out last year.

Carl Szabo: Oh, which that choice is has an active lawsuit against but that’s a different tale for a different time. But that’s exactly it. And so you see this just arbitrary number magically, you know as I said, Target and Best Buy who happen to be based in the same state as Senator Klobuchar are not covered by this legislation. Just a coincidence. And that’s the fundamental problem with this legislation. It is not an objective test. It is a subjective effort to just beat on a bunch of businesses Senator Klobuchar doesn’t like, and that’s just not how our government’s supposed to work.

AJ Kierstead: Carl Szabo, Vice President and General Counsel for NetChoice, thank you so much for joining us for this very interesting conversation and definitely will keep an eye out. It’s the American innovation choice online act that Senator Amy Klobuchar just is pushing through, just got out of committee and is going to be in the news probably for the next few months as Congress decides what is going to be hitting it hitting the floor next. Thank you so much for having this conversation today. You’re listening to the New England take WKXL. I’m your host AJ Kierstaed. Be sure check out to get the backed episodes of the show. We’ll be right back after this Welcome back to the New England Take and WKXL I’m your host, AJ Kierstead. Continuing my conversation here for a couple more minutes with Carl Szabo. He’s the Vice President general counsel for NetChoice. I want to talk about in general, what is NetChoice?

Carl Szabo: You know, I get that question all the time. So the best way to describe it is we’re a tech trade association that promotes free expression and free enterprise on the internet. Ultimately, my goal is to plow the field so that everyone can compete equally on on the online ecosystem for consumers customers and eyeballs.

AJ Kierstead:  What are some big points of action that you guys work towards?

Carl Szabo: So one of the big things that I’d really like to see happen and this has been kind of a dream of mine, I also kind of teach internet privacy law, is to get a FET national standard for privacy law. So one of the things that we’re missing today is a national standard for privacy. So when I traveled from Concord to Washington, DC to Virginia to Massachusetts, my privacy, expectations don’t travel the same everywhere I go.

And not only is that bad for me as a consumer because I don’t know what to expect. It’s bad for new businesses. Because remember, high costs are bad for new entrants. And what we can do is create a national standard, so that every business need only comply with one federal privacy law rather than trying to hire a bunch of attorneys and comply with 51.

AJ Kierstead: It seems like enter the internet was another example of a kind of revamping the way we need to think about how businesses operate because it reminds me a lot of how there have there’s been so much fights with regards to car emissions regulations versus California the internet’s definitely same way you can’t just have one internet in California versus another one in New Hampshire. You can’t completely revamp how a car can possibly ever be on the road in California how it could be in New Hampshire because there’s the interstate commerce implications of such things.

Carl Szabo: Exactly. Right. Exactly. Right. And, I mean, speaking of in interstate commerce, and we alluded to the Florida Content Moderation Privacy Bill. So what we have seen across the country is efforts by ironically, red states to advance legislation to force social media platforms to host content they don’t want to host. It’ll be like somebody coming to you and saying you have to interview this politician because I said so. The government can’t do that to you. And it shouldn’t be able to do that social media platforms.

So we currently have two lawsuits that are ongoing. We’ve received winning victories involved, but they’ve been appealed. One in Florida, one in Texas, basically saying the First Amendment prohibits the federal government from forcing a private business to say something it doesn’t want to say.

AJ Kierstead: A big thing when it comes to the right versus the left to that’s just a constant theme is federalism to how much right the states should have versus DC basically, make sure putting everyone on the same, same level. Is there a Are there any examples where you feel like state should be looking at on an individual basis doing specific things or is this something outside of what you really work for?

Carl Szabo: When it comes to a lot of stuff there is there is there is a role for local state action I want to stuff I’m a big supporter of federalism, which is all about states rights. One example is I’ve spent a lot of my career fighting against the internet sales tax legislation. We actually were the first ones to sue the state of South Dakota protect people like New Hampshire, who don’t pay internet sales tax to get the tax collectors in Boston.

So that’s a place where I see a federal role.  When it comes to privacy legislation. I see a federal role. When it comes to letting businesses decide what content they should allow on their platforms, I actually think we should get politicians out of that business because the more politicians lean into it, the less trust consumers and Americans have in what they see online. They may think it’s just spin for the left or spin for the right. Instead, what they want is businesses to provide them the information that the business thinks is best for them because the business is best positioned to know what’s best for its customers. So I do think there are roles there.

But when it comes to federal standards, I mean, there’s a role for states to codify the consumer welfare standard of antitrust into their state laws. There’s a role to push for national data breach legislation much the same way we have federal privacy legislation. So it’s kind of a mixed bag, because to your point, the internet is all 50 states. And there needs to be some sort o+f standard for businesses, especially if we want to see robust competition, because they need to be able to quickly get online and not have to hire a bunch of attorneys to come into compliance with a new change to Kentucky’s data breach or something like that.