Background:
Over the past two years, there has been a growing bipartisan effort to rein in big tech by reforming America’s antitrust laws and enforcement. Contained with this shift is a proposed abandonment of the consumer welfare standard in favor of an outdated and rigid presumption that ‘big is bad.’ As a result, legislators from both parties have proposed a series of new laws that would enshrine a ‘big is bad’ mentality into law.
One of such efforts is spearheaded by Sen. Klobuchar (D-MN), Sen. Grassley (R-IA), and Sen. John Kennedy (R-LA) who recently introduced the American Innovation and Choice Online Act (AICO).
What does the bill do?
If AICO becomes law, the bill will create a category of “covered platforms.” For example, a company will be classified as a “covered platform” if they have 50 million “United States-based monthly active users” or “100,000 United States-based monthly active business users.” Additionally, a company would be classified as a “covered platform” if owned by an individual “with United States net annual sales or a market capitalization greater” than $550 billion.
This designation would apply for seven years. After this period, a platform can apply to have the “covered platform” designation removed, however, this will be at the digression of the Department of Justice and Federal Trade Commission.
The definition of a covered platform, and the fact it only covers online platforms, means the bill’s provisions would specifically target a select few tech companies including Google, Amazon, Apple, Facebook, and Microsoft. The narrow scope of AICO suggests lawmakers have a specific interest in targeting big tech rather than resolving monopolistic concerns across the economy.
How are Consumers affected?
Perhaps most perplexing about AICO is that consumers are only mentioned once, with much of the bill focusing on addressing competition and perceived anticompetitive behavior. For consumers, this shows lawmakers have deprioritized them from antitrust law. Consumers should be most concerned that AICO would prohibit many practices that have enabled them to access high-quality goods and services for little or no cost. By decentering consumer welfare, AICO could leave consumers with fewer choices and higher prices.
Here are a few ways in which consumer would be affected by the bill:
- Higher prices for consumers and decrease in consumer choice. Once designated as a covered platform, a tech company would be prohibited from self-preferencing its own products over other goods. As a result, Amazon, for example, could not prioritize its own lower-cost products over the products of its competitors. For consumers, this likely means they will be denied easy access to the cheapest products available, forcing them to pay more.
- Increases risks for user privacy and security. Prohibition on using certain data: Covered platforms would be prohibited from using data that is generated from its consumers’ accounts purchasing history. The bill stipulates that a covered platform cannot “use non-public data that are obtained from or generated on the covered platform and activities or data.” Additionally, covered platforms cannot “materially restrict or impede a business user from accessing data generated on the covered platform.” For consumers, this would translate into restricting platforms’ abilities to meet consumer demand and putting consumers’ data at risk for privacy and cybersecurity breaches. Given that large tech platforms operate sophisticated cybersecurity programs and offer substantial data privacy protections, mandating smaller companies with fewer protections to be given access to consumer data means cybercriminals and hackers have greater opportunities to take advantage of these vulnerabilities.
- Prohibition on pre-installation. Tech platforms would be prohibited from “materially restricting or impeding covered platform users from uninstalling software applications that have been preinstalled on the covered platform.” Google, for example, would have to allow consumers to delete its maps products on android devices, and Apple would be prohibited from having its News App automatically installed. As a result, consumers will be forced to install these apps on their phones manually. This stipulation offers few benefits to consumers. It’s unlikely that an android user would delete Google Maps for an inferior product that is not provided free of charge.
Should Small Businesses be concerned?
The bill stipulations would make it difficult for small businesses to access online marketplaces, which have been vital for their growth and success. The risk of de-platforming would be extremely detrimental to small businesses that depend on these platforms to reach a large number of consumers. The alternative for these small businesses would be to set up their own platforms for selling goods and services, which could be extremely costly. This added cost would undoubtedly raise questions about the financial viability of establishing a small business and stifling innovation.