In Washington’s continuing war on big tech, another proposal has emerged from the U.S. Senate that seeks to reform antitrust enforcement. Similarly to other proposals that emerged from the halls of Congress, the American Innovation and Choice Online Act (AICO), recently introduced by Senator Amy Klobuchar, would not only serve to inflict substantial on the very groups its proponents claim to protect, namely small businesses that depend on access to online marketplaces offered by big tech platforms.
If AICO passes both chambers of Congress, it’s provisions will apply to platforms with more than 50 million “United States-based monthly active users” or “100,000 United States-based monthly active business users,” or those owned by individuals “with United States net annual sales or a market capitalization greater” than $550 billion.”
AICO is intentionally written to only apply to big tech companies like Apple, Google, Facebook, and Amazon, not other industries or organizations. The creation of this regulatory structure discriminates against big tech platforms while paying no consideration to the immense value these companies provide for small businesses.
Once classified as a covered platform, big tech would be unable to self-preference their products, use data that is not available to other vendors, pre-install their own products, or impose strict terms and conditions on small businesses that use the platform. 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 discretion of the Department of Justice and the Federal Trade Commission.
Shortly after introducing the bill, Senator Klobuchar stated that AICO will “put policies in place to ensure small businesses and entrepreneurs still have the opportunity to succeed in the digital marketplace.” Her sentiments were echoed by Senator Grassley (R-IA), who contended that AICO will “will help create a more even playing field and ensure that small businesses are able to compete with these platforms.”
While those who support the bill might believe it will enable smaller businesses to compete with Amazon, Apple’s App Store, or Google’s Play Store, they ignore the reality that AICO’s stringent provisions might lead to the exact opposite.
Were this to happen, the effects could be catastrophic for small businesses and consumers.
Between September 2020 and August 2021, Amazon reported it had more than 500,000 sellers on its platform in the US selling over 3.8 billion products. Amazon estimated that those who sell on its marketplace average $200,000 in sales, with 27,000 sellers averaging more than $500,000 in sales. These impressive statistics are only possible because sellers have access to Amazon’s marketplace and 153 million members in the U.S.
Sellers also benefit from substantial protections from fraud. For example, Amazon reported in 2020, it had “invested over $700 million and employed more than 10,000 people to protect our store from fraud and the abuse of customers and sellers.”
Unfortunately, it would be almost impossible for a small business to reach this number of consumers and enjoy substantial fraud protections operating outside of Amazon’s marketplace. Nevertheless, these statistics alone should show lawmakers how dependent small businesses are on these platforms for success and serve as a warning about the dangers of interfering with how they operate.
The situation is similar in the mobile app market.
Developers who sell their apps on Apple’s App store have access to 113 million iPhone users in the United States, allowing developers to generate up to $82,500 in revenue each year. Comparatively, developers who sell their applications on Google’s Play Store have access to 131.2 million Android users.
If Congress passes AICO, these mobile app platforms could see smaller developers removed from the market in favor of in-house app developments such as Google News or Apple Music. Any changes to antitrust law could ultimately see app developers lose access to these substantial consumer bases and the significant revenues they can provide small businesses.
Advocates of antitrust reform are focusing their efforts on leveling the playing field between big tech and those that depend on access to their platforms. What lawmakers fail to consider, however, is the genuine possibility that AICO and similar proposals could see them removed from the playing field altogether, denying access to the substantial consumer base that has allowed them to grow and innovate. Rather than penalizing big tech platforms, Congress should be crafting a regulatory environment that better supports small businesses, not harder. Failure to do so will only see small businesses and consumers harmed by proposals designed to protect them.