Just like the public at large, lawmakers and regulators in Washington are taking an increasingly tough line against big tech platforms and their business practices which are regularly decried as anticompetitive and anti-consumer. These concerns have led to proposals that would rewrite America’s antitrust laws and prohibit many practices that have generated substantial consumer welfare.
One proposal that could inflict significant harm on American consumers is the American Innovation and Choice Online Act that would prohibit certain companies from self-preferencing their products over the goods and services of competitors. This dangerously misguided proposal could deny consumers billions of dollars of savings each year and make streaming TV shows and movies considerably more expensive.
Congress must reject any proposal that leaves consumers materially and financially worse off.
If Congress passes the AICOA, it will prohibit tech companies from preferencing their own “products, services, or lines of business of the covered platform operator over those of another business user.”While this provision would specifically target companies offering their own product ranges such as Amazon Basics, it could also impact the on-demand streaming services often bundled with membership. The bill, for example, could force Amazon to sell subscriptions to its Prime Video service in addition to its core promise of 2-day delivery on millions of items.
The passage of AICOA would not only make it harder for Amazon to compete in a highly competitive market, but it will also negatively affect consumers. Currently, consumers have a significant choice in streaming services, with companies like Amazon, Netflix, HBO, Apple, and others, all offering consumers access to thousands of hours of content. In addition to these platforms, consumers also have access to more specialized content such as WOWPresentsPlus- a service dedicated to LGBTQ+ content or CrunchyRoll, which focuses its offerings on Anime.
|Streaming Service||Lowest Monthly Cost||Cost Per Year|
|Amazon Prime Video (Monthly)||$0||$179.88|
|Amazon Prime Video (Annual)||$0||$139|
|Amazon Prime Video (Stand Alone)||$8.99||$107.88|
Most consumers who regularly watch content on Prime Video likely get the service included in their Amazon Prime subscription price. The cost of prime ranges from $139 if users pay the fee annually or $179 if they decide to pay monthly. Included in this price is not only access to Prime Video but 2-day delivery, Prime Music, Amazon Photos, Prime Gaming. Those who do not subscribe to a wider prime membership can purchase $8.99 per month, a price point comparable to Netflix and HBO Max.
JP Morgan estimated the real value of Prime membership was $785, meaning consumers receive a benefit of either $606 or $646 depending on how they pay. Given the significant value Prime offers, it’s unsurprising that 157.4 million Americans now subscribe to the service.
If Congress prohibited Amazon from preferencing its own streaming service, it could be forced to charge all customers for using its video streaming service $8.99 per month or $107.98 each year. With 157.4 million prime consumers, that equates to $16.9 billion each year. Given that subscribers currently enjoy Prime Video as part of the Amazon Prime subscription, $16.9 billion can be considered as considerable consumer savings each year. However, were consumers forced to pay to access Prime Video in the future, that figure would also represent the lost welfare.
This lost welfare would occur on top of the billions of dollars of consumer welfare Amazon offers through the 2-day delivery each year. While lawmakers are considering prohibitions on self-preferencing, they must also be aware of the wider ramifications of their proposals. The case of Amazon Prime Video is just one example of how any law that imposes substantial restrictions on how big tech operates could leave consumers paying more for services they presently enjoy for free and billions of dollars in lost welfare. Congress must do better to preserve the substantial consumer benefits big tech companies routinely provide.