Antitrust legislation imperils consumers and small businesses

Throughout 2021, Republicans and Democrats in the House and Senate have proposed numerous pieces of legislation that would alter U.S. antitrust law to punish online marketplaces for allegedly abusing their market dominance. While each piece of legislation has a differing likelihood of passing both chambers, they all ignore the benefits that online marketplaces provide to consumers, small businesses, and third-party sellers. Moreover, while limiting consumers’ online choices, these proposals also ignore how small businesses rely on major online platforms as essential sales channels to compete and reach customers.

Congress is currently considering a slew of proposals that, if passed, would rewrite America’s antitrust laws to penalize online marketplaces. Sen. Amy Klobuchar’s (D-Minn.) American Innovation and Online Competition Act, for example, would “prohibit platforms from requiring companies operating on their sites to purchase the platform’s goods or services and ban them from biasing search results to favor the platform.” Another bill proposed by Klobuchar and backed by Sen. Tom Cotton (R-Ark.), The Platform Competition and Opportunity Act (PCOA), would prohibit large companies from acquiring smaller competitors.

In both instances, these bills appear to exemplify rent-seeking — whereby the bill sponsors would deliver benefits to bricks-and-mortar giants located in their home states while spreading costs widely across American consumers. Moreover, because these bills only target five tech companies, including Amazon, it leaves the largest retailers in Klobuchar’s and Cotton’s home states, Target, and Walmart (respectively), exempt from the bill’s provisions while squashing the most formidable of online competitors.

By punishing successful online marketplaces, these bills would limit consumer choice as well abandon millions of small businesses and third-party sellers who depend on unfettered access to online platforms to sell their goods — including the two million businesses that use Amazon as a sales channel. A survey by the Data Catalyst Institute found that these businesses had an average of five different sales channels, often using several online platforms.

Research from Data Catalyst Institute also found that 87 percent of small and medium-sized businesses used Amazon’s online marketplace and used at least one other online marketplace, including 54 percent on Walmart’s marketplace and 50 percent on eBay. In addition, many had their own online sales capability and physical locations, while tapping into other platforms such as Target+ or Etsy. 

These numbers show that small businesses and third-party sellers have considerable choice in where they sell their products. Contrary to what proponents of the bill might suggest, the market is not a monopoly. However, if Amazon’s and other major online platforms were excluded as a sales channel for small businesses, it is hard to understand how these antitrust measures would improve competition, help small businesses, and provide consumers with more choice. What is clear is that these bills would give market power to the firms headquartered in two senators’ home states. 

For small businesses, limitations on how platforms like Amazon operate could be catastrophic. Small businesses would have less opportunity to grow and hire new employees without this consumer reach or the substantial revenues that online marketplaces offer. This would depress employment and deny consumers access to competitively priced and high-quality goods.

When lawmakers discuss new antitrust proposals, they often frame their debate in terms of protecting consumers and competition. While protecting competition and consumers are undoubtedly important contours of a healthy market, it should not come at the expense of ignoring how any new proposals would harm small businesses’ operations and, ultimately, consumers.

The dependence of small businesses on online sales channels provides a clear reason why Congress should reject any new antitrust proposals that alter how they operate. Doing so will only cause unnecessary and potentially irreparable harm to the millions of small businesses and third-party sellers that depend upon unfettered access to online marketplaces and many more consumers who purchase goods online every day.

Steve Pociask and Edward Longe are with the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.org or follow us on Twitter @ConsumerPal