Lawmakers in Washington are about to take a major step toward modifying America’s antitrust laws and departing from the consumer welfare standard that has guided antitrust thought since the 1970s. While the American Innovation and Choice Online Act (AICOA) still has legislative barriers to clear, its mark-up today is an essential step toward it arriving on President Biden’s desk. While Big Tech skeptics will undoubtedly cheer the announcement of a mark-up, the passage of AICOA could cause irreparable harm to American consumers and small businesses who depend on unimpeded access to online marketplaces operated by big tech platforms.
Amid a growing hostility towards technology companies, lawmakers have put forward several proposals that would fundamentally modify America’s antitrust laws. One of the most concerning is AICOA, sponsored by Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa). Under the bill’s provisions, a handful of technology companies would be designated as covered platforms if they (1) have 50 million monthly active users or 100,000 monthly active business users; (2) have sales or a market capitalization exceeding $550 billion; and (3) are a “critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform.”
Once designated a covered platform, these companies would face numerous restrictions on how they operate, including an explicit prohibition on preferencing their own goods and services “in a manner that would materially harm competition on the covered platform,” even if the platform can offer products at a lower cost or better quality.
While self-preferencing may seem anti-competitive, it routinely enhances consumer welfare. For example, due to its size, companies like Amazon and Apple can offer their range of goods and services at considerably lower costs. Under the bill’s provisions, Amazon would be restricted from advertising its goods and services above its competitors, even if they are the cheapest, and it would undoubtedly ban Amazon Prime, a service used every day by millions of consumers.
A ban on self-preferencing would ultimately leave consumers paying more for goods they would otherwise be able to access at a reduced cost. Moreover, consumers would be left with considerably less disposable income when facing more expensive goods and services.
A prohibition on self-preferencing could also harm small businesses, particularly ones that depend on access to online platforms. Faced with stringent regulations governing how they operate, tech platforms that run online marketplaces could reasonably move to limit or remove smaller businesses that depend on their platform to operate.
This would be particularly damaging to small businesses that use these online marketplaces such as Amazon, which provides access to 126 million account holders. Access to a consumer base of this size, unimaginable for most small and medium-sized enterprises, allows them to make approximately $160,000 in revenue each year.
Modifying America’s antitrust laws to constrain self-preferencing would only disincentivize large tech platforms from providing small businesses access to a large consumer base leaving them less profitable and denying consumers the opportunity to purchase a wide variety of goods and access newer technologies.
Senators should perhaps recognize the profound damage they could cause to American consumers and small businesses. Thankfully, the passage of AIOCA is by no means assured, and lawmakers still have the opportunity to review and reject the bill in its entirety. Rejecting the bill will not only ensure consumers have access to cheaper goods and services, but it will guarantee that small businesses can reach the millions of consumers who use online marketplaces.
Krisztina Pusok is the director of policy and research and Edward Longe is a policy manager at the American Consumer Institute (@ConsumerPal), a nonprofit educational and research organization.