The Cicilline Bill Is A Disaster For Small Businesses
We recently explored how Rep. David Cicilline’s American Innovation and Choice Online Act would destroy many of the benefits that consumers love and expect from leading internet services — but consumers aren’t the only group that would be harmed.
In the second of a series of blasts on the bill, we’re taking a look at how this bill would remove many of the tools that small businesses and developers have come to count on to grow and succeed.
Here’s what the bill could do:
– Strip small businesses of free or low-cost online tools and services.
– Undermine small business resiliency.
– Crush opportunity for small businesses and entrepreneurs.
The bill would strip small businesses of free or low-cost online tools and services they use to scale and respond to consumer demands.
The bill could eliminate an enormous sales channel for independent small and medium-sized sellers—who now make up more than half of sales on Amazon, writes CCIA President Matt Schruers. “In the case of Amazon, for example, third party sellers would no longer be allowed to sell alongside Amazon’s own retail offerings 一 a setup that allowed independent small sellers on Amazon to grow from less than 3% of Amazon’s sales to over half of its sales in less than 20 years.
– This is because companies may find that ending their marketplace offering is the safest way to ensure compliance with the new law. “Some companies may simply stop providing a marketplace. This would no doubt impair the company’s business, but that’s unavoidable in an onerous regulatory environment. When all options are bad, the question is which does the least damage. And when regulations are designed to penalize marketplaces relative to traditional retailers who don’t allow independent sellers to sell alongside their own retail operation, companies may choose to revert to more traditional models that don’t have room for independent small businesses.”
Small businesses would lose the over 2 billion customer connections that search engines such as Google facilitate, says NetChoice.
Forcing tech companies to divest free services would make technology and opportunity less accessible, says a letter from the Asia/Pacific Islander American Chamber of Commerce and Entrepreneurship, Chamber of Progress, Latino Coalition, and U.S. Black Chambers. “We are concerned that well-intentioned proposals aimed at forbidding ‘conflicts of interest’ by big technology platforms could negatively impact services that people today receive for free or low cost. By removing the current cross-subsidization for these free services, this proposal could force consumers to pay for these standalone services — making technology and opportunity less accessible. That in turn could also make it more difficult for small businesses like those we represent to reach new customers using these tools.”
Small businesses almost always bear the unintended consequences of reckless legislative proposals, says the Connected Commerce Council. “Amazon’s marketplace is extraordinarily popular with both buyers and sellers for a reason: it works. It works for consumers that want to find millions of different products in one place, it works for large brands that want to benefit from Amazon’s customer base, and it benefits small sellers that could never have the reach or exposure Amazon provides. Prime Day 2021 was the biggest two-day period ever for Amazon’s third party sellers, nearly all of which are small and medium-sized businesses. According to the company, ‘Customers spent over $1.9 billion on more than 70 million small business products during the promotional period, more than a 100% year-over-year increase on sales compared to the Prime Day October 2020 promotion.'”
The bill would undermine small business resiliency
The bill would harm small businesses that rely on the “scale, security, and low prices” of leading companies, says a Connected Commerce Council letter signed by over 7,000 small business owners and supporters. “Research shows millions of businesses would have closed if they did not have access to digital services and online marketplaces. We did not ask you to spend precious time and taxpayer dollars going after companies that help small businesses. The labor market is shifting, uncertainty is slowing recovery, and Congress should focus on helping people. Do not play politics in the name of competition. Instead, talk to small businesses that rely on the scale, security, and low prices that digital platforms provide and that help with recovery and success.”
A case in point: business owner Frankie DiCarlantonio, says the free analytics and tools provided by Google “are essential to how we run our business and communicate with employees and customers.” “Digital platforms provide remarkable data and analytics that empower us to reach customers in ways we had never imagined a decade ago. For the first time, the platforms have made sophisticated marketing available to small businesses with even smaller budgets. Previously, small businesses advertised in the Yellow Pages and used coupon mailers and hoped that people would see their ads. Our digital technology is so much more than advertising. Gmail and Google Docs cost very little, but they are essential to how we run our business and communicate with employees and customers.”
Online marketplaces and platforms not only provided lifelines to small businesses during the pandemic; they’ve provided infrastructure that has allowed small businesses and entrepreneurs to turn unexpected circumstances into opportunity, says SBEC. “Despite the economic upheaval brought on by COVID-19, last year was the biggest year yet for new business applications – more than 4.3 million applications were filed in 2020 (+843,000 more than in 2019) with retail being the fastest growing sector. In 2020, 822,000 applications were filed to launch retail businesses — an increase of 58.2% over 2019.”
– “Access to the mass consumer marketplace through big companies has not only been a positive for small businesses and consumers, it is fueling higher levels of entrepreneurship.”
Digital tools that allowed small business to respond to the pandemic have broad social and economics benefits, as explained by the Center for American Entrepreneurship. “While some businesses have pivoted completely, re-working themselves to meet new Covid-generated demand – such as breweries producing hand sanitizer – many others have digitized their operations to survive and even thrive in a socially-distanced marketplace. New and small businesses have increasingly turned to online platforms like Facebook, Ebay, and Amazon to open digital storefronts, social media sites like Instagram and Twitter to market to customers, video conferencing platforms like Zoom and Microsoft Teams to interact with suppliers and pitch potential investors, and digital payment tools like PayPal, Venmo, and Square to facilitate sales. At CAE, we expect that this dramatic acceleration of technology adoption driven by the pandemic will likely be permanent. And, as I mentioned a moment ago, an historic surge in new business applications is underway.”
The bill would crush opportunity for small businesses and entrepreneurs
The widespread economic harm caused by these bills “would broadly impact American business and our economy”, says Suzanne Clark at the Chamber of Commerce. “The antitrust bills scheduled for markup by the House Judiciary Committee tomorrow would overturn a century of U.S. antitrust law with dangerous consequences for America. Antitrust laws should not be rigged against a small number of companies. Such an approach punishes success and has the government picking winners and losers in our free market economy.”
– “The misguided approach taken in these bills will stymie innovation, harm consumers, and weaken America’s technology leadership. While ostensibly targeting ‘Big Tech,’ this approach to antitrust would broadly impact American business and our economy.”
Small developers would lose access to many of the complementary services they now rely on, says ACT, The App Association. “A separation of platforms from complementary businesses could prevent software platforms from providing important complementary services that App Association members use now.”
The technology ecosystem is highly interconnected, as startups rely on the free or low cost services provided by bigger players, says Engine. “That interconnectedness is on full display, for example, when considering how startups routinely rely on low-cost services provided by other (often bigger, more established) companies. These tools and resources make it easier—and in some cases make it possible—to start and scale a nascent tech business. Startups are also often creating follow-on goods and services made possible by markets and tools built by other companies.”
Banning default apps would make it difficult for developers to design convenient products and services for consumers, says Graham Dufault, Senior Director for Public Policy at The App Association. “The bill would also prohibit default apps such as basic camera, calendar, or email apps under the assumption that making them the default clearly advantages the platform’s own offerings. For example, let’s say a developer makes an app for bird watchers that uses the default camera API to identify a species of bird. Under this legislation, the user will have to download a specific camera app to use, meaning the developer would need to support every possible camera offering leading to friction for the consumer.”
A narrow focus on companies that provide useful services to startups would harm competition in tech sectors, says a letter from ACT, Developers Alliance and Engine. “While [startups] are the supposed ‘beneficiaries’ of action in the competition policy space, a narrow focus on ‘big tech’ and policy proposals aimed only at perceived abuses by these companies—while ignoring their impacts on smaller firms—may actually harm competition in technology-driven sectors”