What They Are Saying: Criticism Of Sen. Klobuchar’s Radical Antitrust Bill Continues To Roll In From All Sides
Since its announcement last week, criticism of Sen. Klobuchar’s radical antitrust bill has been pouring in from all sides. As we have previously highlighted, Senator Klobuchar’s American Innovation and Choice Online Act is yet another breakup bill in disguise.
Left-leaning experts warn…
The Senate bill will “do harm” to American families, explains Lindsay Mark Lewis, Executive Director of the Progressive Policy Institute (PPI). “The antitrust legislation sponsored by Senator Klobuchar will do more harm than good to American families who rely on digital shopping, commerce, and communication every day. Though this bill is trumpeted as bipartisan, the reality is that it is just as radical and far-reaching as the House Judiciary Committee bills.”
Bills proposed in the House and Senate “turn a blind eye to abuses” by Chinese companies and actively require U.S. companies to share data with foreign rivals, explains PPI’s Lindsay Mark Lewis. “These bills would turn a blind eye to abuses by Chinese companies such as Bytedance and Tencent, and would actively require U.S. companies to provide their Chinese and Russian rivals with access to data about U.S. businesses and consumers, preferential treatment on U.S. devices and platforms and an easier path to acquiring U.S. intellectual property and technologies.”
Making major changes to online platforms and marketplaces could have serious negative repercussions on the economy and workers, notes PPI’s Chief Economist Michael Mandel. “As Congress considers several major bills intended to transform the tech-ecommerce ecosystem, it is worth considering what might be lost for workers. Based on our analysis of BLS data, the tech-ecommerce ecosystem added 1.4 million jobs between September 2017 and September 2021, the most recent data available from the BLS. The previous job creation leader, the health care sector, added 500,000 jobs, roughly one-third of the tech-ecommerce total. And the rest of the economy lost 900,000 jobs.”
Proposals by tech critics are the equivalent of ripping out random parts of a perfectly good engine while assuring consumers that everything will be fine, says PPI’s Michael Mandel. “Tech critics are engaged in the equivalent of ripping random parts out of a smoothly running car engine, while assuring the passengers — American workers, in this case — that the parts aren’t necessary and that the car still runs just as fast.”
This bill treats leading tech companies like criminals for no apparent reason, says PPI’s Michael Mandel. “These are really national champions and it basically sort of treats them as criminals without actually explaining why it should be they should be treated that way.”
The vague language of the bill will hurt Prime free shipping and leave consumers and workers worse off, says PPI’s Michael Mandel. “There is no language in the bill that guides regulators about which price to use, and no safe harbor. In particular, the usual antitrust presumption in favor of consumer welfare is nowhere to be found.”
— Mandel continues: “[T]he loser would be consumers and workers. The legislation would break a successful business model that makes consumers happy and provides hundreds of thousands of jobs for workers, and for what purpose? The exact same issues arise for other important services provided by large platform companies covered by the Klobuchar-Grassley legislation. The broad language, lack of safe harbor, and high fines would force them to reduce the services they provide. Consumers will be worse off, and so will be workers.”
The Klobuchar bill would “break tech products that millions of Americans use every day,” says Adam Kovacevich of Chamber of Progress. “Senator Amy Klobuchar plans to soon introduce her own version of House Democratic legislation that would ban or degrade tech services used by millions of voters. Based on a leaked draft of Klobuchar’s legislation, here’s what we know about what her bill is — and is not.”
— Kovacevich explains: “It would break tech products that millions of Americans use every day.” Klobuchar’s bill would:
— “Block Amazon from offering its low-cost Basics brand products”
— “Ban Amazon from offering free shipping on select products through Amazon Prime”
— “Prevent Google from showing Google Maps in search results”
— “[Put] limits on U.S. products that don’t apply to those companies’ foreign competitors”
— Kovacevich also breaks down myths and facts about the bill here.
The bill “isn’t going to do anything to make the Internet better for families,” says Chamber of Progress Founder and CEO Adam Kovacevich. “Preventing Amazon from selling Amazon Basics and banning Google’s maps from its search results isn’t going to do anything to make the Internet better for families. This is like calling a car mechanic to fix your laptop.”
The AICOA would effectively break Amazon Prime, an incredibly popular service used by millions of Americans, explains Adam Kovacevich of Chamber of Progress. “Amazon Prime — which again, nearly half of Americans have chosen to use — would face an uncertain future. Given all the more important challenges facing the country, I just don’t understand why U.S. Senators would want to effectively break such a popular service.”
Right-leaning experts warn…
The Senate bill and those like it are anti-consumer, anti-enterprise, and anti-innovation, say Alden Abbott and Andre Mercado of the Mercatus Center. “A new antitrust proposal in the Senate, named the ‘American Innovation and Choice Online Act,’ would punish the largest platforms and technology companies for conduct that has been benefiting consumers since goods began to be sold in stores. Under this bill — and its companions in the House — store brands, self-advertising, and large savings at checkout would be found to violate antitrust laws, punishable with fines of up to 15 percent of the company’s revenue. The catch: These new bills affect only seven companies, whose market capitalization is $550 billion or greater, which is the Senate bill’s statutory threshold. In other words, they are not antitrust bills at all. More accurately, these proposals are clear regulation of the technology sector, dressed up in a trendy new outfit, aimed at harming the most productive sector of our economy and knee-capping the innovative output of the United States for the foreseeable future.”
— They continue: “[W]ith a growing technological threat from China, the next decade will probably decide who wears the crown of world technological superpower. Without growth and profit incentives for U.S. companies investing in future technologies, and with staggering levels of regulation proposed in Congress that would limit the innovative potential of the tech sector, it’s becoming all too likely that China will be crowned king”
The Senate bill “retains the worst features of the House bills with some new additions” says Robert Bork Jr. in Real Clear Politics. “I’ve since had a glimpse of the latest iteration of the Senate draft, which retains the worst features of the House bills with some new additions.”
— Bork continues: “In sum, the Klobuchar draft – as it has so far unfolded – lacks the clarity and consistency of the current legal benchmark, the consumer welfare standard. For 45 years, courts have held that antitrust actions should be taken only when a proposed merger, acquisition, or practice harms consumers. Thus, courts protect competition to protect consumers. The Klobuchar draft would protect competitors, which would lead to no end of special pleading. The result would be the politization [sic] and weaponization of the law.”
If these measures are passed, “the FTC would become a regulatory leviathan,” says Robert Bork Jr. “If Ms. Klobuchar’s measures are embraced by Republicans, the consumer-welfare standard would be no more, and the FTC would become a regulatory leviathan. Her approach includes giving the FTC the power to levy a death-penalty fine on U.S. companies of 15% of their total U.S. revenue for the years the violation occurred. Ms. Klobuchar’s rectification campaign would bring American capitalism under the control of a woke bureaucracy.”
“We don’t need policies that will kill growth, job creation, and innovation,” says Robert Bork Jr., President of the Antitrust Education Project. “Republicans who buy into the dangerous antitrust theories of Sen. Amy Klobuchar will find themselves responsible for turning over terabytes of U.S. customer data to China. They will kill popular services that Americans love. They will subject all American businesses a potential death penalty fine of 15 percent of their total U.S. revenues. At this time of high inflation, we don’t need policies that will kill growth, job creation, and innovation.”
This legislation would “throw consumers to the wayside so long as the firms suffer” explains R Street Institute’s Jeffrey Westling. “There’s an old saying about not cutting off your nose to spite your face—and Sen. Amy Klobuchar (D-Minn.) may be falling victim to it. In a war against any large technology platform, the Senator just announced legislation that would throw consumers to the wayside so long as the firms suffer. Stemming from an outdated “big is bad” mindset, the bill would make thousands of innovative and consumer-friendly features illegal.”
The Senate bill takes a “guilty-until-innocent approach” and would have a “chilling effect on security” explains R Street Institute’s Tatyana Bolton. “Unfortunately, Sen. Amy Klobuchar (D-Minn.)’s American Innovation and Choice Online Act (S. 2992) takes a similar guilty-until-innocent approach, which mentions security in only one of seven prohibited practices and would have much the same chilling effect on security as the House bills.”
The Senate bill and its House companion punish successful online businesses for engaging in the same practices as brick-and-mortar stores, says Scott Shackford. “Antitrust is supposed to be about protecting consumers from predatory practices, not punishing successful businesses for doing the same competitive practices that brick-and-mortar stores have been doing for more than a century.”
This legislation would put American companies in a “Mother-May-I” relationship with the government, with harmful consequences, explains the Open Competition Center. “[T]he Klobuchar bill would put leading American companies into a ‘Mother-May-I’ relationship with unelected Biden bureaucrats, stifling innovation and raising prices on goods and services as American families grapple with runaway inflation.”
— They continue: “This bill is barely antitrust law as traditionally written or understood – in reality, this is European-style regulation dressed up as antitrust law. Banning companies from offering free apps or services or selling generic products does nothing to stop or even limit conservative censorship. Instead, it is simply a Trojan horse designed to give unelected Biden bureaucrats even more power to control the economy.”
This legislation would make it difficult for small businesses to access the services that have been vital for their growth, notes American Consumer Institute Director, Krisztina Pusok. “Consumers and small businesses alike would be harmed. The extreme legal risk created by such proposals will make it difficult for small businesses to access online marketplaces, which have been vital for their growth and success.”
In a letter to Congress, the American Consumer Institute warned the bill would harm consumers and small businesses by making it harder to operate online marketplaces. “Consumers and small businesses alike would be harmed. The extreme legal risk created by such proposals will make it difficult for small businesses to access online marketplaces, which have been vital for their growth and success. These online marketplaces and platforms not only provided lifelines to small businesses during the pandemic, but also provided the opportunity for small businesses, startups, and entrepreneurs to access the pool of consumers and enjoy the free or low-cost online tools and services these marketplaces offer.”
In this bill, lawmakers have deprioritized consumers from antitrust law, notes ACI. “For consumers, this shows lawmakers have deprioritized them from antitrust law. Consumers should be most concerned that AICO[A] would prohibit many practices that have enabled them to access high-quality goods and services for little or no cost. By decentering consumer welfare, AICO[A] could leave consumers with fewer choices and higher prices.”
ACI explains that this bill would affect consumers through:
— “Higher prices for consumers and decrease in consumer choice.”
— “Increase[d] risks for user privacy and security.”
— “Prohibition on pre-installation.”
The Senate bill would hurt small businesses that rely on online marketplaces, explains ACI. “The bill stipulations would also harm smaller businesses that depend on the open access to online marketplaces.”
— ACI continues: “Amazon, for example, has over 4,000 small businesses on its marketplace, while Google Pay has over 724,000 active app developers. Rather than complying with AICOA’s provisions, it is entirely possible that tech platforms remove competitors rather than face the ‘covered platform’ designation. This de-platforming would force small businesses to create their own platforms that are more expensive and would reach fewer consumers. This would inevitably negatively impact the profitability of smaller businesses and prevent them from providing consumers with new and innovative products. “
The provisions in the Senate bill would harm consumers, says Edward Longe of the American Consumer Institute. “[A] bipartisan group of U.S. Senators, led by Amy Klobuchar (D-MN), introduced the American Innovation and Choice Online Act (AICOA) that would significantly change America’s antitrust laws in a way that would profoundly harm consumers.”
The bill “entirely disregard[s]” the consumer welfare standard, explains Josh Withrow of National Taxpayers Union Foundation. “These proposed restrictions entirely disregard the consumer welfare standard that has guided antitrust enforcement for over four decades. The services and products that could be effectively eliminated by Klobuchar’s proposal are overwhelmingly popular because they provide convenience and value to consumers.”
The restrictions imposed by this bill would harm consumers by restricting choice and competition, says American Action Forum President Douglas Holtz-Eakin. “The bill would prohibit platforms from utilizing the data they collect to develop and price their own products. Per AAF’s previous analysis: ‘Contrary to concerns, this is typically benign behavior that often benefits consumers and has long occurred in traditional retail. For example, this proposal would limit the ability of app stores to set rules, prices, offer preinstalled apps on devices, or offer generic brands of other sellers’ products. Such restrictions will likely harm consumers by restricting choice and competition, and by reducing manufacturers’ ability to provide products that are ready to go right out of the box.'”
— Holtz-Eakin continues: “[T]his does not seem to be a step in the right direction. It imposes an artificial separation on the activity of platforms, and just because they are platforms. The arbitrariness would violate the consumer welfare standard, which is why retaining its discipline is so important. The result would also be two sets of rules – one for platforms and one for the rest of the economy – which is hardly a desirable state of affairs. The action has moved to the Senate, but the action itself is no better than that which was proposed by the House.”
If passed, the bill would harm “consumer convenience and security,” points out the Taxpayers Protection Alliance. “The sweeping legislation would ban America’s most successful technology firms from engaging in practices that are commonplace in the offline world, such as self-preferencing. This would fundamentally alter the internet and personal devices such as smartphones, dramatically harming consumer convenience and security.”
“There would be plenty of consumer aggravation, and no consumer benefits,” says Ryan Young of Competitive Enterprise Institute. “How would the bill work in practice? It would not ban online companies from selling their private brand products, but it would ban them from giving their own products special treatment. Google, for example, would probably not be able to show Google Maps in its search engine, or at least not as a leading search result, which could lead to a lot of frustrated drivers. Amazon’s Prime program might go away entirely. At the very least, Amazon’s house brands would become harder to find and might not qualify for free shipping. There would be plenty of consumer aggravation, and no consumer benefits.”
— Young continues: “The American Innovation and Choice Online Act is clearly not about consumer protection.”
The rules of this bill would restrict companies’ offerings and make things worse for consumers, says CEI’s Jessica Melugin. “In an effort to transform online platforms into some sort of ideal of managed competition, the act constrains private companies in ways that would surely leave customers worse off. Consider just a few possible consequences: Amazon would not be able to offer free-shipping services on certain items; Google would not be able to display its map at the top of search results for local businesses”
“Customers stand to lose the most from this ill-conceived legislation,” explains James Czerniawski of Americans for Prosperity. “This legislation punishes businesses in the U.S. for creating successful products and undermines their ability to be competitive in the broader global economy. The bill also empowers the FTC’s Chair, already bent on radical reform, to further weaponize antitrust laws for political reasons. In the end, customers stand to lose the most from this ill-conceived legislation.”
This bill works in tandem with House efforts to “restrict choice and jack up prices,” says Independent Women’s Forum’s Carrie Sheffield. “Unfortunately, Klobuchar’s bill would turn the clock back on Internet shopping innovation, working in tandem with efforts in the U.S. House (a good rundown on those efforts by our Patrice Onwuka is here) to restrict choice and jack up prices.”
The bill, if enacted, would harm consumers and small businesses, notes Independent Women’s Forum. “If enacted, this bill will leave American households with fewer choices, fewer conveniences, and higher prices. Small businesses will also lose the competitive advantages that allow them to compete successfully.”
This sort of legislation “bucks antitrust law” and will endanger American security, says American Enterprise Institute Senior Fellow Klon Kitchen. “This approach breaks with American precedent, bucks antitrust law, and endangers American security.”
— Kitchen continues: “Instead of railing against these companies because of their size, we instead should be thankful that our free-market economy has produced an alignment of interests where private-sector actors can generate wealth and jobs while also developing capabilities that will provide for the common defense. This uniquely American advantage may well be decisive in an era of escalating geopolitical competition. It would be reckless to give it away.”
The premise of the bill is based on fallacies about competition in tech and the benefits of Europeanizing the American market, says AEI’s Mark Jamison. “The bill’s underpinnings are also based on fallacies: The authors are wrong on the intensity of competition in tech markets and in their belief that the US should be more like Europe, whose laws and policies discourage the development of successful tech companies.”
Groups representing small businesses and entrepreneurs warn…
The bill would give the government more power to “micromanage the digital economy,” explains the Small Business and Entrepreneurship Council. “The legislation would also give the federal government significant new powers to micromanage the digital economy.”
— They continue: “[T]his massive intrusion into the digital economy would actually lead to less innovation and less choice, and harm small businesses and U.S. tech leadership.”
The bill may be aimed at larger companies, but it will hurt small and medium-sized businesses the most, explains Karen Kerrigan of the Small Business & Entrepreneurship Council. “The bill is ostensibly aimed at certain large American companies, but it would actually hurt the small and medium-sized businesses that use digital tools and services from the targeted companies[.]”
Like its House companion, the Senate bill puts politics over small business success, explains the Connected Commerce Council. “This bill, like its companion in the House which has not been moderated at all, demonstrates, again, that Members of Congress do not understand how the digital economy works, or perhaps they are putting politics and optics over our nation’s post COVID recovery and small business success.”
The risks posed by the bill are very real, points out John R. Dearie of the Center for American Entrepreneurship. “[T]he risk of unintended consequences associated with marketplace-focused legislation is very real – particularly following the Covid-19 pandemic which, as we have previously noted, dramatically accelerated the adoption of digital technologies by businesses and customers alike.”
Business and industry groups warn…
The legislation would turn antitrust into a tool for the government to manage competition, notes the U.S. Chamber of Commerce. “This legislation is not substantially different from the progressive proposals pushed in the House earlier this year that seek to turn antitrust from a tool to promote competition into one designed to allow big government to manage competition.”
This bill is the “very definition of government picking winners and losers,” points out the U.S. Chamber of Commerce. “The Chamber strongly urges you to oppose S. 2992, the ‘American Innovation and Choice Online Act,’ which would rely on levels of market capitalization to apply one set of rules to some companies and a different set for everyone else – the very definition of government picking winners and losers.”
— The Chamber continues: “Antitrust law should remain an area of widespread application firmly guided by economic analysis that measures the total impact, both harms and benefits, that accrue to consumers. Antitrust should remain unconcerned with harm to competitors – highly competitive markets often adversely impact competitors, but routinely to the benefit of consumers. Antitrust laws should only intervene when analysis demonstrates consumer harm outweighs any corresponding benefits.”
The Senate and House bill would both have negative consequences for consumers and SMBs, says TechNet.“The legislation announced today in the U.S. Senate, which mirrors harmful legislation previously introduced in the U.S. House of Representatives, would have vast unintended consequences that will hurt consumers and small- and medium-sized businesses in every community in the country.”
This bill, and others like it, would hobble American success stories, explains the Computer and Communications Industry Association’s Matt Schruers. “The American success stories that these bills would hobble have helped people work, shop, study, pray, and stay connected to family during the pandemic, and helped thousands of small businesses keep the lights on through an unprecedented economic crisis. From my perspective heading an association that has advocated for tech competition for nearly 50 years, policymakers do little to promote competition by prohibiting innovations that consumers have come to value. U.S. competition policy has long focused on promoting consumers’ welfare. When policymakers pick winners and losers, consumers’ interests can take a backseat to politics.”
The Senate bill would “break Amazon Prime as we know it” explains CCIA’s Matt Schruers for the Disruptive Competition Project (DisCo). “[T]he Senate version of the House bill, AICOA, would likely prevent Amazon from offering its highly valued two-day shipping service. The only scenario where Amazon would not likely be required to end its two-day shipping is if Amazon chose to remove Prime eligibility for all third party sellers on its marketplace and sold only Amazon products through FBA. Even this outcome, however, would break Amazon Prime as we know it.”
Policies like the Senate proposal would disrupt tech services Americans like and weaken U.S. competitiveness, says CCIA. “The Senate proposal, like its House companion, requires nondiscrimination between products, services, or lines of businesses offered by only a handful of online services that would have the unintended consequences of disrupting Americans’ use of integrated tech services they like, and weakening U.S. competitiveness. It is concerning that the country with the strongest tech industry and producers of some of the most popular digital products appears to be gravitating towards government-mandated industrial policies used in other countries with less robust innovation. The type of government industrial intervention proposed is what we’d expect to see from China, Russia, and other countries. These policies would actually hold back U.S. companies as they compete with China and other countries.”
The Senate bill and those like it would make things “harder, more expensive, less convenient, and less secure” says CCIA’s Don’t Break Our Tech. “Americans have overcome unprecedented challenges over the past year, but now Congress is playing politics with the products that helped us get through it. Before and during the pandemic, Americans turned to tech products to receive deliveries for their favorite products, find directions to local businesses, and to connect with loved ones. These bills could make all these things harder, more expensive, less convenient, and less secure.”
The Senate bill and House antitrust proposals could cost the U.S. economy hundreds of billions of dollars, hurting consumers and SMBs, finds a study commissioned by CCIA. “A study by economists at NERA Economic Consulting estimates that U.S. House and Senate legislative proposals subjecting online platforms and marketplaces to common carrier, structural separation, and line of business restrictions would cost the economy approximately $300 billion. The study also finds that the proposals would impact at least 13 additional American companies in the near term and over 100 companies over the next decade. Finally, the study finds that the proposed legislation would have a greater impact on American companies than on foreign companies doing business in the U.S.”
— Study author Christian Dippon says: “These bills are ostensibly intended to target only large U.S. tech companies, but in reality, would have economic repercussions on small businesses and everyday products and services that consumers use. Not only would restricting online platforms and marketplaces increase costs to small businesses and consumers, but at least 13 U.S. companies who are not the primary targets stand to be impacted over the next decade. These bills would discourage the growth of U.S. startups, jeopardize international competitiveness, and overall make American consumers’ lives more expensive and less convenient.”
The bill destroys innovation and growth opportunities for businesses and will harm consumers, says The Developers Alliance. “The American Innovation and Choice Act destroys both choice and innovation by making it impossible for American companies to grow and compete. It will raise consumer prices, weaken security, decrease consumer choice, reduce the quality of services, and throw millions of hardworking Americans out of work or offline. Software developers — many of which run small businesses themselves — will bear the brunt of the losses this act will trigger. Without market reach or the ability to scale, our innovators and entrepreneurs will be forced to charge more to survive inside government-defined markets. The elimination of thriving digital ecosystems will complicate software development and will force consumers to become their own IT department. Without the tools and services that today’s platform’s provide, fewer, more restricted, less compatible, and more costly apps will become the new consumer norm.”
The Senate bill will cause “irreparable harm” to SMBs and startups and break products consumers love, explains Consumer Technology Association President Gary Shapiro. “The American Innovation and Choice Online Act will cause irreparable harm to small businesses and startups and put U.S. companies at a competitive disadvantage against China and other nations eager to overtake our country as global tech leader. The bill allocates vast new powers to the FTC, allowing the commission to ignore the consumer welfare standard, while imposing massive fines with minimal due process. Everyone who is alarmed by the controversial antitrust package introduced in the House should be equally concerned by this Senate legislation. Further, the bill will take away features and functions that millions of Americans love and use in their everyday lives.”
“[T]he Senate’s American Innovation and Choice Online Act will brick the internet,” just like the House Antitrust Package, explains NetChoice.
The bill would have “profoundly negative” effects on consumers and small businesses, reminds NetChoice’s Jennifer Huddleston. “Far from being a moderate reform that would improve enforcement of objective competition policy, this legislation targets a handful of disfavored firms and would have a profoundly negative impact on consumers and small businesses alike.”
This radical proposal would “threaten the very essence of consumer tech products as we know them” explains NetChoice. “The American Innovation and Choice Online Act introduced by Senators Klobuchar (D-MN) and Grassley (R-IA) is a radical proposal that, if enacted, will make the internet much less convenient, push government overreach into our next smartphone update, and threaten the very essence of consumer tech products as we know them.”
Radical antitrust proposals would “crush” digital markets, says NetChoice. “Online tools provide value, choice, and convenience to all Americans. But radical legislative antitrust proposals would crush our digital markets.”
“Americans would be left with fewer services and conveniences right when they need them most,” reminds Carl Szabo of NetChoice. “This bill puts the interests of corporations ahead of consumers by banning useful services that Americans value because competitors say those services are difficult to compete against. By banning choices we rely on, Americans would be left with fewer services and conveniences right when they need them most.”
— Szabo continues: “Many vulnerable Americans rely on accessible products to stay safe and independent, but this radical bill could ruin those smart tools we take for granted like same-day contactless delivery and voice integration.”
Americans “overwhelmingly like and rely on” the products this bill would break, explains NetChoice. “Americans overwhelmingly like and rely on the products and services offered by the industries this bill targets. Instead of promoting American innovation, Senator Klobuchar’s bill succeeds only in delivering a win for corporate giants like Yelp, Spotify, and Match Group. Government-led crony capitalism doesn’t serve the American consumer and should not be enshrined through the passage of the American Innovation and Choice Online Act.”
Requirements in the AICOA would allow foreign companies to exploit loopholes and potentially gain access to user information, notes NetChoice’s Jennifer Huddleston. “Thanks to the requirements in the American Innovation and Choice Online Act, malicious businesses, including foreign companies, could exploit its data portability loophole and gain access to user information.”
— Huddleston continues: “But the Klobuchar proposal structurally doesn’t help users and would require companies to provide portability and interoperability to other companies, not to the users themselves.”
Antitrust and tech policy experts warn…
This legislation will end up “deterring innovation to the detriment of consumers,” explains ITIF’s Aurelien Portuese. “This is the latest example of Congress advancing legislation in the name of antitrust reform that will end up distorting competition and deterring innovation to the detriment of consumers. The House unveiled a deeply problematic package this summer that would reform antitrust laws according to firms’ size instead of their conduct. Now Senators Klobuchar and Grassley say they are planning to introduce a bill that would prohibit technology platforms from favoring their own products and services. In both cases, U.S. lawmakers are taking cues from their counterparts in Europe, who do not have U.S. economic interests in mind.”
— Portuese continues: “It would harm consumers because self-preferencing usually fosters competition rather than undermining it. Prohibiting self-preferencing would put a select handful of companies in a special class that is no longer able to improve their products and offer better prices. In addition to harming consumers, that would create an unfair playing field, since it would exempt other big rivals, many of which are foreign, from the same restrictions. The bottom line is that the Klobuchar-Grassley bill would disrupt innovation without achieving anything beneficial.”
This bill would make innovation and experimentation too risky due to new regulations, say Sam Bowman and Geoffrey Manne in a joint post. “Thus, again, as a practical matter, the difference between the Senate and House bills may be only superficial. The effect of this will likely be to diminish product innovation in these areas, because companies could not know in advance whether the benefits of doing so would be worth the legal risk. We have previously highlighted existing conduct that may be lost if a bill like this passes, such as pre-installation of apps or embedding maps and other ‘rich’ results in boxes on search engine results pages. But the biggest loss may be things we don’t even know about yet, that just never happen because the reward from experimentation is not worth the risk of being found to be ‘discriminating’ against a competitor.”
The bill misunderstands competition and allows an opportunity for politicized enforcement, says International Center for Law & Economics (ICLE). “[T]he legislation fundamentally misunderstands the nature of platform competition and the benefits that accrue to consumers from many self-preferencing practices. The bills also would delegate enormous power and discretion to antitrust regulators, who may use that power to achieve fundamentally political ends.”
In their quest to regulate, the bill would “abandon the tool best-situated to protect consumers and competition,” says Dirk Auer of ICLE. “If passed into law, the bill would effectively outlaw a wide array of common tech industry practices in which platforms favor their own products. This despite scant evidence that such practices are detrimental to consumers.”
— Auer continues: “Ironically, in seeking to address their fears about a hypothetical dystopian future, they would abandon the tool best-situated to protect consumers and competition. Their proposals are paradigmatic examples of a cure that is worse than the disease.”
The Senate bill would harm innovation, “leaving both consumers and competition worse off” say ICLE’s Sam Bowman and Professor Brian Albrecht. The Senate bill “misunderstands the trial-and-error process of innovation. Companies have ideas about what consumers might like, and they try those ideas out. The ones that consumers like are left standing while the others go bust. It’s often difficult for a business to know exactly why its product is successful. Requiring that a business must prove that a given feature improves its service would foreclose much of this experimentation, leaving both consumers and competition worse off.”
— They continue: “The principle that businesses, like citizens, are to be considered innocent until proven guilty comes from the fact that regulators, prosecutors, and courts often get things wrong and so we should be cautious about giving any of them the power to dictate in advance how private businesses operate.”
There is no reason to regulate virtual platforms for doing the same things as brick-and-mortar businesses, says Tim Worstall. So what’s so special about the tech companies and their virtual shelves? The answer: not much. Except that they’re the latest eruption of economic power into our polity. The reason for going into politics is to gain power over what happens out there. A new distribution of power toward Amazon means new attempts to gain political power over it. The cry that virtual stores require more regulation than physical ones is only an excuse for an extension of political power. It is not a reason or justification for that extension of power.