Markup Of Sen. Klobuchar’s Anti-Tech Bill Shows Serious Problems Cannot Be Fixed
Sens. Amy Klobuchar (D-MN) and Chuck Grassley (R-IA) rushed out a managers’ amendment to the flawed American Innovation and Choice Online Act (AICOA), the problems with which were on full display during today’s markup. The amended bill would continue to destroy convenient products and services, weaken American national security, and make it harder to protect user data, and ultimately makes the bill even worse.
Here’s all you need to know about Sen. Klobuchar’s amended bill. The bill:
— Does nothing more to protect American national security and likely leaves Chinese and Russian companies untouched.
— Continues to break convenient products and services that consumers love.
— Continues to put small businesses at risk of losing access to low-cost products and services.
— Continues to prevent companies from best-protecting user security.
— Sweeps in a broader range of American companies, introducing more distortions to the US economy.
The bill does nothing more to protect American national security and likely leaves Chinese and Russian companies untouched.
The bill continues to target American companies with the possible addition of TikTok, unlikely to impose any of these mandates on other competitors from Russia and China, highlights Adam Kovacevich, CEO of Chamber of Progress. “The ‘covered platform’ definition has been expanded to include companies that have more than ‘1 billion worldwide monthly active users’. Guess who just hit that number? Tiktok. It’s not as if [Sens. Klobuchar and Grassley] said they wanted to include all the big foreign tech firms. No Yandex, no Baidu. Just Tiktok.”
The bill fails to extend mandates to Chinese technology firms, like Huawei and Alibaba, ignoring the competitive pressure from China in key technology fields, reminds Project DisCo. “The amendment does little to extend commitments to many Pacific Rim champions like Huawei, Alibaba, Baidu, Yandex, since few such firms currently meet the 50M U.S. user threshold. The competitive pressure represented by Chinese and other rivals is real: President Xi announced in 2020 that his government would invest $1.4 trillion in its technology sector by 2025 to overtake the U.S. in key technology fields.”
Sen. Klobuchar’s rushed and now amended bill is not “a sound economic or security strategy” for hamstringing select US companies, warns CCIA’s President Matt Schruers. “Even as this legislation is being rushed to a markup, more experts are questioning the wisdom in hamstringing a few U.S. companies, forcing them to share data and other information with foreign rivals. That may work as a political strategy, but it is not a sound economic or security strategy.”
The criteria of “covered platform” is “unclear and irremediably prone” to unintended consequences for American competitiveness and consumers, warns ITIF’s Aurelien Portuese. “If the criteria of [‘covered platform’] are cumulative, the size threshold would target only a handful of companies, leaving major online platforms unregulated against fair competition principles. If the criteria are alternative, the size threshold would include many companies that are in a growth trajectory and do not yet represent tech leaders when compared with global competitors. Again, either way, the size thresholds are unclear and irremediably prone to considerable unintended consequences for consumers who use the targeted products and for American competitiveness.”
The bill continues to break convenient products and services that consumers love.
Sen. Klobuchar’s bill continues to ban covered platforms from engaging in pro-consumer practices, ultimately harming consumers, reminds R Street’s Wayne Brough. “Prohibiting covered platforms from engaging in pro-consumer behavior may also yield surprising consequences for consumers. Free shipping with Amazon Prime, for example, may be viewed as an illegal discriminatory practice. Many popular software products or applications that bundle a suite of services together and give consumers a discount, such as Adobe Suite, may no longer be feasible. Instead, consumers may be required to build their own bundles by searching for a host of products or features sold by rival companies. In fact, it may become challenging to define what features can be considered an integral part of a product and which are add-ons ripe for regulatory scrutiny. Consumers may have one view of what a final product should look like, but regulators may disagree.”
Allowing subscription services to benefit subscribers missed the point. The amended bill could still undermine retail experience for Prime customers, highlights Adam Kovacevich. “Klobuchar made a change that appears to implicitly acknowledge the Amazon Prime subscription – by carving out ‘subscription’ services from the bill’s liability. But that misses the point. It’s never been the Prime subscription itself that would be affected by the bill. It’s the way in which Prime and Fulfilled by Amazon work together to deliver two-day shipping to 150M+ US households. The bill’s prohibitions impacting Prime are all still there.”
Only exempting paid subscriptions could incentivize companies to charge for previously free services, underscores PPI’s Malena Dailey. “The implementation of such a carve-out for subscription services introduces additional complications for online platforms which also come at the expense of the consumer. By shielding from liability in cases where a fee is charged to users, companies are incentivized to begin charging for services which are currently available free of cost to ensure that they remain accessible to consumers in their current form. For example, under the original language of the bill, Google is not able to display Google services such as maps or company profiles at the top of search results, as such a practice is considered as self-preferencing. The amendment makes it so that to preserve this feature, Google must offer a paid subscription to services such as Google Maps, essentially making it so that companies seeking to avoid penalties under this bill must implement fees to consumers for already popular services to avoid legal liability.”
By only exempting paid subscriptions, the bill could also disincentivize the creation and continuation of free services, reminds Adam Kovacevich. “And by clumsily exempting ‘subscriptions’ to make this Prime criticism Go Away, the bill implicitly incentivizes [covered platforms] to escape liability by turning free integrated services into subscription services.”
The bill continues to put small businesses at risk of losing access to low-cost products and services.
Sen. Klobuchar’s antitrust bill could demolish the platform service bundles that benefit small sellers, disproportionately advantaging the largest sellers, remind a small business coalition in a letter to Congress. “In the retail context, S. 2992 and H.R. 3816 would demolish the platform service bundles, which benefit smaller sellers the most because they benefit more heavily from offloading the core overhead costs of competing. In fact, the legislation would disproportionately advantage the largest sellers on the platforms by raising costs for the smallest companies that threaten to outcompete them.3 For example, Fulfillment by Amazon (FBA), which enables even small sellers on the platform to guarantee two-day shipping to customers, saved small firms an average of 30 percent on shipping costs.4 S. 2992 and H.R. 3816 would prohibit FBA as a component of Prime by barring Amazon from offering sellers this valuable service. The bills would therefore remove retail platform services that help level the playing field for the smallest sellers as they vie against well-resourced rivals.”
Sen. Klobuchar’s antitrust bill could disrupt a whole range of affordable services for small businesses, highlights SBE Council’s Karen Kerrigan. “Indeed, there are now many options available for small businesses to reach consumers online, both big and niche. S. 2992 ignores this market reality. The growth of online marketplaces, big online marketplaces, and diverse online marketplaces is a good news story for small businesses – especially in the COVID economy – but S. 2992 would force only a few companies to separate their marketplace from their own retail offerings, and in the end disrupt a whole range of free or affordable services that both consumers and small businesses benefit from.”
Sen. Klobuchar’s antitrust bill could break consumer marketplaces that small businesses access to compete and thrive, reminds SBE Council’s Karen Kerrigan. “[Sen. Klobuchar’s antitrust bill] would erect barriers to the massive consumer marketplaces that small businesses currently have access to, which are driving new sales, helping them to compete and survive – even thrive – in the COVID economy. Congress needs to focus on the pain points and priorities of small businesses, and breaking ‘big tech’ is not one of them.”
Sen. Klobuchar’s antitrust bill could threaten our nation’s small businesses and startups and harm America’s economy, warns Connected Commerce Council in a letter to Congress. “By undermining the future of American innovation and ceding our nation’s technological edge to foreign adversaries, these bills do nothing to help small businesses still struggling to recover from COVID-19 shutdowns. Instead, the proposals could harm America’s economy and threaten our small businesses. We urge you to consider the unintended consequences of ‘antitrust’ legislation on Capitol Hill that will inflict harm on America’s small businesses and start-ups. Digital platforms and tools helped small businesses survive the pandemic, are helping their businesses today and a full recovery will depend on our ability to leverage technology and innovation.”
Antitrust laws that run on partisanship could harm America’s consumers, small business ecosystem, and competitive edge, warns NetChoice’s Zach Lilly. “We cannot let partisanship ruin what has been a long-held, bipartisan belief that the American consumer should come first. If we forget how antitrust law has focused on the consumer to the benefit of small businesses and the American economy, America is doomed to ruin our small business ecosystem, our competitive edge, and so much more.”
The bill continues to prevent companies from best-protecting user security.
The amended bill concedes that covered platforms are expected to interoperate or share data with some bad actors, underscores Project DisCo. “A ‘rule of construction’ in Section 3(c)(7)(iii) acknowledges [privacy and user security] criticism by attempting to carve out some bad actors: it states that covered platforms can refuse to interoperate or share data with entities that are on sanctions lists, or present national security threats. This language concedes that under other circumstances, covered platforms are expected to interoperate or share data with bad actors. Unfortunately, many bad actors, like foreign adversary-designed apps seeking to collect data on Americans, fraudsters, and counterfeiters, are unlikely to be on U.S. government sanctions lists.”
The bill that limits the universe of bad actors to the U.S. government sanctions lists is “laughably inadequate and irresponsible cybersecurity policy,” underscores the App Association’s Graham Dufault. “Limiting the universe of bad actors subject to removal to those that appear on lists “maintained by the Federal Government” is laughably inadequate and irresponsible cybersecurity policy. The new language only protects token cybersecurity activity, shielding platforms if they rely on the lists of prohibited persons and businesses from the federal government. Cybercriminals adapt quickly and take a variety of measures to prevent detection. Requiring platforms to wait for threat identification and addition to a federal government list gives criminals an enviable new advantage and would expose consumers to a fresh wave of new threats that mobile devices can easily avoid at present.”
Despite the amendment, Sen. Klobuchar’s antitrust bill could still “put consumers’ security and privacy at risk,” warns CCIA’s President Matt Schruers. “The managers’ amendment concedes many of the critiques of the bill, yet does nothing to address the fact that it will put consumers’ security and privacy at risk, and threatens to cripple services that consumers love and that small businesses use to reach their customers.”
The bill could sweep in a broader range of American companies, introducing more distortions to the US economy.
The amended bill broadens the scope of “covered platform,” “ensnaring companies in the grocery, agriculture, and professional services sectors,” highlights Grover G. Norquist, President of Americans for Tax Reform. “The original bill targeted companies with a market capitalization over $550 billion and 50 million monthly users. Sen. Klobuchar’s manager’s amendment broadens the criteria for a ‘covered platform’ even further to include privately held companies with annual revenue of more than $30 billion, ensnaring companies in the grocery, agriculture, and professional services sectors.”
The bill could subject other sectors, like banking and finance, to new regulations, notes R Street’s Wayne Brough. “While the current target of AICOA is clearly large technology companies, it is not necessarily exclusive to tech. Over time large platforms in other sectors—like finance and banking—may find themselves defined as covered platforms subject to new regulations. And, of course, Congress may find it useful to amend the definition of covered platform in ways that provide political benefits.”
The “arbitrary” $550 billion market cap threshold in the bill helps the Senate select winners and losers, highlights American political commentator Drew Johnson. “Clearly, the Senate is using the seemingly arbitrary $550 billion market cap threshold to select winners and losers in the bill. There’s little doubt that the number was chosen specifically to benefit particular companies and potentially harm others.”