Senator Klobuchar’s Antitrust Bill Version 3.0 Carves Out Telcos and Banks; Original Flaws Remain
Sen. Klobuchar’s revised American Innovation and Choice Online Act (AICOA) recognizes the original bill’s numerous problems, as raised by a bipartisan group of 13 senators during January’s Senate Judiciary Committee markup, but solves none of them.
Even worse, this new legislation explicitly carves out big telecommunications, banks, and credit card companies. Without the special exemption, an economic analysis of the bill found these companies (i.e., AT&T, Visa, Mastercard, JP Morgan Chase, Bank of America, and Comcast) would have been impacted in the next five to seven years.
This legislation still:
— Fails to address national security concerns by discriminating against American companies to the benefit of Chinese or Russian rivals.
— Jeopardizes Americans’ privacy and device security while weakening our nation’s cybersecurity.
— Breaks low-cost digital tools and services that American consumers love and small businesses rely on at a time of record inflation.
— Ignores concerns about content moderation and privacy.
Here is what experts across the political and business spectrums are saying about the new manager’s amendment:
The “worst attributes” of the AICOA “remain intact,” warns R Street Institute’s Josh Withrow. “S. 2992’s worst attributes remain intact. Data privacy and security compromised, popular integrated products likely to be dismantled, companies still guilty till proven innocent, etc. Senators w/ grave concerns in cmte should still be concerned[.]”
— Withrow continues: “Half the committee members from both parties who voted to rush this through committee did so only with assurances that the privacy and cyber concerns would be addressed, but the resulting tweaks appear more cosmetic than real.”
The revised AICOA “still has the same problems it always had” by harming consumers, writes American Action Forum’s Jeffrey Westling. “Changes are out and the bill still has the same problems it always had because Klobuchar inherently targets integration, even those that benefit consumers.”
— Westling continues: “There are significant pro-consumer benefits that come with integration: two day shipping, allowing sellers a single contact for all their fulfillment, having different apps work together, etc. There can be competitive harms, but courts currently look at whether benefits outweigh. This bill says courts shouldn’t even look at that question. Instead, any time a firm has two lines of businesses that overlap, it is presumptively engaging in anticompetitive. Do consumers benefit? Who cares…”
The revised version of the AICOA fails to address competition, consumer, and national security concerns raised by a bipartisan group of senators, explains the Computer and Communications Industry Association’s Krisztian Katona. “It is encouraging that bill sponsors have recognized this legislation is problematic, but unfortunately these changes do not address the problems identified by national security experts, economists, and consumer advocates.”
— Katona continues: “As an organization that has supported sound antitrust enforcement to address anticompetitive behavior, this is too important to use as a political football. Congress’s attempt to regulate the market and to create winners and losers has resulted in legislation that would benefit foreign competitors and harm consumers. The senate should reject this approach – not tinker with it.”
The new changes to the AICOA, “a bill that has never received a legislative hearing,” still present risks to low-cost services at a time of “rampant inflation,” points out the Taxpayers Protection Alliance’s Executive Director Patrick Hedger. “Under the cover of a holiday weekend, Sen. Klobuchar released changes negotiated behind closed doors to a bill that has never received a legislative hearing. Yet, the changes still do nothing to address the significant risks the bill presents for the economy and cybersecurity.”
— Hedger continues: “At a time of rampant inflation, Americans stand to lose low cost (even free) conveniences from Amazon Prime to streamlined Google search results. And while China and Russia are on the march and cybercrime grows, Sen. Klobuchar’s legislation creates strong disincentives towards the most effective cybersecurity practices and investments by America’s leading tech firms.”
The rushed legislation process on the AICOA has failed to address “very public concerns” about the bill’s impact on security and the economy, explains TPA’s Director of Tech Policy Dan Savickas. “The process that has been followed on this antitrust bill embodies the lack of transparency and dysfunction that many Americans have come to associate with Congress. It was rushed through committee without testimony from a single witness or a single hearing, despite very public concerns about the impacts it will have on cybersecurity and the economy.”
— Savickas continues: “Polls show that going after tech companies is one of the lowest priorities for the American people. It is not difficult to see why. These companies keep our families connected, informed, and give us access to quality goods and services in an efficient manner. They proved themselves indispensable amidst a global pandemic. That Sen. Klobuchar’s response is to try and dismantle their business models shows how wildly out of touch many on Capitol Hill have become.”
Business and industry groups warn…
Tweaks in the AICOA 3.0 are “woefully insufficient” and fail to address “the numerous bipartisan concerns,” notes the U.S. Chamber of Commerce. “This legislation would irreparably harm the American economy and innovation. It fails to address bipartisan concerns that it would undermine our national security, cybersecurity, privacy, and international competitiveness—and harm consumers. Such an approach will fuel further inflation, limit choices, and undermine investment in innovation by injecting regulatory uncertainty into the marketplace at the worst possible time.”
— U.S. Chamber of Commerce’s statement continues: “Moreover, last minute cosmetic tweaks to address the bill’s well-documented shortcomings are woefully insufficient. Instead, the sponsors have rushed ahead intentionally avoiding any hearings to thoughtfully evaluate the bill. American innovators and businesses of all sizes deserve better. The legislation is too consequential to not have been properly vetted as it seeks to remake an entire tech ecosystem that has made the United States the envy of the world. But it won’t just impact the tech sector—it seeks to upend the role of antitrust in an effort to give government sweeping authority to regulate entire industries and micro-manage our economy.”
The revised AICOA legislation does not address consumer impact concerns, carves out “telcos, banks, and credit cards,” and hands the FTC and DOJ more power at the expense of consumers, says Adam Kovacevich of Chamber of Progress. “The bill makes zero changes to its heart – the ban on vertical integration that would effectively ban or degrade Amazon Prime, Amazon Basics, Google maps in search results, and Apple apps on iPhones.”
— Kovacevich continues in a tweet: “Last big change: the bill makes clear DOJ/FTC only have to prove a case against big tech by “preponderance of the evidence” standard. That’s 51%. Win for @linakhanFTC, @JusticeATR, and state AGs — but a loss for consumers who benefit from integrated products.”
Tinkering with the text of the AICOA “could have made it worse” as big industries received “carve-outs,” explains Karen Kerrigan of the Small Business & Entrepreneurship Council. “The revised S.2992 is very light on changes. Senators and stakeholders expressed serious concerns about the downstream impact and unintended consequences of the legislation, especially for consumers, small businesses, national security, and the competitiveness of the U.S. digital ecosystem. In fact, the tinkering could have made it worse, if that’s possible. Unlike the big industries that were able to get carve-outs in the new S. 2992, small businesses will still unfortunately experience harmful fallout.”
The revised legislation does not address significant national security and global competitiveness concerns, says TechNet’s President and CEO Linda Moore in a statement. “The revised legislation still fails to address significant concerns about our national security and global competitiveness. Before rushing this to the Senate floor, we need a bipartisan hearing to explore the broad ramifications of such a sweeping measure.”
— Moore continued: “The bill in its revised form would still only apply to iconic American businesses, not to our foreign adversaries. This would benefit countries looking to undermine U.S. influence and global leadership and make it harder for American companies to counter ongoing Russian disinformation campaigns and growing cyber threats.”
See here, here, here, and here for more Springboard content on the unintended consequences and downfalls of the AICOA.