ICYMI: Stanford Law Professor Doug Melamed Explains What’s Wrong With Sen. Klobuchar’s AICOA
Antitrust expert and Stanford Law Professor Doug Melamed published a detailed analysis of the flaws in the American Innovation and Choice Online Act (AICOA) and why the Senate should not pass the bill.
Melamed, the former Acting Assistant Attorney General in charge of the Department of Justice Antitrust Division and Principal Deputy Assistant Attorney General, explained: “Sound legislation requires a clear, factually-based understanding of the problems the legislation is seeking to address and of the costs and benefits of the solutions. AICOA is not yet such a bill.”
Professor Melamed notes three flaws with the bill:
— 1) The bill does not adequately define “harm to competition” and may upend decades of antitrust law, harming consumers.
— 2) “The bill would prohibit welfare-enhancing conduct” and “glosses over important ambiguities.”
— 3) Lawmakers do not agree on the bill’s impact on content moderation.
1) The bill does not adequately define “harm to competition” and may upend decades of antitrust law, harming consumers.
— The bill does not adequately define “harm to competition.” Melamed notes that “the statutory language is patently ambiguous [and] does not include the normal antitrust language (e.g., ‘competition in the market as a whole,’ ‘market power’) that gives meaning to the idea of harm to competition, nor does it say that the imprecise language it does use is to be construed as that language is construed by the antitrust laws.”
— This ambiguity could lead to “increased costs, reduced output, and harm to consumers and suppliers.” He notes that in the past, the U.S. has tried to pass laws contrary to current antitrust laws, that “insulate weak firms from competition provided by more efficient firms. The results have been increased costs, reduced output, and harm to consumers and suppliers.”
2) “The bill would prohibit welfare-enhancing conduct” and “glosses over important ambiguities.”
— The bill “could undermine economic welfare” because it “would prohibit conduct that is not anticompetitive” and its “broad language” “glosses over important ambiguities.” “The antitrust laws do not punish firms that succeed by welfare-enhancing competition on the merits, even if they gain market power by doing so. Those laws prohibit only anticompetitive conduct. AICOA, by contrast, would prohibit conduct that is not anticompetitive.”
— Melamed points to the “ambiguities” in the bill: “Do the prohibitions on self-preferencing mean that the platforms cannot enable their products and services to take advantage of their joint scale and scope economies? Do they mean that the platforms cannot preinstall their new products and services, even if users want them preinstalled?”
— The bill “is likely to impair innovation” even though “[e]conomists have long understood that innovation is far more important for economic welfare than static efficiency.” “Economists have long understood that innovation is far more important for economic welfare than static efficiency. Yet AIOCA is likely to impair innovation by the platforms. As noted above, the bill would not permit conduct to be justified even if it is necessary to enable development of valuable new products and services, and it might inhibit or prevent the evolution and improvement of the platforms themselves.”
— Congress has not held any hearings or conducted investigations on the impacts and costs of the AICOA, if implemented. “[T]here have been no hearings on the bill, and Congress has made no other investigation or findings that would support a conclusion that the costs of restricting efficient, innovative conduct by the platforms will be less than the benefits from insulating rivals in complementary markets from the conduct that the bill would prohibit.”
3) Lawmakers do not agree on the bill’s impact on content moderation.
— Republicans and Democrats are not on the same page on the bill’s impact on content moderation. “According to newspaper reports, Senator Cruz, Congressman Buck, and other Republicans are saying that the AICOA will be a useful tool against content moderation or, as they think of it, liberal bias on the digital platforms. Senator Klobuchar and other Democrats have said that the bill is about commercial practices, not content moderation.”