Overview
Lawmakers across the aisle have teamed up to introduce legislation that would prohibit dominant tech companies from using discriminatory practices against competitors’ products on their online marketplaces.[1] This legislative proposal would largely affect Big Tech companies such as Amazon, Apple, Google, and Facebook, who have been accused of abusing their dominant positions in the past.[2]
Current Senate Bill
On October 14, 2021, Senator Amy Klobuchar (D-MN), chair of the Senate Judiciary Committee Antitrust Subcommittee, and Senator Chuck Grassley (R-Iowa), the top Republican on the Senate Judiciary Committee, announced new antitrust legislation aimed at combatting the use of “self-preferencing,” a tactic where the dominant company favors their own products over those of their competitors.[3] The American Innovation and Choice Online Act[4] (“the Bill”) “sets commonsense rules of the road for major digital platforms to ensure they cannot unfairly preference their own products and services.”[5] To accomplish this goal, the Bill prevents dominant companies from compelling third-parties to purchase goods or services in order to operate on the platform; it also prohibits the use of search algorithms that favor the dominant company’s products.[6] The Bill has bipartisan support in the Senate.[7] Current co-sponsors include Senators Dick Durbin (D-Ill)., Richard Blumenthal (D-Conn.), Cory Booker (D-N.J.), Lindsey Graham (R-S.C.), John Kennedy (R-La.), and Cynthia Lummis (R-Wyo.).[8]
Supporters of the Bill have claimed that it will support small businesses by allowing them to compete with large companies in an increasingly digital world.[9] In a press release, the Bill’s authors have argued that the Bill will “prohibit specific forms of conduct that are harmful to small businesses, entrepreneurs and consumers, but that do not have any pro-competitive benefits.”[10] In Senator Klobuchar’s words: “[a]s dominant digital platforms—some of the biggest companies our world has ever seen—increasingly give preference to their own products and services, we must put policies in place to ensure small businesses and entrepreneurs still have the opportunity to succeed in the digital marketplace.”[11] Senator Grassley added that the Bill will “create a more even playing field and ensure that small businesses are able to compete with these platforms.”[12]
However, critics of the Bill have argued that consumers would ultimately bear the costs of the Bill because it could result in limited access to products that consumers enjoy.[13] The Chamber of Commerce released a letter opposing the Bill, arguing that “[a]ntitrust laws should only intervene when analysis demonstrates consumer harm outweighs any corresponding benefits.”[14] The Chamber contends that while there are “[l]egitimate policy debates that have arisen from the digitization of the economy are worthy of thoughtful discussion . . . congressional action would be better focused on other methods to address these concerns, not changes in the law to alter the role of antitrust enforcement.”[15]
Legislative History
The Senate legislation is similar to the bipartisan House bill which introduced in June 2021.[16] Both bills ban “covered platforms” from using their market power to hurt competitors. [17] However, the Senate bill lowers the House’s market capitalization threshold – the minimum total market value for a company to be considered a “covered platform” – from $600 billion to $550 billion.[18]
This is not the first time that Congress explored its options for regulating Big Tech. Just last year, House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law conducted a 16-month investigation into allegations of antitrust misconduct by Amazon, Apple, Facebook and Google.[19] The investigation included a highly anticipated hearing with Jeff Bezos of Amazon, Tim Cook of Apple, Sundar Pichai of Alphabet, and Mark Zuckerberg of Facebook, in which legislators questioned the executives about their companies’ use of predatory practices.[20] With regard to Amazon, it was alleged that the company’s algorithm made their own products – the Amazon Basics brand – appear first on the “search results” page, in a more noticeable position than their competitors’ products.[21] It was similarly alleged that Google adjusted its algorithm in order to give prominent placement to its own content on the “results” page, while demoting its competitors’ content.[22] With regard to Facebook, questions about monopoly power were raised about the company’s acquisitions of Instagram, WhatsApp, and Oculus.[23] And, finally, Apple faced criticism regarding the possible anticompetitive effects of its App Store policies, including practices such as: collecting commissions on apps sold and in-app purchases, requiring certain apps to be pre-installed on all iPhones, and the exclusion of rival apps on the App Store.[24]
The House Judiciary Subcommittee on Antitrust ultimately released a report on its findings, which concluded there was evidence of monopolization and monopoly power with regard to all four companies.[25] The Subcommittee offered a broad range of recommendations, including: “[n]ondiscrimination requirements, prohibiting dominant platforms from engaging in self-preferencing, and requiring them to offer equal terms for equal products and services.”[26]
Conclusion
The American Innovation and Choice Online Act has the potential to majorly disrupt the current configuration of online marketplaces. While it remains to be seen whether the Bill will ultimately become law, its bipartisan support sheds light on how legislators view their role in updating the American antitrust framework to curtail practices that may have discriminatory effects.
[1] See Press Release, Amy Klobuchar, Senate, Klobuchar, Grassley, Colleagues to Introduce Bipartisan Legislation to Rein in Big Tech (Oct. 14, 2021), https://www.klobuchar.senate.gov/public/index.cfm/news-releases?ID=3AD365BE-A67E-40BB-908A-C8570FF29600.
[2] See John D. McKinnon, Effort to Bar Tech Companies From ‘Self-Preferencing’ Gains Traction, Wall St. J. (Oct. 15, 2021, 12:17 PM), https://www.wsj.com/articles/effort-to-bar-tech-companies-from-self-preferencing-gains-traction-11634202000.
[3] See id.
[4] S. 2992, 117th Cong. (2021).
[5] Klobuchar, supra note 1.
[6] See Diane Bartz, Big Tech to face another bipartisan U.S. antitrust bill, Reuters (Oct. 14, 2021, 6:37 PM), https://www.reuters.com/world/us/big-tech-face-another-bipartisan-antitrust-bill-2021-10-14/.
[7] See id.
[8] See id.
[9] See Press Release, John Kennedy, Senate, Kennedy, Klobuchar, Grassley introduce American Innovation and Choice Online Act to rein in Big Tech (Oct. 18, 2021), https://www.kennedy.senate.gov/public/2021/10/kennedy-klobuchar-grassley-introduce-american-innovation-and-choice-online-act-to-rein-in-big-tech.
[10] See id.
[11] See id.
[12] See id.
[13] See Cat Zakrzewski, Senators aim to block tech giants from prioritizing their own products over rivals’, Wash. Post (Oct. 14, 2021, 5:00 AM), https://www.washingtonpost.com/technology/2021/10/14/klobuchar-grassley-antitrust-bill/.
[14] Letter from U.S. Chamber of Com., to Members of the U.S. Senate (Oct. 20, 2021), https://www.uschamber.com/letters-congress/us-chamber-letter-s-2992-the-american-innovation-and-choice-online-act.
[15] Id.
[16] H.R. 3816, 117th Cong. (2021).
[17] See Margaret Harding McGill & Ashley Gold, Congress unveils bills to dismantle tech giants, Axios (June 11, 2021), https://www.axios.com/congress-bills-dismantle-tech-giants-0d47feb9-f9a6-4a82-8719-100bcd549285.html.
[18] See id.
[19] See Majority Staff of H.R. Subcomm. on Anti., Comm., and Admin. L. of the Comm. on the Judiciary, 177th Cong., Rep. on Investigation of Competition in Digital Mkts. (Comm. Print 2020) [hereinafter House Report]; see also Online Platforms and Mkt. Power, Part 6: Examining the Dominance of Amazon, Apple, Facebook, and Google: Hearing Before the Subcomm. on Anti., Comm., and Admin. L. of the H. Comm. on the Judiciary, 177th Cong. (2021).
[20] Id.
[21] See Darrell M. West, Congressional hearing reveals that tech firms will face greater oversight, Brookings (July 29, 2020), https://www.brookings.edu/blog/techtank/2020/07/29/congressional-hearing-reveals-that-tech-firms-will-face-greater-oversight/.
[22] See id.
[23] See id.
[24] See id.
[25] House Report, supra note 16.
[26] Id. at 20.
