Antitrust Bill that Stifles Innovation Approved by Judiciary Committee
January 20, 2022
The Committee for Justice released the following statement regarding the Senate Judiciary Committee’s approval today of the American Innovation and Choice Online Act:
Today the Senate Judiciary Committee voted to send the American Innovation and Choice Online Act (AICOA) to the full Senate. The bill would prohibit large online (“covered”) platforms from recommending or boosting their own products and services, a common practice online and in chain stores known as self-preferencing. The bill’s name is ironic because AICOA would stifle both consumer choice and American innovation. We oppose its passage by the Senate.
Amongst its many problems, the bill uses vague and ambiguous language to describe self-preferencing. It lacks detail about what it means for a company to “unfairly preference” its products or services or to “unfairly limit” the ability of another business’s products or services to compete on the company’s platform.
The bill repeatedly references conduct that would “materially harm competition on the covered platform,” but fails to clarify what that means. Is a company materially harmed if it is the second result in a Google or Amazon search rather than the first? Is a company materially harmed if its app does not come preloaded on your cell phone?
Moreover, the bill's vague prohibitions coupled with crippling penalties would limit companies’ ability to offer many of consumers' favorites online services and products. For example, AICOA would forbid Amazon from promoting its inexpensive generic products as alternatives to big-name brands. The company’s millions of Prime customers would likely no longer see a “prime” logo indicating the availability of next-day shipping, because that would “discriminate” against competitors who don't offer that valuable service.
Google search results may no longer be able to show a Google map and reviews. Google and Apple would be prevented from pre-installing apps on Android devices and iPhones, ensuring that your new phone would do little more out of the box than make calls. Apple may be prohibited from blocking an app in its App Store even if Apple believes the app poses a security or privacy risk. No wonder a staffer for the bill’s co-sponsor, Sen. Grassley, admitted that the bill does not “make carveouts for all the pro-consumer features” that will be lost if AICOA becomes law.
The bottom line is that AICOA imports European antitrust principles that would stifle American innovation and consumer choice. The bill changes antitrust law to focus on how a company’s conduct affects its competitors, rather than on the welfare of consumers. As a result, a successful firm that offers innovative products, superior service, and lower prices may be found guilty of disadvantaging its less efficient competitors by making it harder for them to compete.
Former FTC Commissioner Josh Wright cautions that these “European principles … are, to put it mildly, not obviously conducive to the sort of innovation and business growth that Americans may expect,” while noting that “Europe has no tech giants of its own.” That is why more than thirty conservative and free-market organizations are opposing a European-style takeover of American antitrust.
It is disconcerting to see some Republican senators who are angry at Big Tech supporting this bill, when they know it will empower and embolden progressives at the Federal Trade Commission and in the Biden Justice Department bent on targeting all sectors of the economy, not just Big Tech. Sen. Klobuchar, the bill’s main sponsor, has made it clear that she wants to target every industry “from cat food to caskets.”
AICOA would give left-leaning bureaucrats unprecedented power to manipulate the free market and the design of consumer products and services. At very least, that would endanger the highly innovative environment that has empowered the U.S. to become the world’s technology leader. At worst, that power will be used to advance political and social agendas that have nothing to do with promoting competition or advancing consumer welfare.
Bureaucrats may also use their newfound power to damage or even bankrupt politically disfavored companies. Under this bill, if a company is found liable in court, it could be fined up to 15% of its total U.S. revenues earned during the years when the illegal conduct was allegedly occurring. Such fines would dwarf the most significant fines we have ever imposed on American companies and could easily be greater than the target company’s profits during the same period.
The text of the bill voted on today was significantly changed just yesterday, leaving very little time for economists and other experts to study the potentially disastrous effects it could have on consumer welfare and the ability of American businesses to compete with foreign tech companies unbound by AICOA. Worse yet, despite the long parade of Senate and House hearings aimed at investigating Big Tech, Congress has never held a hearing on AICOA.
At the very least, the full Senate should demand that this bill get an open hearing, where experts can testify, before voting on it. American innovation is at stake and should not be jeopardized by ramming this bill through Congress without addressing the many unanswered questions about AICOA’s language, scope and economic effects.