But is it doubling down on the House's flawed approach?
Following the House Judiciary Committee’s introduction of its package of bills to address alleged anticompetitive practices in the tech industry back in June, Senate Judiciary Committee members Amy Klobuchar (D-MN) and Chuck Grassley (R-IA) have announced the first in a series of long awaited companion bills.
Both the House and Senate versions of the American Innovation and Choice Online Act would ban “covered platforms” from unfairly advantaging their own products or disadvantaging the products of other businesses. Targeting the largest of the tech giants, the American Innovation and Choice Online Act — along with the rest of House Judiciary Chairman Cicilline’s package — define covered platforms as having 50 million US based monthly active users, or 100,000 monthly active business users. The definition also has a market capitalization requirement that is set at $600 billion in the House version and $550 billion in the Senate.
Although the Senate bill is quite similar to the House version, it differs from its House counterpart in several important ways, including the lower market capitalization requirement.
Most notably, the Senate bill removes the individual right of action found in the House version. This means that only federal and state authorities could sue covered platforms for acting in a way that “materially harms competition” based on a preponderance of the evidence. This is a welcome change for those concerned about the potential deluge of new individual lawsuits against major firms.
After months of hearings in both chambers focused around “Big Tech’s” bigness, the changes made to the American Innovation and Choice Online Act indicate that antitrust hawks have been working across the aisle. While Democrats and Republicans are irritated by the tech industry for seemingly contradictory reasons, there seems to be agreement that Congress should act. The question remains whether or not there is enough bipartisan support to get any major legislation through the full Senate.
Nonetheless, the Senate companion to the American Innovation and Choice Online Act fails to address many of the issues that have drawn the ire of outside groups. One of the most significant flaws of both the House and Senate attempts to reign in the tech industry is the breadth of the proposed legislation. In an attempt to punish the "Big Four" tech companies, the four bills in the Cicilline package using the covered platform framework are likely to end up doing irreversible damage to the broader innovation landscape.
Take e-commerce for example. While Amazon currently has a near-majority share of the e-commerce market (around 50 percent according to Statista), its economic moat may not be that wide, considering the price sensitivity of consumers, low switching costs, and other factors. Notably, Amazon's major rival, Walmart, has been rapidly gaining ground. After experiencing 97 percent growth in 2020, and 37 percent growth in Q1 of 2021, Walmart is expecting to gross $75 billion in e-commerce sales in 2022. This projection, taken with the fact that Walmart.com has “up to 100 million unique visitors a month” — not including their subsidiaries like Sam’s Club — means that it is very likely that Walmart will end up as a “covered platform” in the near future. The lower market capitalization requirement in the Senate bill makes this outcome even more likely as Walmart hit a record market cap of $429 billion towards the end of 2020.
If this were to happen, Walmart would presumably be banned from preferencing their own generic brand of products, at least in their online retailer. What’s more, it is also likely that Walmart’s ability to determine which third-party products they choose to host on their platform would be significantly hamstrung. Ironically, the result of this outcome would be greater market dominance for Amazon.
Walmart is merely one example of a company that might end up being covered by the American Innovation and Choice Online Act merely because of its broad scope. While it is questionable whether or not Congress should be taking antitrust action against ecommerce at all, at the very least, any legislation should be more finely tailored so as not to accidentally encompass nascent players in ecommerce.
Yet, damage to up-and-coming firms like Walmart is not the only issue with Congress’ current approach to addressing the issues with the tech industry. The broader issue with the House and Senate Judiciary Committee’s approach is a shift away from our existing antitrust system that focuses on the consumer towards a more European model that focuses on competitors. The American Innovation and Choice Online Act is clearly tailored towards protecting competitors, often at the detriment of consumers who enjoy many of the products and services that would be banned.
While there are legitimate policy debates to be had over tech regulation, legislators on both sides of the aisle must be careful their proposed solutions don't bring major market distortions that harm consumers. With the American Innovation and Choice Online Act, as well as much of the Cicilline package, Congress is attempting to use a sledgehammer to drive a nail, and the result is likely to be unexpected collateral damage. It is time to take a step back and consider the impact that the current antitrust crusade is likely to have beyond just four (or five) of the biggest companies.
