Senator Amy Klobuchar (D-Minn.) introduced a new versionof the “American Innovation and Choice Online Act” (S. 2992) late Wednesday night, the culmination of months of behind the scenes machinations to get the bill closer to the 60-vote Senate threshold.
Unfortunately for Klobuchar, the latest draft is still riddled with problems that will prevent Senators concerned with inflation or crony capitalism from jumping on board. Instead of working to address fundamental issues with the legislation, it appears Klobuchar made minor tweaks to exempt certain companies and industries.
S. 2992 prohibits platform companies with a market capitalization of over $550 billion and 50 million monthly users from promoting their own “products, services, or lines of business” next to those of a competing business in a way that would “materially harm competition.” In plain English, the bill bans companies over a government-determined size from promoting their own private-label products next to name-brand products. This is not an insidious practice – Costco does this when they sell Kirkland paper towels next to Bounty paper towels.
If a bureaucrat determines that a company has violated S. 2992, the government can levy a civil penalty of up to 10 percent of revenue. While Klobuchar slightly reduced the penalty from the original 15 percent, the fine could easily be twice the size of the profits in a low-margin industry like retail.
As written, the bill targets four or five American technology companies and would make it far more difficult for Americans to use their popular services. Amazon would no longer be able to offer free two-day Prime shipping or sell AmazonBasics products that are often cheaper than the name brands. Apple could no longer pre-install apps on their products, rendering your new iPhone a brick out of the box. Google could no longer display Maps directions or YouTube videos when searched.
The bill raises several fundamental questions. If a business practice is bad, shouldn’t it be illegal for every business, not just a select few? Are voters clamoring for self-preferencing to be fixed? Does legislating via market cap open the door to future crony capitalist sectoral regulation? Does the legislation as written give far too much regulatory authority to the FTC/DOJ?
Instead of addressing these important questions, the newest version of S. 2992 makes minor tweaks that exempt certain industries and companies. The new draft eliminates the distinction between publicly traded and privately held companies, striking the provision added during markup that would sweep in private companies over $30 billion. The new version modifies the definition of online platform to explicitly exclude broadband providers and ISPs. The updated draft removes “facilitating payment” language from the covered platform definition, exempting banks and credit card companies.
The Klobuchar bill is privately roiling the Senate Democratic caucus, who see the bill as a political liability heading into the midterm elections. Vulnerable Senators up for reelection want Congress to focus on pocketbook issues impacting the American people – like inflation or rising gas prices. According to Politico, one Senate aide called AICOA Klobuchar’s “pet project” that had little political payoff, saying: “We should be focused on items that will help consumers deal with rising costs…[and] nobody can figure out why it would be a priority.” Another Senate aide was also quotedasking, “Does the Klobuchar bill reduce rising costs in the short term for consumers? No. So why would it be a focus between now and the election?”
Prominent Democrats are publicly calling out problems with the Klobuchar bill. In a May 10 op-ed for Cyberscoop, Rep. Eric Swalwell (D-Calif.) came out against the antitrust bills, citing harm to his constituents and pressing national security concerns. Obama National Economic Council Director Larry Summers blasted the Biden Administration’s “non-analytical” antitrust approach and said that enacting radical changes to antitrust law would “make the U.S. economy more inflationary and less resilient.”
Public support for tech regulation is eroding as pocketbook issues take center stage. According to a recent Pew Research poll, just 44 percent of Americans think major technology companies need additional regulation, down from 56 percent in April 2021. A Gallup poll surveying 2,000 Americans was released with 52% of Americans naming inflation as their most important issue, whereas antitrust did not even rank as an issue of concern for voters.
Ultimately, after months of waiting, the updated version of S. 2992 makes very little substantive changes that would increase the likelihood of reaching 60 Senate votes. Republicans should feel no need to help Klobuchar’s “pet project” reach the finish line before the midterm election.