MICHAEL BLOOMBERG: Bill that takes a swipe at tech firms ‘deserves a bipartisan burial’
Few bills in recent memory have been as misleadingly titled as the ‘American Innovation and Choice Online Act,’ writes Michael Bloomberg
I have always believed we need more bipartisanship in Washington, but just because an idea is bipartisan doesn’t make it good. A bill now making its way to the Senate floor is a perfect example.
Few bills in recent memory have been as misleadingly titled as the “American Innovation and Choice Online Act.” It takes a swing at big tech companies but would hit American consumers and workers on the nose, knocking both backward.
Supporters of the measure claim it will create “commonsense rules of the road for major digital platforms” by preventing them from “unfairly” preferencing their own products. That sounds great in theory, but what it calls common sense is really just a failure to understand the technology industry and how it works. In practice, the bill would impose immense costs, limit consumer choice, reduce innovation, undermine competition, and — quite possibly — outlaw some of the most popular services that Americans use every single day.
At the heart of the bill is an effort to prevent big tech companies from using a widespread business practice called self-preferencing, which is generally good for both consumers and competition. Think of it this way: An ice-cream parlour makes its own flavours and sells other companies’ flavours, too. Its storefront window carries a large sign advertising its homemade wares. In smaller letters, the sign mentions that Haagen-Dazs and Breyers are available, too. Should Congress force the ice-cream store owners to advertise Haagen-Dazs and Breyers as prominently as their own products?
That’s essentially what this bill would force a handful of the largest tech companies to do. For instance, Google users searching the name of a local business now get, in their search results, the option of clicking a Google-built map. But under the bill’s requirements, the search results would likely have to exclude the Google map. Similarly, Amazon would likely be prevented from promoting its less-expensive generic goods against the biggest brand names.
Lots of businesses offer configurations of products and services in ways that are attractive to customers, often for both price and convenience. Doing this can allow companies to enter — and potentially disrupt — new markets, to the great advantage of customers
Yet the bill views such standard business conduct as harmful. It would require covered companies — essentially Amazon, Apple, Google, Facebook and TikTok — to prove that any new instance of preferencing would “maintain or enhance the core functionality” of their business. Failure to comply could lead to fines of up to 15% of a company’s total US revenue over the offending period.
In addition to being draconian, this stipulation would contravene the bill’s stated goals of encouraging innovation and helping consumers. Where the large tech companies might once have conducted continual experimentation to find new product combinations that appeal to consumers, they’d now need to seek government permission. Given the legal risks, they may not even try, fatally undermining the trial-and-error process that leads to innovation.
The bill might also derail some immensely popular offerings. Take Amazon Prime, the enhanced-shipping service used by about 150-million Americans. Prime is made possible by a programme called Fulfilment by Amazon, in which merchants pay a fee to have Amazon handle their logistics and get their stuff to customers within a day or two. Though its language is ambiguous, the bill would likely prevent Amazon from labelling certain goods as Prime-eligible, thus eroding the consumer benefit of selecting products that could arrive fastest. Depending on how it’s interpreted, the bill could also prohibit the funding model that makes Prime possible, or even render the entire fulfilment arrangement infeasible.
Is crushing Amazon Prime really what Congress thinks the American people want? The bill’s supporters claim that some tweaks were made to ensure that Prime won’t actually be banned. But what about the next company that wants to offer an innovation like Prime? And what about all the other economic and consumer benefits the bill could effectively outlaw?
An aide to one of the bill’s sponsors summed up the answer perfectly: “If we make carveouts for all the pro-consumer features, then the bill will be useless.” That is exactly right — and why the bill should be defeated.
Bills like this happen when lawmakers try to channel animus towards tech companies into high-minded legislation, with insufficient concern for the unintended consequences. Easy politics rarely make smart economics.
There are many, many other ideas in Washington that deserve bipartisan support. This deserves a bipartisan burial.
Bloomberg. More stories like this are available on bloomberg.com/opinion
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