Recently, Senator Klobuchar introduced the American Innovation and Choice Online Act (“AICOA”) proposing sweeping regulations for a handful of tech companies that operate digital services used by both businesses and consumers.
While the Bill is ostensibly intended to prevent self-promotion and discriminating against competitors, it would end up sweeping up a broad range of ordinary business operations that provide huge benefits to consumers.
The Bill is notable for its combination of very broad and vague language for defining illegal activity; very heavy penalties for companies and corporate officers; and very narrow language for affirmative defense.
Moreover, the Bill makes no mention of consumer benefits as an affirmative defense and hence advances the interests of certain businesses over the interests of consumers and small businesses that use such services.
The problem is that this three-way combination goes far beyond imposing normal compliance costs or regulatory burdens, by creating huge financial and business risks for even ordinary business decisions.
In response, well-liked services such as Google Search, Fulfillment by Amazon, and the Apple App Store, will have to be substantially reconfigured and/or limited. These proposed standards would not only undermine the tech companies that would be subjected to the legislation, but inevitably harm its users as well.
In fact, because the Bill fails to distinguish between markets that are competitive and markets that suffer from market power, it would inevitably harm competition in digital markets as well. The Bill would essentially make it less likely that either firms subjected to the regulations or ones arbitrarily protected from them would invest in new, innovative consumer products.
Consumers could lose out on a range of products and services offered by the targeted companies that would be swept up by the Bill. Just a few of the products and services that could hampered by the Bill include:
Consumers would also suffer from reduced innovation, as the targeted companies would have to obtain regulatory pre-approval with every new product to meet the unspecified criteria in §2(a) and (b) of the Bill.
Far beyond its stated goals, the Bill could end up harming consumers by breaking the products and services that they have come to greatly value and depend on.
View the full research deck by Dr. Michael Mandel of the Progressive Policy Institute, Dr. John Scalf of NERA Economic Consulting, and Professor D. Daniel Sokol of the University of Southern California Gould School of Law.
