Reining in the power of tech giants

What is the American Innovation and Choice Online Act? How does it aim to break the e-market monopoly?

January 24, 2022 12:35 pm | Updated 12:44 pm IST

File photo for representation

File photo for representation

The story so far: On January 20, the U.S. Senate Committee on the Judiciary approved a bill that would prohibit Big Tech platforms, such as Inc., Facebook-owner Meta Platforms Inc., Apple Inc. and Alphabet Inc.’s Google, from favouring their products and services or ‘self-preferencing’. The committee’s 16-6 majority vote to pass the bill aimed at weakening the dominance of Big Tech, exhibited bipartisan support for the antitrust legislation and moved it closer to the floor of the full Senate for consideration. The bill, however, faces strong resistance from tech firms and their lobbying activities, with still a long road ahead before it becomes a law.

Why did the lawmakers introduce the bill?

The American Innovation and Choice Online Act was introduced in Senate on October 18, 2021, by Senators Amy Klobuchar and Chuck Grassley, and co-sponsored by Senator Richard Durbin, Chairman, Senate Judiciary Committee, and nine other Senators.

Part of a list of bills aimed at reining in the outsized market power of tech giants, the legislation would bar dominant platforms from unfairly preferencing their “own products, services, or lines of business” over those of other businesses that depend on their platforms. That means, Google would not be able to give preference to Maps or YouTube in its search results, Apple iPhones would not come with its pre-loaded apps like iMessage or FaceTime, and Amazon would no longer be allowed to highlight its Basics brand products and services like Prime.

Then there is also the question of data. Dominant digital platforms would not be allowed to use non-public data from other businesses to compete with them on their platforms. The world’s largest online retailer has been accused of doing this — using third-party sellers’ data to develop some of its products. The idea is to create a more level playing field that would help products from other companies, including small businesses and entrepreneurs to reach more consumers, instead of the ones pushed by the dominant firms, who have been alleged of crowding out other players in their domains.

Lawmakers have stated that the bill would give more choices to the consumers. However, there were counterarguments and concerns about the bill from tech firms, their lobbying groups, as well as lawmakers.

What is the likelihood of the bill becoming a law?

The bill, which now advances out of the Judiciary Committee to the full Senate, needs 60 votes to pass the Senate floor, superseding the legislative filibuster, a political tactic to stop a legislation’s final approval. During this round of approval, the six votes against the bill were all from Republican Senators. But going forward the markup would need significant Republican support as well. The committee’s Ranking Member Senator Grassley, a Republican, said that he’s looking forward to continued collaboration with Senator Klobuchar and others to get this bill passed in the full Senate.

The legislation also received endorsement from firms like Roku, DuckDuckGo, Yelp, Spotify, and Match Group, who sent a letter to the committee urging it to advance legislation, along with over 30 small and medium tech companies.

During the committee’s meeting, some concerns were raised about the bill, including “the broad scope and the vague language” it contains, as well as “privacy and security”, and “global competitiveness”. The Senators also presented over 100 amendments to the bill. An amendment, which was adopted, addressed national security concerns by clarifying that the legislation doesn’t require data to be shared with bad actors, a statement said, adding that “foreign companies, including Chinese Big Tech companies such as TikTok, are subject to the same rules.”

Their counterparts in the U.S., however, don’t want to be bound by the rules and have started massive lobbying operations. Senator Ted Cruz, who voted for the legislation, stated that he had a 40-minute phone call with Apple CEO Tim Cook, who “expressed significant concerns about the bill.” Other Big Tech platforms have also voiced their concerns.

With mixed views about the bill, including some who wish to ensure “robust competition on dominant tech platforms”, with some others supporting the tech firms for political or personal reasons, and taking into account external forces like lobbying, the final passage of the legislation could become an uphill task for the sponsors.

Are other countries doing something similar?

Yes. The European Commissioner for Competition Margrethe Vestager has made the 27-country bloc’s stance clear about U.S. tech firms with proposals for two sets of rules —the Digital Services Act (DSA) and the Digital Markets Act (DMA) —meant to take on U.S. tech giants.

The DSA proposal defines clear responsibilities and accountability for providers of intermediary services, and in particular online platforms, such as social media and marketplaces. It would force Amazon, Apple, Google and Meta to remove illegal products, services or content on their platforms or risk fines up to 6% of global turnover.

The DMA proposal blacklists certain practices used by large platforms acting as “gatekeepers” and enables the commission to carry out market investigations and sanction non-compliant behaviours, with fines of up to 10% of global turnover.

While the European Parliament had approved the DMA proposal in December last year, the DSA was approved on January 20. The negotiations on the new rules are expected to begin this year, with the rules likely to be adopted in 2023.

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