Earlier this month, U.S. senators Amy Klobuchar (D., Minn.) and Chuck Grassley (R., Iowa) unveiled plans for their American Innovation and Choice Online Act. The legislation would empower federal regulatory agencies to prevent the biggest platforms — namely, Amazon, Google, Facebook, Apple, and Microsoft — from giving preference to their own products and services over those of third parties. Unfortunately, the bill does not live up to its name: Allowing such companies to prefer their products over others confers value and convenience for consumers, not harm.
In an effort to transform online platforms into some sort of ideal of managed competition, the act constrains private companies in ways that would surely leave customers worse off. Consider just a few possible consequences: Amazon would not be able to offer free-shipping services on certain items; Google would not be able to display its map at the top of search results for local businesses; Facebook would be prevented from showing you a friend’s Instagram story at the top of your news feed; and Apple’s App Store wouldn’t suggest the apps that might be the best fit for users. Microsoft would even be swept up by the bill’s prohibitions, too, by no longer being allowed to integrate LinkedIn contact info with Microsoft Office 365.
This legislation is nothing more than a solution in search of a problem that doesn’t exist. Take Amazon, for instance, who makes money in two ways: first, from their cut from third-party sales on Amazon Marketplace and second, by competing against those same third-party sellers with their own generic-products line, Amazon Basics. The bill seeks to thwart Amazon’s promotion of the these private-label items, but neglects the fact that the company already must delicately balance these two revenue streams. The best way to strike that profit-maximizing balance is to let customers decide, not regulators. Whether it means suggesting an Amazon Basics product or highlighting a superior offering from a third-party seller, the market signals keep Amazon working hard to please customers. The same cannot be said for members of Congress willing to throw consumers’ interests overboard to score political points for bashing Big Tech.
Beyond that, such companies as Amazon are not doing anything online that traditional retail hasn’t been doing for decades. Brick-and-mortar grocery chains carry third-party brands, while also selling their own private-label versions of some products. Amazon generates only 1 percent of its revenue from private-label goods. Meanwhile, Kohl’s makes 46 percent and Target 33 percent of their revenue that way. Big-box stores gather lots of information with their club cards and can use that data to make production and marketing decisions for their own brand. Amazon’s decisions about placements of third-party and generic brands in search results is a clear parallel.
In fact, Amazon has long had an internal policy prohibiting the use of third-party data to influence its product development. While its adherence to that policy has recently come under greater scrutiny, the truth is that Amazon’s alleged conduct is not sufficiently different from that of offline retailers. Generics often benefit consumers with more choices and lower prices.
And while some third-party sellers might not like to compete with Amazon’s free shipping, millions of Prime subscribers remain tickled pink about it. U.S. antitrust law is about making consumers happy, not placating one’s competitors. For the past 40 years, American antitrust law has revolved around the necessity of proving consumer harm in the form of higher prices, lessened output, or reduced innovation or quality. Where, then, is the consumer harm from Amazon generics giving buyers more choices, perks, and often lower prices? Ironically, harm can be found only in the unintended consequences of this bill.
Read the full article at National Review.