Klobuchar’s revised antitrust ‘pet project’ makes the same mistakes
Sen. Amy Klobuchar (D-Minn.) introduced a new version of the “American Innovation and Choice Online Act” (S. 2992) late Wednesday night, the culmination of months of behind-the-scenes machinations to try to reach the 60-vote Senate threshold.
But the latest draft is riddled with problems, and senators are focused on pocketbook issues instead of Klobuchar’s pet project. At its core, the legislation remains a massive government power grab that will give the Biden administration vast new regulatory authority to reshape the economy. Instead of working to address fundamental issues with the legislation, it appears Klobuchar made minor tweaks to exempt certain companies and industries from new mandates the act would create.
Klobuchar’s bill 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. It has sparked discussions about whether Amazon would be able to offer free two-day Prime shipping or sell AmazonBasics products that are often cheaper than the name brands. There are similar questions about whether Apple could pre-install apps on their products and if Google could show Maps directions or YouTube videos when searched.
The bill raises several fundamental issues. 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 capitalism and sectoral regulation? Does the legislation give far too much regulatory authority to the Biden Federal Trade Commission or Department of Justice?
Instead of addressing these important questions, the newest version of S. 2992 nibbles around the edges to exempt a select few industries and companies from being whacked with new regulations. 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. It also modifies the definition of an online platform to explicitly exclude broadband providers and internet service providers (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 the bill Klobuchar’s “pet project” that had zero 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 quoted asking, “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 weigh on the minds of American families. 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 percent of Americans naming inflation as their most important issue, whereas antitrust did not even rank as an issue of concern for voters. Instead of using valuable floor time to address issues Americans care about, Majority Leader Charles Schumer (D-N.Y.) would rather waste time on Klobuchar’s “pet project.”
After months of waiting, the updated version of S. 2992 makes very few substantive changes that would increase the likelihood of reaching 60 Senate votes. Given the numerous clear problems, Republicans should feel no need to help Klobuchar’s bill become law before the midterm election.
Tom Hebert is federal affairs manager at Americans for Tax Reform and executive director of the Open Competition Center.
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