Technology

Senate panel advances bill blocking tech giants from favoring own products

Bloomberg/Pool

A Senate panel advanced a bill Thursday aimed at blocking the biggest technology platforms from giving preferential treatment to their own products, a proposal that has deeply divided the industry. 

While the Senate Judiciary Committee’s favorable reporting of the legislation is a major step toward moving forward a revamp of antitrust laws, time remains a major stumbling block as other items on President Biden’s agenda dominate Congress’s time.

And although the American Innovation and Choice Online Act was approved by a 16-6 margin, many supporters expressed reservations about its current composition and the bill may undergo major changes before reaching the Senate floor.

“We haven’t meaningfully updated our antitrust laws since the birth of the internet,” said Sen. Amy Klobuchar (D-Minn.), one of the bill’s lead co-sponsors along with Judiciary ranking member Sen. Chuck Grassley (R-Iowa). “For the time, the monopoly power is going to be challenged in what I consider to be a smart way.”

The legislation would block dominant online companies defined by user base and revenue — likely at least Amazon, Apple, Meta and Google — from giving preference to their own goods or discriminating against rival products on their platforms.

In practice, that could look like Amazon no longer being able to place its own products at the top of results or Google being barred from highlighting its own services in search.

Critics of big tech companies have long held that that kind of self-preferencing boxes out competitors and ultimately decreases the quality of options available to consumers.

The legislation, a version of which was passed out of the House Judiciary Committee during a marathon session last summer, faces a difficult path to passage.

Thursday’s Judiciary Committee markup was shorter than anticipated, with several senators withdrawing amendments with the caveat that they wanted opportunities to address their issues with the bill before a floor vote.

Sen. Thom Tillis (R-N.C.) brought dozens of amendments before pulling them back and ultimately voting against the legislation.

Sen. Ted Cruz (R-Texas), who admonished his colleagues for not tackling unsubstantiated evidence of anti-conservative bias, brought up proposals to introduce a limited private right of action to the legislation but opted not to bring them to a vote. Unlike Tillis, he did vote to advance.

“I’m prepared to vote to move this bill along, to move it towards the floor, but whether or not this bill gets my support on the floor will depend on how we work together to incorporate these amendments,” Cruz said. 

The bill notably lacked support from Klobuchar’s Republican counterpart, the antitrust subcommittee ranking member Sen. Mike Lee (Utah), who said it poses unintended consequences that could harm innovation and may “entrench the very four companies in which it is aimed at” by creating an incentive to cease business with third parties.

Lee, as well as other senators in opposition to the bill, argued the process was rushed without a full committee hearing on the proposal — a concern echoed by tech industry groups.  

Sen. Dick Durbin (D-Ill.), the chair of the full committee, rebuffed those concerns early on during Thursday’s hearing. 

“There has been opportunity for members to review this bill and debate it,” he noted, pointing to the over 100 proposed amendments.

The antitrust subcommittee also held a series of hearings over the last year about market power and potential solutions, and the proposal followed a 16-month investigation in the House, Klobuchar said.  

“You’d have to have your head in the sand if you didn’t know that was going on,” Klobuchar responded to Lee. “And if you haven’t read those reports that Rep. [Ken] Buck [R-Colo.], a friend of yours, worked on for a long, long time, I suggest that you do. They’re very disturbing.”

Some Democrats also expressed hesitancy with the proposal, despite all voting to advance it.

Lingering opposition from the California delegation could threaten the future of the bill. Sens. Dianne Feinstein (D-Calif.) and Alex Padilla (D-Calif.) ultimately voted for the proposal, unlike the California Democrats in the House during last year’s Judiciary Committee vote on a raft of antitrust bills.

Both lawmakers said they were concerned the bill targets specific companies that are mostly headquartered in California. Padilla called the covered platform definition “arbitrary” and expressed concerns about the bill’s potential negative impact on privacy and cybersecurity.

Feinstein also implied during the hearing that she was told that federal agencies have concerns with the bill. Klobuchar pressed Feinstein on the assessment, calling it a “bold statement.” 

“I don’t like it at all because I think that it’s not true,” Klobuchar said. 

Sen. Patrick Leahy (D-Vt.) raised concerns about the potential effect on small businesses that rely on major platforms for exposure, saying he would like to see that addressed “before I’d feel comfortable supporting the bill on the floor.”

Sen. Chis Coons (D-Del.), a key ally of President Biden, said he has remaining concerns about privacy and data security, global competitiveness and services that are “widely popular with consumers,” but will continue to work with the bill’s sponsors to address “these open questions” as the legislation moves forward. 

Beyond lawmaker opposition, the legislation is also facing a narrowing window of opportunity. With Democrats potentially losing majorities in both chambers, antitrust reforms that have counted on limited albeit dedicated support from Republicans could be on the chopping block.

The self-preferencing bill has drawn intense lobbying from big tech companies, particularly Apple and Google.

Apple sent a letter to lawmakers earlier this week restating its warning that the proposal would pose security risks for consumers. Cruz said on a call ahead of the markup that Apple CEO Tim Cook expressed the same concerns with him. Google came out with similar accusations in a blog post against the bill, arguing it would degrade security and hurt features that consumers use to get the best search results.

Tech industry groups that are backed by the large companies have also launched campaigns against the bills. For example, Chamber of Progress, which is backed by Amazon, Apple, Google and Meta, accused the proposal of forcing companies to do away with popular features such as Amazon having to end its Prime subscription service. 

Senators backing the bill refuted the accusations. 

“This bill is not meant to break up Big Tech or destroy the products and services they offer. The goal is to prevent conduct that stifles competition,” Grassley said. 

But it has also drawn together a broad coalition of smaller — relatively — tech companies in support.

Forty companies including Yelp, Sonos and Basecamp released an open letter saying that self-referencing has allowed dominant platforms to “entrench their gatekeeper status in the market to the detriment of competition, consumers, and innovation.”

Katie McInnis, senior public policy manager at the alternative search engine and open letter signee DuckDuckGo, told The Hill that Google’s default position on its Chrome web browser and Android phones makes it “extremely hard” to compete. 

“If companies were able to compete against Google on the merits, we think consumers would have benefits of even more innovative products and service,” she said.

Two amendments were successfully added during Thursday’s markup. A manager’s amendment offered by Klobuchar and Grassley expanded the scope of the bill to likely cover the Chinese-owned social media companies TikTok and Tencent. The amendment also sought to address some of the underlying security concerns senators raised. 

Sen. John Cornyn’s (R-Texas) amendment that aimed to prevent data on covered platforms from being transferred to foreign adversaries was also approved by the committee only after the scope of the proposal was narrowed by a secondary amendment from Klobuchar and Grassley to only cover data transfers specifically to the government of China or to other foreign adversaries. 

The committee was also slated to debate the Open App Markets Act, a proposal intended to promote competition in app stores, on Thursday but it was withheld after the vote on the American Innovation and Online Choice Act.

Tags Alex Padilla Amy Klobuchar antitrust law Big tech Chuck Grassley Dianne Feinstein Dick Durbin Joe Biden John Cornyn Mike Lee Patrick Leahy self-preferencing Ted Cruz Thom Tillis

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