By Mark Jamison

Supporters of the American Innovation and Choice Online Act (AICOA) recently announced that they intend to hold a Senate vote to pass the legislation. The bill would require companies that have reached particular sizes, such as 50 million users who like a company’s service so much that they actively use it every month, to stop doing some of the things those 50 million people enjoy.

The underlying theory appears to be that handicapping these successful services will drive customers to lesser products. Supporters ironically call this “competition.” Others might call this “crony capitalism.”

Based largely on beliefs that regulating competition should be about benefiting customers, critics of the bill have accused it of weakening cybersecurity, stifling market dynamism, suppressing innovation, and generally being incoherent. The primary author of the bill, Sen. Amy Klobuchar (D-MN), disagrees that markets are solely for customers. Her statements supporting the bill give employees, innovation, and economic equity equal status with customers.

But does the bill actually protect employees, spur innovation, or promote economic equity? It doesn’t appear so. The performance of our pre-COVID-19 economy demonstrated that a robust economy is the best way to protect workers and promote equity. According to the Wall Street Journal, with lower taxes and lighter regulations from 2017 until COVID-19,

Wage growth accelerated, and opportunities for low-skilled workers grew. People with disabilities or criminal records, for the first time in years, found themselves sought after for work. Firms turned to internal training programs to give workers needed skills. . . . Median household incomes grew, inequality diminished, and the poverty rate among Black people dropped below 20% for the first time in post–World War II records.

AICOA’s ramped-up regulations would not only harm workers by depressing business activity but also suppress innovation. The bill’s supporters seem to conflate innovation with small company size. But years of research have shown that no such relationship exists. By limiting who is allowed to innovate, the bill would necessarily make the economy less dynamic.

So if the bill doesn’t benefit consumers or employees, doesn’t increase innovation, and doesn’t improve equity for workers that struggle in a heavily regulated economy, who does the bill benefit? Aaron Schur, general counsel at Yelp, provides the answer in a disclaimer at the end of his essay supporting the bill. He explains, “Yelp is a competitor to Google. . . . Passage of the American Innovation and Choice Online Act could increase the likelihood of additional antitrust proceedings against Google.” Simply put, the bill hamstrings companies that consumers widely appreciate to benefit companies like Schur’s.

Schur also admits that the bill’s increased regulation is
not based on careful thought or rigorous analysis but entirely on arbitrary
limits on how many customers a successful company can serve before encountering
new regulations. Citing recent cases against Facebook and Google, Schur argues
that the bill would not redefine market power.  In today’s antitrust ecosystem, practitioners
understand “market power” to mean that a firm’s profits are protected by
barriers that restrict customers from switching suppliers to obtain better
products or prices. Detecting market power is complex, involving detailed and
data-intensive analyses. Thus, Schur’s argument implies that the bill’s
increased regulations are based solely on its arbitrary triggers.

Schur also argues that the bill would not change the
definition of “harm to competition.” Under today’s antitrust practices, a
company with market power is considered to harm competition if its conduct
against rivals also harms customers. If AICOA does not change that, then its
new regulations are not about competition but about benefiting companies that
fail in competing on their own merits.

Supporters of AICOA may be correct that they have the votes
to pass the bill. If it passes, the companies that it benefits would have cause
to celebrate. Consumers and workers, however, would not have reason to
celebrate as they would be the ones paying the price.

(Disclosure statement: Mark Jamison provided consulting
for Google in 2012 regarding whether Google should be considered a public
utility.)

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