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For years, Congress has flirted with regulating Big Tech, and it appears we finally will have a bill in front of the full Senate. Sen. Amy Klobuchar, D-Minn., has announced that the Senate will vote soon on a revised version of the American Innovation and Choice Online Act (AICOA). Unfortunately, after months of editing and whipping votes, the bill is just as destructive as when we started.
If passed into law, AICOA would give competition regulators at the U.S. Justice Department (DOJ) and the Federal Trade Commission (FTC) broad discretion to override or penalize key business decisions, notably in how online platforms design their services. Such bureaucratic oversight will harm competition and innovation in tech.
AICOA specifically targets Big Tech firms such as Google, Amazon, Apple, Microsoft and Facebook and grants the FTC and DOJ authority to fine these companies up to 10% of their total U.S. revenue for infringing the bill's provisions. This is essentially a business-by-bureaucracy approach to regulating Big Tech.
Central to the bill is a ban on so-called "self-preferencing." This sort of behavior is ubiquitous in the online world, and for good reason. When Google places its Google Maps at the top of a search result, that's self-preferencing. When an iPhone comes integrated with Apple Pay, Apple is self-preferencing its payment platform over others. Fining Google and Apple for these practices is essentially punishing them for selling an integrated product that prioritizes a seamless user experience.
While AICOA is often talked about as antitrust legislation, it is anything but that. Antitrust is about ensuring competition. Existing antitrust laws make it illegal to monopolize a market or conspire to restrain trade through collusion. Preventing these behaviors is necessary to ensure competition and innovation in markets.
Instead of bolstering competition through antitrust, the Klobuchar-Grassley bill attempts to regulate the behavior of a few politically unpopular Big Tech firms. Google is not monopolizing the market for digital maps; Apple is not conspiring to restrain trade when it bars random developers from accessing its tap-to-pay features. These are standard business decisions about how to offer the best products for consumers. Under the bill, such perfectly mundane business decisions as what technology to make public will be evaluated by bureaucrats.
We can look to the European Commission's case against Apple to see how this type of regulation will play out. Apple made "tap to pay" mainstream, with more than 40 million estimated users in the U.S. Now, the European Commission is fining them for not allowing others to piggyback on their inventions. According to the commission, Apple's crime is barring access to "the necessary hardware and software" for other developers to create their own tap-to-pay payment services on iPhones.
With these fines, the European Union has chosen a business-by-bureaucracy approach to regulating Big Tech. Apple contends that limiting access to its tap-to-pay technology is necessary for security and privacy. Whether or not Apple's claim is true is beside the point. The real question is: Who should get to decide? Apple, or a regulator in Brussels?
The problem with the regulation approach is that it imagines that technologies just simply exist. Given that they exist, why not force Apple to make them freely available to all developers? But that's not how innovation works. We may cross our fingers that Apple and Google will continue to churn out products we love out of the sheer goodness of their heart. But experience demonstrates that rewarding innovators with profits is a more reliable system to encourage innovation.
Instead of rewarding innovation, the self-preferencing bills would force these companies to defend themselves in court any time they want to integrate new services they offer. The primary defenses the bill would allow against the lawsuits it creates all place a ridiculous burden on accused companies.
Is it "reasonably tailored and reasonably necessary, such that the conduct could not be achieved through materially less discriminatory means" for Apple to keep tap-to-pay exclusive to Apple Pay? Who knows? But Apple nonetheless will be forced to prove it is "necessary" anytime the FTC or DOJ questions their business decisions. In anticipation of lawsuits like this, we can expect Apple to be significantly more conservative and less innovative when it comes to rolling out new products.
The E.U. shows us the innovation-harming lawsuits one will see under bureaucratic control of Big Tech. It doesn't have to be like that in the United States. Just because a government is near a policy cliff doesn't mean it needs to jump off. Cooler heads can prevail.
Geoffrey Manne is the president and founder of the International Center for Law & Economics (ICLE) in Portland, Ore. Brian Albrecht is the ICLE's chief economist and lives in Minneapolis.