It’s Deja Vu for Yet Another Misguided Tech Regulation Proposal
Substantive and procedural concerns in tech regulation bills in the House and Senate are starting to feel like deja vu for yet another misguided anti-tech proposal.
On June 11, 2021, House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law Chairman Cicilline introduced H.R. 3816, the American Choice and Innovation Online Act, along with a number of other anti-tech bills. Despite concerns raised by the New Democratic Caucus to House Leadership and the Judiciary Committee requesting that a legislative hearing be held on these bills, these bills were rushed to a marathon 48-hour markup, less than two weeks after introduction. During the markup, on June 23-24, 2021, many members of the House Judiciary Committee complained about the process and not having time to understand the bills before being forced to vote. Nevertheless, all six bills were voted out by House members of both parties and are waiting for floor consideration.
Meanwhile in the Senate…
On October 18, 2021, the Chair of Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, Amy Klobuchar, introduced S. 2992, the American Innovation and Choice Online Act, the Senate companion to H.R. 3816. Late in the evening on January 10, 2022, S. 2992 was noticed for a markup just a few days later on January 13th. Customary to the Senate’s practice, the markup is expected to be held over until when the Senate returns from recess on January 20th.
2992 mandates a handful of covered platforms that meet the arbitrary threshold of $550 billion in market capitalization and 50 million active monthly U.S. users or 100,000 active monthly U.S.-based business users must interoperate with other products, services, and lines of businesses operating on the platform. The proposal essentially requires business users and all products, services, and lines of businesses that operate on the platform to be treated the same (i.e., there can be no discrimination between the cover platform’s products, businesses, and lines the services and those of business users). The bill introduces a new standard that a business user’s products, services, and lines of businesses operating on the covered platform must not be treated in a way that “materially harms competition.” This is a new standard that is not defined anywhere in proposal itself or competition policy law more generally. Perhaps if a hearing were held before markup, this issue could be addressed.
Why is S. 2992 so bad?
S. 2992 adds additional prescriptions compared to the House companion, and it also shares the House companion’s bias against U.S. firms. S. 2992’s thresholds only count U.S. users, so international competitors like Chinese giants Alibaba, Tencent, and Baidu won’t be affected while U.S. firms are subject to costly regulation. Making U.S. firms comply with costly regulations while foreign competitors are excluded is a surefire way to destroy U.S. jobs by reducing the international competitiveness of U.S. firms. Violation of S. 2992 allows the FTC to collect 15% of revenue of the covered platform during the pendency of the violation and grants the DOJ broad injunctive relief to stop the conduct. Additionally, the DOJ or a state AG can seek injunctive relief in the form of a 120-day temporary restraining order, if a claim is made that a covered platform may in the future violate the Act and the action impairs the ability of business users to compete with the covered platform. A proceeding for a violation of the Act can be instituted within 6 years of the date when the violation occurs. Thus, there could be cumulative and multiple violations that a covered platform can be subject to at the same time. Indeed these stiff penalties have the ability to break covered platforms.
If Congress believes what it’s doing is right, what’s the rush?
The prohibition on treating products, services, and lines of businesses differently in S. 2992, as discussed previously on DisCo, could bring an abrupt end to the digital conveniences that Americans have come to know, enjoy, and rely upon during the pandemic. There is a disjunct between the small faction in the Congress that is leading members down the primrose path that ultimately will make its members walk the plank and kill these tech services as we know them by voting for this bill and the U.S. voters, who value these services. Voters will be the bellwether as to which course was correct.
But the problems surrounding this bill listed above are just the tip of the iceberg when it comes to the untold consequences that can result from its passage. Doing the same thing over and over again expecting different results is futile, among other things. Rather than have a repeat of the 28-hour markup over two days that played out in June 2021, why not hold a hearing to allow the public and other interested stakeholders to provide input? If Senators believe the bill is in the best interest of the American people, it need not be the subject of another rush job.
