Senate self-preferencing bill targeting Big Tech advances out of committee

Lawmakers voted Jan. 20 to advance a bill that would prohibit Amazon.com Inc. and other major tech companies from promoting their own products over those of competitors, the latest step in a larger bipartisan effort to rein in Big Tech's market dominance.

The Senate Judiciary Committee advanced the American Innovation and Choice Online Act in a 16-6 vote. The legislation aims to prohibit dominant platforms from providing an advantage to their own private-label products, a practice better known as self-preferencing.

The bill was introduced in Oct. 2021 by Sen. Amy Klobuchar, D-Minn., who leads the Judiciary Committee's antitrust subcommittee. It was sponsored by Sen. Chuck Grassley, R-Iowa, the judiciary committee's ranking member.

"The bill strikes the right balance between preventing the conduct that hurts competition while also ensuring that platforms can continue to provide privacy and data security features to their users, compete against rivals in the United States and abroad and maintain services that benefit consumers," Klobuchar said in prepared remarks.

The bill is expected to require Amazon to use more neutral criteria for deciding which products to promote on Amazon.com, including fastest shipping speeds and lowest prices. Tech giants such as Google LLC and Apple Inc. would also be impacted by the bill due to the popularity of their app stores, as well as Google's dominance in the website search market.

Many Republican senators voiced concerns about cybersecurity and privacy matters during hourslong amendment discussions regarding the bill. Most of the proposed amendments were not recognized, as many senators favored advancing the bill out of the Judiciary Committee quickly.

Interest groups react

The bill would give more exposure to third-party merchants on Amazon's site and provide more choice for consumers online, said Alex Petros, policy counsel with non-profit public interest group Public Knowledge, in a statement to S&P Global Market Intelligence.

"Right now, Amazon's platform is set up in ways that benefit Amazon," Petros said. "It'll put Amazon Basics first, it will put Prime-eligible things first."

The Federal Trade Commission and the Department of Justice would be responsible for enforcing the law. "This is all about giving our agencies and our enforcers the tools they need," Petros said.

But the number of reservations lawmakers voiced about the legislation in its mark-up hearing casts doubt about its potential passage and ultimate impact, policy watchers told Market Intelligence.

"There is a problematic gap between some lawmakers' understanding of the tech sector and their relentless desire to regulate it," said Shane Tews, a nonresident senior fellow at the American Enterprise Institute.

"While it was voted out of committee, the remarks we heard made it clear that the bill's not ready for the floor," said tech coalition Chamber of Progress CEO Adam Kovacevich in an email to Market Intelligence.

The House version of the bill, introduced in June 2021, is sponsored by Reps. David Cicilline, D-R.I., and Lance Gooden, R-Texas, and is among a series of House proposals designed to restrain Big Tech's dominance. The Senate legislation passed out of committee the same week that the Federal Trade Commission and Department of Justice announced plans to overhaul joint merger guidelines amid concerns about market consolidation, particularly in tech.

Big Tech reacts

Brian Huseman, Amazon's vice president of public policy, said in a statement this week that the bill is "being rushed through the legislative process without any acknowledgment by its authors of its unintended consequences."

Google's chief legal officer Kent Walker in a Jan. 18 blog post said the legislation could "break" popular online services like Google search. "We're deeply concerned about these unintended consequences," Walker wrote. The post acknowledged that the Judiciary Committee had considered an amendment following discussions with Google concerning security flaws where consumers may be forced to share data with bad actors or foreign companies.

Apple did not return a request for comment by the time of publishing but issued a letter to the Judiciary Committee earlier in the week regarding its reservations about the bill.

Next steps

The bill has faced mixed views since its conception. Some experts and lawmakers say it will enhance competition, while others believe it will hurt consumer choice. Still, it has been widely regarded as more likely to pass than other proposals aimed at reining in Big Tech.

The act will need to undergo numerous revisions before it can be voted on to pass on a full Senate floor, assuming a second hearing on the bill is not held. The House also awaits votes on several bills that were introduced this past summer.

President Biden in July 2021 signed sweeping executive orders asking Congress and agencies to crack down on Big Tech and tackle competition and price transparency amid broadband providers. Among several asks, the president encouraged the FTC to establish rules barring unfair methods of competition on internet marketplaces, something that the bill advanced would likely impact, notably on e-commerce platforms and app stores.