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January 27, 2022updated 01 Feb 2022 2:28pm

All eyes are on Washington’s new antitrust proposal

By GlobalData Thematic Research

The US antitrust debate is at a critical point. The American Innovation and Choice Online Act approved by the US Senate judiciary committee represents an important milestone towards adapting traditional antitrust rules to the digital economy. Designed to stop companies from giving preferential treatment to their own products and services, the bill will have major implications for online marketplaces like Amazon and Alphabet, both of which have been accused of misusing customer data to gain a competitive advantage.

The passing of the bill is seen as an important test of Congress’s ability to pass new and, for many, long overdue antitrust regulation.

It is still unclear when the full Senate will vote on the bill, but if it passes both houses of Congress it will prohibit Big Tech companies from using their own search results to favor their own products and will remove any requirements for third-party merchants to pay for a platform’s services in return for more prominent placement. Violations of the law would be punishable with penalties of up to 15% of a company’s US revenue.

Big Tech groups rushed to criticize the antitrust bill

In a major lobbying effort, Alphabet, Apple, and Amazon have rushed to warn that the changes would hamper customers’ online experience, for example preventing Alphabet from showing directions in Google Maps in response to a search query. Apple has long been accused of unfairly controlling the kinds of apps that users can download onto its phones, forcing them to go through its own app store instead of downloading them from the internet. However, the Cupertino company claims that Apple breaking its dominance on its own App Store would “reward those who have been irresponsible with users’ data and empower bad actors who would target consumers with malware, ransomware, and scams”.

Another concern voiced by TradeNet (the trade group that represents Apple, Google, and Facebook) is that the law would only apply to American businesses, not foreign companies. However, during the committee debate, the bill was amended to specify that it should also include the Chinese technology companies Tencent and TikTok, clarifying that groups will not be forced to hand over data to any other technology company that has been sanctioned by the US government.

Seizing the opportunity before November’s midterm elections

The clock is ticking on introducing the new law before midterms, as it becomes increasingly uncertain that the Democrats will be able to maintain their control of both chambers of Congress. The bill passed with bipartisan support, with five Republicans voting with the Democrats to advance the bill out of the committee. However, the debate in the Senate also highlighted continued divisions; two California Democrats expressed reservations about the effect the bill would have on companies and consumers in their home state. Sen. Dianne Feinstein, who said she intended to oppose the bill, warned that it unfairly targeted a handful of companies and said it could introduce new privacy risks to consumers.

US-EU cooperation will be crucial

Whatever the outcome, Washington has never looked more aligned to Brussels in its willingness to tackle digital monopolies. The EU came up with a legislative proposal in 2020 aimed at preventing large online platforms (so-called ‘gatekeepers’) from abusing their market power. Under the Digital Markets Act (DMA), designated gatekeepers will have a set of obligations and could be fined up to 10% of their worldwide turnover in cases of non-compliance. Such closeness, strengthened by Lina Khan’s appointment as head of the Federal Trade Commission, will be crucial as the US looks at ways to toughen competition law in the technology sector.