PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The Senate Takes its Turn at Destabilizing U.S. Tech Leadership

By at 26 January, 2022, 11:01 am

SMALL BUSINESS INSIDER

On Jan. 20, S. 2992 was advanced out of the Senate Judiciary Committee despite the many significant concerns and issues expressed by Senators about the bill. It did not receive the traditional hearing before markup. Concerns also focused on harmful small business impacts.

Committee advances S. 2992 after most Senators express significant concerns about the bill.

by Raymond J. Keating –

When it comes to the international marketplace, the usual policy problem is to get politicians to refrain from providing special protections or subsidies to domestic businesses via trade protectionism. Of course, tariffs and other protectionist measures raise costs for small businesses and consumers and reduce choices for everyone.

Now, elected officials are working against U.S. businesses that are global leaders in technology in a different way, that is, with direct threats of increased regulation and intrusive targeting that in the end will harm small businesses, consumers and U.S. competitiveness.

This regulatory barrage being unleashed by agencies such as the Federal Trade Commission (FTC) and through proposed legislation not only undermines the tech leaders targeted by these actions, but there will be collateral damage that would spread far-and-wide beyond “Big Tech.” Such as to the many small businesses that partner with these companies or serve these large firms and/or their employees. While harming millions of small businesses that are customers of these firms. The competitive ecosystem would also be damaged, which means current or future competitors to these technology leaders may also be impacted.

Make no mistake, this domestic battering against “Big Tech” – specifically, targeting Amazon.com, Apple, Facebook, Google and possibly Microsoft – is nothing more than populist pandering that runs counter to sound economics.

It also should make everyone very uncomfortable when politicians structure a bill so that it clearly is targeted at specific enterprises while leaving others untouched who employ the same business practices in question. This is a disturbing message that creates significant uncertainty and inequities, which undermines all U.S. businesses.

Senate Moves on Tech “Preferencing” Bill

The “American Innovation and Choice Online Act” (S.2992) was voted out of the Senate Judiciary Committee on January 20, even after many Senators expressed significant concern. One of them being that S. 2992 did not receive an open hearing before markup. In a statement expressing small business concerns about the bill, SBE Council noted that S.2992 is “a mish-mash of regulatory and anti-trust provisions that will have consequences – both intended and unintended – on small businesses, innovation, U.S. competitiveness, consumer privacy, and the overall health and vibrancy of the digital ecosystem.”

These are exactly the same concerns many Senators raised, which they are hoping somehow get fixed on the Senate floor.

In a letter to the Senate Judiciary Committee, SBE Council President and CEO Karen Kerrigan wrote, “S. 2992 could significantly alter the very digital conveniences that consumers fully enjoy, and those that entrepreneurs and their employees use to access the open consumer marketplaces and digital tools that have resulted in the growth and success of millions of small businesses.”

The “American Innovation and Choice Online Act” uses sweeping, vague language – such as:

● “unfairly preference”

● “unfairly limit”

● “discriminate”

● “may materially harm competition”

● “lines of business that compete or would compete”

…and so on. Such vague language serves to empower government bureaucrats to bring the hammer of regulation down upon the aforementioned technology leaders who have found political disfavor with Members of Congress on both sides of the political aisle. And again, S. 2992 disallows “preferencing” among the big tech companies, but allows it in the traditional big retail space and for companies under a certain market cap.

An Unchartered Framework for Antitrust Policy and Targeting Companies

S. 2992 tosses aside decades of understanding of antitrust regulation – that it should be focused on limiting consumer harm.

Instead, and again, S.2992 is about government undermining certain U.S. tech businesses in order to, in effect, subsidize or protect other businesses. Consumers don’t come into the equation at all (apparently.) Instead, this legislation opens the door further to government regulation of these leading tech firms based on the lobbying of competitors (who are apparently hung up about their own position in the competitive market) and new regulation based on the direction political winds happen to be blowing.

Again, this is about politicians and their appointees deciding what’s fair and unfair, including what lines of business companies are allowed to engage in and which they are not. For example, a variety of services offered by Amazon.com would be placed in jeopardy. See the analysis from the Chamber for Progress and this piece by American Action Forum, for example.

Government dictating and limiting business decision-making and business models for large technology firms, including limiting lines of business in which a platform would be allowed to operate, would limit innovation and consumer options, and hurt millions of small businesses.

As Amazon.com has reported, nearly 2 million small businesses sell their products on the platform. And for those small businesses choosing Fulfillment by Amazon (FBA), whereby “Amazon stores, packs, picks, and ships orders for sellers from fulfillment centers around the world,” these enterprises have experienced more than 30 percent savings in shipping costs and a 20 percent to 25 percent boost in sales.

Amazon also notes that “products from small and medium-sized businesses account for more than half of everything sold in our store.”

In the end, attacking Apple, Amazon.com, Facebook and Google is not about government protecting consumers against some sort of monopoly harm. After all, there are no monopolies at work here. These four leading technology firms are competing against current, emerging and future competitors.

At the same time, they also are partnering with and serving entrepreneurs and small businesses, whether via computer and cellphone hardware and software, providing various goods and services, providing expanded sales opportunities for small firms, offering powerful and affordable marketing opportunities, and much more.

Political attacks on these leading technology companies amount to government undermining entrepreneurial success, whether it be entrepreneurs who already have built leading global enterprises, or entrepreneurs who are working to startup and build great businesses of all kinds and across sectors. In the end, this harms the U.S. economy and benefits our international competitors who are likely applauding these U.S. government actions that go after (and are mimicking global regulatory attacks on) America’s most successful tech companies.

See: Small Business Would be Collateral Damage in the Senate’s New Antitrust Bill, OC Register.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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