Breaking Up U.S. Tech Will Inflame the Pain Points of Small Businesses

By SBE Council at 8 June, 2022, 1:28 pm

Congress and President Biden Must Focus on the Priorities of U.S. Entrepreneurs and Main Street Businesses

By Karen Kerrigan –

Legislation that aims to regulate and break up certain big U.S. technology companies is pending in Congress. The Senate may soon act on the “American Innovation and Choice Online Act,” S. 2992 (there’s a companion bill in the House, H.R. 3816), a bill that has raised the concerns of the small business community, consumer groups, national security and cybersecurity experts, and a broad swath of the U.S. business community. The bills would vastly change how several large U.S. technology companies are allowed to operate, and would gut or add new costs to some of the free or low-cost tech services and tools that small business owners use on a daily basis.

The impact of S. 2992 would be felt across the economy, and negatively affect the digital ecosystem…and by extension America’s small businesses and entrepreneurs.

TAKE ACTION! Please contact your U.S. Senators (find them here). Call the Capitol Switchboard at 202-224-3121. Urge them to support legislation that HELPS small businesses with inflation and SUPPORTS the economy and U.S. businesses, not bills like S.2992 that would raise costs and gut access to customers and valuable tech services! Urge them to OPPOSE S. 2992!

The impact of S. 2992 would be profound for small businesses and startups.

New Costs for Startups and Small Businesses at (a Minimum) of $3,000 Per Employee

“Startups and other small business users of impacted [free or low-cost] services would be first among the many users harmed by these developments…Startups and small businesses would face incremental costs from the loss of integrated online platforms and marketplaces that allow them to run their business operations and even generate revenue without incurring higher sales, marketing, and advertising costs that would otherwise be required to connect to consumers…In the simplest model, where startups were forced to shift to current market alternatives, startups could incur costs of up to $3,000 per employee each year. For a startup with 10 employees, an increase in operating costs of up to $30,000 per year could dramatically shorten their funding runway and force them to make difficult decisions.” Source: Disruptive Competition Project (DisCo)

Loss of Customer Access and Visibility for Small Businesses, Higher Costs and a Productivity Hit

“Many of the 2 million [California] businesses that use Amazon as a sales channel would lose customer access. Local restaurants would no longer appear on Google maps or in business reviews because those features would be considered as unfairly competing with rival services… Under this legislation, integrated services would be broken up and scattered across the internet. Companies would lose the economies of scale obtained by bundling services. And consumers might face the reality of paying for services that are currently low-cost or free.” Source: Los Angeles County Business Federation

Critical Tech Conveniences and Tools that Benefit Small Businesses Would be Banned Under S. 2992, H.R. 3816

“Amazon Prime Free Shipping: By requiring equal treatment of all products and marketplace sellers, the bills would make it impossible for Amazon to offer its Prime free shipping service for certain products.”

“Google Maps appearing in Google search results: The bills would prohibit Google from showing its maps in main search results when you search for a local business.”

“Facebook and Instagram Cross-Posting: The bills would make it impossible for Facebook to show your friends’ Instagram stories at the top of the news feed — and ban users’ one-touch cross-posting between Facebook and Instagram.”

“Facebook Marketplace and Groups alongside your Facebook news feed: Under the bills, Facebook wouldn’t be able to show its Marketplace and Groups on the same page as its News Feed.”

“Apple apps pre-installed on iPhones: The iPhone wouldn’t be able to come with any Apple apps pre-installed — making it harder for the novice user to quickly get started with Safari, Note, or Apple Podcasts.”

“Google recommending the top-rated florist: Because the bills would impose an “equal treatment” principle, Google wouldn’t be able to show you the top-rated pizza place in town.”

“YouTube videos in Google search results: Because Google owns YouTube, it wouldn’t be able to display YouTube videos in Google search results when you search for a song or video.”

“Calculator results in Bing’s search results: Microsoft’s Bing browser couldn’t display its own calculator in search results — and would instead have to steer users to calculator websites.”

Source: U.S. Chamber of Progress.  WAIT, there’s more here in an updated analysis of the legislation.

The Degradation of Amazon Prime Hurts Small Business Consumers and Sellers

“This degradation of the Prime experience would materially hurt not just Amazon (which is what we believe to be the real, unstated goal of the legislation), but, more importantly, every American consumer and small business that currently relies on the Prime service…. [Small and third-party] sellers have grown to become a bustling marketplace that generates nearly 60% of gross merchandise sales on Amazon. There are now over 500,000 U.S. selling partners using Amazon today, and together, they are responsible for more than 1.8 million jobs in the U.S.…We consistently hear from our selling partners that what they find most valuable in working with us is the broad distribution and traffic from hundreds of millions of consumers they get by listing their products in our store – the very benefit they stand to lose with this proposed legislation. It’s worth remembering that hundreds of thousands of American small and medium-sized businesses make a living via Amazon’s marketplace.” Source: Amazon blog post.

Inflation Would Worsen

“Anti-tech bills raise the price of low-cost digital services, making consumers worse off. Sen. Klobuchar’s AICOA would prohibit many practices that create and sustain efficient, seamlessly integrated, high-quality, and low-cost digital goods and services. Leaving consumers and small businesses with fewer choices at higher prices…Inflation has remained low for digital goods and services in the technology sector, reflecting the efficiency and affordability of online services.”  Source: Consumer Price Index vs. Digital Price Index, 2014-2022 – Springboard CCIA, Adobe Analytics, Adobe Digital Price Index, BLS      

Pension Plans and Investors Would be Harmed, $1.02 Trillion in Added Costs to Businesses and Consumers

“Radical proposals like S. 2992 and H.R. 3816 would lead to increased costs and lost retirement savings for millions of Americans…If the legislation is enacted, regulated businesses would be forced to ‘structurally separate,’ or break up, and incur increased operating costs in order to comply with the bills. These increased operating costs would reduce the market value of securities issued by the regulated businesses, particularly equities (stocks)… These bills would increase operating costs for an ever-growing number of impacted businesses, reaching up to $1.02 Trillion in added costs for over 100 U.S. businesses by the late 2030s. Increasing operating costs drives down the value of these companies’ stock, which is held in significant amounts by the public pension funds that manage the retirement savings of 14% of America’s workforce. Meanwhile, supporters of these bills have yet to show any quantifiable benefits for these Americans in return.” Source: Computer and Communications Industry Association

Global Competitors and Bad Actors – such as China and Russia – Benefit by Dismantling of U.S. Technology and Innovation

“There has been no hearing with the FBI, NSA, or CIA to examine potential security risks despite continued warnings from security experts. The bill in its revised form would still only apply to iconic American businesses, not to our foreign adversaries. This would benefit countries looking to undermine U.S. influence and global leadership and make it harder for American companies to counter ongoing Russian disinformation campaigns and growing cyber threats.”  Source: TechNet

Startups Fear the Loss of Key Services and Tools, Access to Customers and Higher Costs

In a spring survey of new startups by TechnoMetrica and SBE Council, 61% of respondents were “very” or “somewhat” concerned that government regulations against America’s largest technology companies would negatively affect their businesses.

In terms of impact:

● 58% say these actions will make it more expensive to access and retain customers.

● 58% said the outcome of government actions will likely lead to making them pay for the services they currently use for free.

● 49% are concerned about the disruption of communications with customers, and potential customers.

● 47% said it will be harder for customers to find their business.

● 43% say new customer acquisition will become more difficult.

● 21% are concerned that the back-office support they receive – such as shipping and packaging – will be disrupted.

Source: Small Business Research: New Business Startups During the Pandemic, SBE Council

Congress’s Priorities are Not the Priorities of Entrepreneurs and Main Street Businesses

If you are asking why some in Congress are focused on taking away important tech tools that small businesses depend on, or that raise costs for small businesses, rather than addressing their priority concerns – such as inflation, supply chain challenges, labor shortages, high gas prices, access to capital, access to affordable health coverage, and policies in general that could help thwart a possible recession – you would not be alone.

The startups in the SBE Council survey noted above, and in many other surveys that research the concerns and needs of small businesses, say exactly the same thing. They want Congress and President Biden focused on their pain points, not making their day-to-day struggles more difficult.    

As I noted in a recent Op-Ed about how out-of-touch some members of Congress are with the needs of Americans and the workings of the modern marketplace:

“Congress has not grasped the reality that consumers are benefitting from more choice and convenience than ever before. Legislation such as the ‘American Innovation and Choice Online Act’ would replace what consumers want and like with what politicians and government regulators think would work better. The bill, for example, proposes different sets of rules for online marketplaces above a certain size versus traditional retailers, even though our strong and dynamic retail sector is largely driven by the blending of technology and digital tools to enhance the in-store shopping experience… If Congress and Biden administration regulators move forward with punitive, misguided policies aimed at ‘big tech’ that actually hurt consumers and business owners, they could take down the dreams of many entrepreneurs who are using digital tools to effectively compete with big players across many industry sectors.”

Again, please TAKE ACTION and urge your U.S. Senators to support American businesses and to work on policies that would help heal the economy, rein in and lower inflation, fix the supply chain mess, make energy more affordable, and address needed workforce policies and education issues that will help small businesses meet their human capital needs.

TAKE ACTION! Please contact your U.S. Senators (find them here). Call the Capitol Switchboard at 202-224-3121. Urge them to support legislation that HELPS small businesses with inflation and SUPPORTS the economy and U.S. businesses, not bills like S.2992 that would raise costs and gut access to customers and valuable tech services! Urge them to OPPOSE S. 2992!

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.