They’re back!
Special interest groups across the political spectrum are pushing Congress to reintroduce the American Innovation and Choice Online Act (AICOA), which would get the federal government into dictating how large online retailers conduct their business. A similar measure has been introduced in the California Senate, and, if passed, could become de facto national legislation because of the website and systemic operational changes it would mandate.
AICOA requires a handful of large online companies to not “self-preference” their own products in postings because, proponents claim that third-party sellers are being deprived of sales and consumers are overpaying.
But there are no victims here. The legislation is predicated on the assumption that consumers are lazy and stupid. It also assumes small businesses are held hostage economically to big online retailers. Those assertions, as documented below, are false. At best, AICOA is a solution in search of a problem.
When first introduced in the U.S. Senate in 2021, AICOA would have applied to four companies: Facebook (Meta), Google, Amazon, and Apple. The California legislation, introduced by Senator Scott Wiener on March 18, would apply to companies with a market capitalization of more than $1 trillion and with more than 100 million monthly users in the United States. As Senator Wiener said in announcing the bill, the four above companies are the targets.
On April 1, 16 diverse organizations wrote to Senators Chuck Grassley and Dick Durbin, the chairman and ranking member, respectively, of the U.S. Senate Judiciary Committee, urging them to reintroduce AICOA. They claim this is necessary because of “the ability of dominant technology platforms to impose fees and pricing restrictions that raise costs not just on their own marketplaces, but across the entire economy.”
The groups, which primarily represent organizations concerned with social and cultural issues, should have first checked with one of the country’s largest and most effective small business advocates, the Small Business & Entrepreneurship Council (SBE Council).
On March 11, the SBE Council released its annual national survey of small businesses, which examines their views and experiences with large online platforms in depth.
Key findings include:
- Three in ten small businesses (30%) use Amazon as a sales channel. Two-thirds of them (64%) report that Amazon margins are higher or about the same as those of other sales channels.
- Small business sellers on Amazon are highly diversified, with 61% using social media platforms and 58% operating their own business website.
- More than one-third of Amazon sellers also use Walmart (37%), Etsy/Shopify/eBay (36%), or other retail/wholesale partners (36%).
The AICOA supporters’ contention that consumers are harmed by online sales at the largest websites does not pass the commonsense test or the majority of consumers’ personal experiences. First, since the beginning of capitalism, merchants have been preferencing products in different ways, and consumers know how to look around for the best deals and what best meets their needs. Furthermore, scrolling through one or more websites is far easier than driving to different stores.
Consumers, similar to the small businesses the SBE Council surveyed, can also go to the websites of Walmart, Costco, Etsy, Shopify, eBay, Target, and many others if they do not like the deals being offered on one of the handful of companies that AICOA would impact. And with the rise of AI and its ability to help consumers search more efficiently and better understand what exactly they should buy, AICOA makes even less sense.
It is refreshing that Congress has not reintroduced AICOA 15 months into this session. Hopefully, Senator Grassley, once a lead co-sponsor of AICOA, and others have reconsidered. And, when they see that the California effort is being led by a progressive running to replace Nancy Pelosi in Congress, that should give added pause. Even Pelosi was reportedly against AICOA.
Regardless of those developments, it is markets - not politicians who should determine what is bought and sold. Furthermore, America’s online markets are competitive and diversified to such an extent that any company arrogant enough to think it has an iron grip on consumers and other sellers will soon get a powerful comeuppance.
