Yesterday, we covered the Open App Markets Act — a bill in Congress that targets the anticompetitive practices in app stores. Today, we’ll cover its companion bill, the American Innovation and Online Choice Act (AIOCA, for short).
We could also go into the specific metrics of what platforms/companies are covered under the AIOCA, but it’s safe (and shorter) to say that it will impact Apple, Google (Alphabet Inc.), Amazon, Facebook (Meta) and likely Microsoft. However, it will be up the Federal Trade Commission and the Department of Justice to name which companies will be covered by the bill.
The purpose of the bill is simple: to stop and prevent large tech companies from disadvantaging competing businesses that use the companies’ platforms.
More specifically, it prohibits: platforms self-preferencing their own or partners’ products over competitors’ products; platforms limiting the reach of businesses that offer similar products on the platform; enforcing terms of service discriminatorily; making it difficult to or otherwise punishing businesses for using other platforms to market products; forcing businesses to purchase a product or service from the platform as a condition for being listed on the platform; using non-public data generated by a business or a user on that platform to target consumers with the platform’s own products; restricting businesses from gathering consumer data generated on the platform; making it difficult to uninstall pre-installed apps or changing their default settings; ranking the platform’s own products higher in searches than competing products; retaliating against businesses that report the platform for unfair conduct.
The Big Tech companies hate this bill, of course, and have launched a campaign against it, saying it threatens the way they do business and consumers’ experience. Small and medium-sized businesses are onboard, though — 60 businesses signed a letter to the Senate — and it also has the support of the DOJ and Consumer Reports.
In practical terms, what will this bill do? The most obvious examples come from Amazon. The online giant has become notorious for using consumer data to figure out which products in its online store are the most popular, creating knock-offs of that product, then burying the original so deep in the search results that consumers never see it.
Amazon also tends to disadvantage sellers who don’t use Prime: If multiple sellers offer the same product, Amazon always defaults to the seller(s) who ship through Prime or Amazon’s warehouses, even if those sellers aren’t offering the best price. Under the AIOCA, Amazon can still offer Prime services, but Amazon won’t be able to stack the results with vendors that ship with it or make those vendors the default selling option.
Consumer Reports also gives some examples of the bill’s impact. CR points to ways these large tech companies make exceptions to the terms and conditions for each other, such as Google giving Facebook better access to its advertising network or Apple taking a lower commission from Amazon’s video streaming app. CR also explains how Apple’s in-app purchase system prevents the app developer from gathering data on its own users. On the one hand, this prevents apps from getting payment and transaction data; on the other, it prevents apps that are similar to Apple apps (think Spotify compared to Apple Music or Apple Podcasts) from gathering data that allow it to better compete with Apple’s services.
There are some genuine concerns about how the AIOCA might impact security or change the way consumers are used to engaging with these platforms. However, the bill is careful to use language that gives some latitude for discretion and to grant affirmative defense. Basically, if the platform can prove that what it’s done has not resulted in “material harm” to competition or was “reasonably” done for security purposes, it won’t run afoul of the law. But the law might scare Big Tech companies just enough that they release their stranglehold on the online marketplace.