AICOA’s Failure and the Future of Competition Policy in Congress
As the 118th Congress gets underway, it is useful to examine why the previous session’s “antitrust” efforts failed, and to consider how the House and Senate should proceed with competition and internet policy that would actually encourage innovation and competition while protecting America’s global edge in the technology sector.
Despite much fanfare and promises by lawmakers and proponents, misguided antitrust legislation designed to weaken some of America’s most prominent technology companies was not even brought to a vote on the floor of the House of Representatives or the Senate. The American Innovation and Choice Online Act (“AICOA”)(S.2992 / H.R.3816) failed to pass because of serious privacy, security, and content moderation problems that were identified early on but never adequately addressed by sponsors and supporters.
The collapse of AICOA illuminates the fundamental problem with current antitrust efforts in Congress. For decades courts and antitrust agencies have put consumers first in their evaluation of competition in the economy. This attention to the consumer welfare standard has led to tremendous benefits for innovation and the broader economy. Current lawmakers are instead obsessed with the size or conduct of specific companies and how to exert pressure on them or break them up. It is time for Congress to return to basic economics and promote antitrust efforts from a grounded, evidence-driven perspective or the failures of this legislative approach will be repeated in the new Congress.
No Protection for Content Moderation
Perhaps the single largest reason for the failure of AICOA was the sponsors’ inability to achieve consensus on whether to permit corporate content moderation policies designed to protect Internet users from hate speech, harassment, and disinformation online. Section 230 of the Telecommunications Act allows companies to freely remove such dangerous content and the First Amendment protects companies from being mandated to host dangerous content that violates their terms of service. (The Supreme Court will be taking up this issue in February).
Senate Democrats and academics publicly and repeatedly asked for changes to AICOA to ensure that affected companies would be able to continue content moderation practices that were denied by the language of AICOA. Unfortunately, no substantive changes were made to satisfy these concerns because sponsors knew that Republicans would abandon their support for AICOA if such content moderation policies were explicitly protected in the bill. Content moderation by companies benefits consumers and protects the internet. The failure of AICOA’s sponsors to reconcile this issue eventually led to the collapse of bipartisan support for the legislation.
Damage to U.S. Global Economic Competitiveness, National Security, and Cybersecurity
U.S. technology companies are among our nation’s greatest economic assets. These companies have created millions of American jobs and brought U.S. innovation to every region on earth. In response, China and Russia are increasing state investments in technology companies. China has promised to invest $1.4 trillion in its own technology sector to better compete globally against U.S. competitors on AI, mobile communications, and data centers. Congressional supporters of AICOA have counterintuitively responded to these global challenges by attempting to weaken or break up leading American companies that currently stand as China’s greatest competitors. Such a strategy would leave foreign companies untouched, thereby further harming U.S. interests.
But AICOA’s problems went way beyond weakening U.S. global competitiveness. The legislation’s provisions would have also harmed U.S. national security by preventing American companies from eliminating foreign government disinformation campaigns. AICOA would also limit the ability of companies to protect consumers through fully integrated security tools and block companies from eliminating bad actors who may compromise user data. These security problems loomed large during congressional debate because AICOA’s language raised issues that would serve to harm rather than benefit consumers. However, because sponsors were unable to allay concerns with new legislative language, these security issues played a large role in the ultimate failure of the bill.
Total Lack of Antitrust Focus on Consumers
The bedrock concern of American antitrust law and policy has been properly focused on prohibiting anti-competitive conduct that may harm consumers. For decades, enforcers and courts have applied the consumer welfare standard by promoting competition rather than competitors. However, AICOA completely ignored this consumer-focused and evidence-based antitrust tradition, targeting instead specific companies and conduct with no demonstrable harm to competition or consumers.
Instead of focusing on potentially anticompetitive practices, the factors that were used to define which companies would be “covered” under AICOA related only to corporate size, including total market capitalization and number of subscribers. Companies, indeed, can and have fallen out of the market capitalization provision even as debate on the bill continued. Using such subjective criteria may lead to significant short, medium, and long-term risks and unintended consequences as AICOA’s provisions would not react to actual market realities and changes while the size and metrics of companies ebbs and flows over time.
The fundamental problem was that AICOA was designed not to benefit consumers, but to punish specific American technology companies for conduct that may often be procompetitive or that does not lead to demonstrable harm to competition or consumers, such as self-preferencing. When any of these conducts proved to be anticompetitive, antitrust enforcement has been able to address them. AICOA, would have banned procompetitive conduct, thereby harming innovation and the economy. In fact, AICOA would have raised prices, slowed delivery times, and broken much-loved products including Amazon Prime and Google’s integrated services such as Maps.
Should the 118th Congress pursue competition legislation, it should be focused on specific conduct that may harm consumers and competition. AICOA failed because Congress should not be picking winners and losers in the economy, but rather pursuing policies that benefit consumers, encourage innovation, and strengthen the American economy.