Media Library (51)

The American Innovation and Choice Online Act — A Bill Not Ready for Primetime

Proponents and opponents of the main tech-oriented antitrust bills currently before Congress all agree on one thing: To have a chance of passing before the midterms, a floor vote will likely need to happen before Congress starts its August recess. Whether born of desperation or a desire to test-run novel approaches to legislative PR, bill proponents have enlisted the help of, among others, an online tabloid news outlet and a British comedian in their efforts to sell voters on the merits of the American Innovation and Choice Online Act (AICOA).

But legislatively overruling decades of legal precedent, which is what supporters of the bill are proposing to do, is no laughing matter. This legislation has wide-ranging potential consequences and thus requires careful deliberation, not a rushed vote. Neither AICOA nor its companion bill in the House has had a single hearing, where experts have been questioned about any collateral repercussions that might result from them. And make no mistake. AICOA is rife with potentially serious unintended consequences. Below is a sample of issues related to AICOA in its current form.

For decades, the overriding goal of the antitrust laws in the United States has been to protect the interests of consumers. The consumer welfare standard, and its attendant focus on economics in evaluating the relative benefits and harms of corporate actions, has worked extraordinarily well. This is particularly true in the tech space, where it has helped unleash a level of innovation that is the envy of the world. Remarkably, this has led some to surmise that antitrust law is in need of a major overhaul.

AICOA seeks to deliver on this promise by overturning years of antitrust precedent. While Congress can do that, to do so based on legislation that has never been properly vetted, is overbroad, and leaves foundational terms undefined, will create great uncertainty for consumers, businesses, the enforcement agencies, and the courts.

Take, for example, the ban on “self-preferencing” in section 3(a)(1). Looking at the text, the provision seems to ban companies that are covered by the bill from selling or promoting their own products or services if they are in competition with those of their direct competitors. But this interpretation is subject to uncertainty. Not only is the proposal itself silent on what it means by terms like “preference” and “materially harm competition,” these terms are also undefined in existing antitrust law. And this is to say nothing of the practical challenges associated with implementing the rule, even if the above interpretation eventually is confirmed by the courts. A list of search results, after all, must place someone or something first, and deciding which product or service “is the best” is inherently subjective.

Another example of the proposal using language that is woefully unclear centers on the issue of content moderation. Section 3(a)(3) prohibits “discrimination in the application or enforcement of the terms of service.” The Democratic bill drafters, Senator Amy Klobuchar (MN) and Representative David Cicilline (RI), have made clear that, as they see it, the sole goal of the bill is to regulate commercial practices, and they dismiss out of hand any connection to content moderation. The lead Republican sponsors, Senator Charles Grassley (IA) and Representative Ken Buck (CO), on the other hand, are just as adamant that they see AICOA as a helpful tool in fighting what they contend is a liberal bias among digital platforms, and that their support for the bill is contingent on this interpretation.

Irrespective of which side ultimately might prevail, their incongruent understandings of what the bill is meant to do make two things plain. First, whether the Democrats agree or not, since Republican lawmakers have made clear that their support for the bill is conditioned, at least in part, on content moderation concerns that will be part of its legislative history, which could well affect how a court would rule if an appropriate case should come before it. Second, given the importance of the issue, not least in the aftermath of the Supreme Court’s recent decision in Dobbs, it would be almost reckless not to get more clarity on what the bill actually is intended to do in this area before moving it forward.

Beyond these specific examples, however, the bill more broadly gives the Department of Justice and the Federal Trade Commission tremendous leeway to decide what is lawful, which companies are covered, whether such a designation applies to the company’s entire business or only a part of it, and for how long a designation remains in effect. And while section 4(a) states that the enforcement agencies “shall jointly issue agency enforcement guidelines outlining policies and practices … with the goal of promoting transparency …,” the very same provision also says that these “guidelines … do not … bind…” those same enforcement agencies. How the legislative text will be interpreted and implemented, in other words, is left to the whims of whoever oversees the enforcement agencies at any given time.

It would be unreasonable and impractical to demand that a legal text be fashioned with such precision as to leave no room for doubt. That said, the operative language in AICOA is so unclear and malleable that it would be highly vulnerable to shenanigans and political abuse. Because of this, it would behoove bill proponents to find some agreement about what they are trying to accomplish before attempting to push this bill across the finish line.

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Reflections on the U.S.-EU TTC: Progress on Transatlantic Digital Policy – But Controversial Issues Remain

By Mort Skroejer and Paul Lekas

There is much to celebrate about the second ministerial meeting of the U.S.-EU Trade and Technology Council (TTC), held on May 16 in Paris-Saclay, France. Relations between the U.S. and the EU have vastly improved in the past year. Contacts at all levels of government are more frequent, and they are marked by a genuine desire to work constructively toward finding solutions to common challenges. But there is also room for improvement. After two rounds of high-level meetings, the TTC is approaching a point where the parties will need to move beyond the low-hanging fruit and show measurable progress on some of the thornier issues in the transatlantic relationship around digital governance.

The second TTC meeting took place in the shadow of the brutal and illegal Russian invasion of Ukraine. Tragic as it is, the invasion provided an opportunity to reaffirm the importance of the transatlantic relationship, pursue policies based on “shared democratic values” and, with astonishing speed, agree to implement debilitating sanctions and export control measures aimed at the Putin regime.

The U.S.-EU Joint Statement outlines a robust agenda for pursuing alignment on tech and digital policy.  SIIA is pleased that the ministerial adopted recommendations we advocated for with U.S. and EC officials. Importantly, the TTC announced that it will undertake concrete steps to further a risk-based approach to artificial intelligence (AI) that builds on the critical work being done by the OECD, the National Institute of Standards and Technology, and standards development organizations.This will enable regulators to better assess AI systems for safety, security, trustworthiness, and bias. 

In addition, as suggested by SIIA, the TTC will pursue a common project around privacy enhancing technologies (PETs). The PET category includes technologies that are designed to protect the privacy and security of sensitive information. The reason PETs are so important is that they can serve as an integral part of a democratic model of emerging technology, and act as a counter to an authoritarian model preferred in some countries that sacrifices privacy, trust, safety, and transparency.

The TTC was not going to be able to solve every trade or technology-related irritant in the transatlantic relationship in the first year of its existence. And there is much to commend governments on both sides for all that has been accomplished so far. But after two successful meetings, it is also important to be clear-eyed about the challenges that lie ahead.

There remain challenges in the transatlantic relationship around digital policy. Critically, the EU has moved forward with a series of regulations that will make it more difficult to pursue a shared vision of democratic technology governance. These include the Digital Markets Act and the Digital Services Act, which would create barriers to U.S. companies and carry risks to international security. In addition, the recently proposed Data Act compounds these challenges and would impose restrictions on international transfers of information well beyond those that led to the invalidation of the Privacy Shield and have imperiled transatlantic commerce. 

Forging closer bonds and reestablishing trust are important accomplishments in the first year of the TTC. But building on these early successes by delivering more concrete results will be important for the next round of talks in December.

SIIA’s recommendations for the second TTC ministerial are summarized here. And the joint U.S.-EU Joint Statement following the talks can be found here.

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Why EU Competition Policy is a Bad Fit for the U.S.

A bipartisan group of U.S. lawmakers are engaged in a frantic race against the Congressional calendar to fundamentally change antitrust law. Their goal is to rein in the alleged excesses of large American tech companies, which, so the argument goes, have been allowed to go unchecked due to the inadequacy of existing antitrust rules and enforcement when dealing with the challenges posed by the digital economy.

As is often the case, this conversation does not happen in a vacuum. Many other countries are already in the process of clarifying and updating their competition rules. None more so than the European Union and some of its member states. Proponents of U.S. antitrust reform have long admired the vigorous, some might say heavy-handed, enforcement of existing rules that the EU has become famous for. The two main U.S. antitrust bills, the American Innovation and Choice Online Act (AICOA) in the Senate, and its companion bill, the American Choice Online and Innovation Act (ACOIA) in the House, also borrow heavily from the EU’s just-agreed Digital Markets Act (DMA). While the U.S. and the EU share many things in common, there are several reasons why attempts to duplicate EU competition policy in the U.S. is both ill-advised and doomed to fail.

Reform proponents adopt EU focus on “fairness” and a “level playing field”…

When introducing the DMA in 2020, the European Commission stressed that “European values” were at the heart of the proposal, which aimed to “prohibit unfair conditions imposed by online platforms that have become or are expected to become gatekeepers….” While the implied contention that existing EU competition law has fallen short in policing the digital economy is debatable, the DMA’s focus on risk mitigation and adherence to a code of “fair” competition undeniably represent a core European ethos.

What is more surprising is that those exact same arguments have been adopted, almost word for word, by proponents of antitrust reform in the U.S. When the AICOA was introduced, the bill’s authors released a statement lamenting that “our laws have not changed to keep up and ensure [that large tech] companies are competing fairly.” In a later statement, they argued that “[e]veryone acknowledges the problems posed by dominant online platforms. Our legislation sets out to level the playing field….”  

But those concepts have produced questionable results in Europe and are foreign to U.S. antitrust

There are several problems with these arguments in favor of antitrust reform that reform advocates elide or happily ignore.

First, it is not at all clear there are any antitrust “problems posed by dominant online platforms” that can’t be comfortably handled within the framework of current law. In fact, a recent economic study found “that trends in industrial concentration should not be [used] as a basis for changing U.S. antitrust policy.” To the contrary, “pursuing decentration as an economic policy objective is unwarranted and risks causing significant economic harm.” 

Second, one of the terms that figure prominently in both the DMA and the U.S. antitrust bills is the concept of “fairness.” The problem with using that term in a legal context is that no one knows for sure what it really means. Often it is “a vagrant claim applied to any value that one happens to favor.” In the EU, at least, it has been part of the legal lexicon for a long time, which presumably gives practitioners and judges a way to intuit what it most likely means in specific situations. The EU’s highest court, for example, has found that “[a dominant company] … has a special responsibility not to allow its conduct to impair genuine undistorted competition….” But there is no equivalent obligation under U.S. antitrust law and would therefore cause substantial uncertainty for companies, lawyers, and the courts.

Third, talk of “leveling the playing field” might, like the concept of fairness, sound good in theory, but it is important to be honest about what it means in practice. Singling out a small group of companies and imposing a set of obligations that apply only to them, is not leveling the playing field in any meaningful sense of how that expression is usually understood. Rather, it is tilting the field heavily in favor of some firms at the expense of others. To put an even finer point on it, it is the government intervening in the market to pick winners and losers – not to improve welfare for consumers.

The EU has an interest in fostering European entrepreneurship and subsidizing local champions in the tech space. There are no EU-based companies that compete at scale with cloud companies, social media platforms, and other essential consumer and business technologies developed by U.S. and Chinese firms. The DMA and other digital initiatives of the EU are intended to give domestic European tech companies a leg up to develop products and services to compete globally. While that may be sensible from the perspective of European lawmakers, it is a dangerous model for U.S. regulation. Picking winners and losers has never been seen as the role of government, or the antitrust laws, in the U.S. For over a century, since the Sherman Act was passed, the purpose of U.S. antitrust has been to protect competition, not competitors. And for good reason. Deciding which companies to advantage over others is not a role the government is equipped to fulfill.

Finally, there is a risk of serious collateral consequences. As the Antitrust Law Section of the American Bar Association recently pointed out, the main Senate antitrust bill, “as written, departs in some respects from accepted principles of competition law and in so doing risks causing unpredicted and unintended consequences.” And contrary to what the bill’s sponsors claim, those concerns have not been thoroughly examined. There is a significant difference between conducting hearings on problems, real or imagined, and holding hearings aimed at vetting the potential consequences of specific legislative text.

A way forward

The digital economy has opened the door to exciting opportunities. At the same time, it has created a new set of challenges. The question of whether antitrust law is flexible enough to adapt or needs to undergo substantial change is an important and worthy conversation. Some of the loudest American voices in favor of fundamental change are inspired by many of the same arguments that underlie EU competition law. What they miss is that these are two very different systems, and that attempts to transplant EU law principles in the U.S. would make for a very uncomfortable fit.

The U.S. and the EU share many interests in common. As the recently established U.S.-EU Trade and Technology Council shows, there are many ways for the two sides to work together to define the rules of the road for the future of the digital economy. The focus should be on promoting innovation and transatlantic democratic values, not a misguided attempt to import European legal principles that will not work in our U.S. system.