Executive Vice President, Chief Policy Officer, and Head of Strategic Advocacy, U.S. Chamber of Commerce
June 06, 2022
The American Innovation and Choice Online Act would be better named the Lina Khan Empowerment Act. Taken together, the provisions of the bill give the FTC (and the DOJ) the power to decide who is covered by the law, what is unlawful, and the penalty for breaking the law. Under the bill, the FTC isn’t even required to follow the processes and guidelines that they themselves are tasked with writing. What could possibly go wrong?
Here are just some of the powers the bill gives to the FTC:
The power to decide what is and is not lawful. The bill specifies 10 different actions that are deemed unlawful for companies covered by the law to engage in (note, the very same activities are not unlawful for companies not covered by the bill). The ten unlawful actions are at best vaguely defined and are really a matter of judgement by the FTC and DOJ.
For example, what does it mean to preference a service in a manner materially harmful to competition? Is providing free, embedded language translation in a search engine an unfair preference that harms people selling language translation? The bill also prohibits providing preferred placement on a covered platform on the basis that the user also utilizes other non-intrinsic services provided by the platform. But what constitutes a preference and what is intrinsic? Is providing preference to sellers who use a platform’s distribution center to ensure faster delivery an unfair preference? Are distribution centers intrinsic to an online marketplace? The answers to these and other similar questions determines what is and is not lawful, but without clear definitions, the bill leaves those decisions up to the FTC and DOJ.
The power to decide who the law applies to and who it doesn’t. While the bill sets size thresholds (number of users and revenue or market cap) that a company must exceed to be covered under the act, the actual decision as to whether the law and all of its restrictions actually apply to an eligible business is made by the FTC and DOJ. (Section 3(d)(1)). Further, if the law applies to a company and then the company falls below the minimum size threshold, the FTC has the power to refuse to undesignate a company. (Section 3(d)(2))
The power to decide how broadly to apply the law across a captured enterprise. The legislation has very few safeguards to prevent a captured company from having all of its various lines of business subject to enforcement. Many of the companies are conglomerates housing diverse businesses from retail to movie studios, to cloud computing services, to social media outlets, to gaming, to computer hardware and software businesses. What is unlawful conduct has dramatically different impacts depending on the different lines of business, and the FTC and DOJ are left to decide the limits of its reach.
The power to define the penalty for breaking the law. The bill provides that civil penalties for violating the act should be “sufficient to deter violations,” but then leaves the determination of appropriate penalties up to the FTC and DOJ to define. The only requirement is that the penalty cannot exceed 10% of total U.S. revenue for the company for the period of the violation. The FTC could impose a penalty for a violation, on which a company made no money and the consumer was not harmed, equal to 10% of the revenue of the entire company.
The power to break their own rules. The bill requires the FTC and DOJ to issue guidelines outlining policies and practices for the enforcement of the provisions of the bill that bar companies from engaging in certain conduct. The guidelines are required to be subject to public comment. But then the bill explicitly exempts the FTC and DOJ from having to follow the guidelines, stating that the guidelines do NOT “confer any rights upon any person…” or “operate to bind the [FTC]…to the approach recommended in the guidelines.” (Section 4)
The power to define what constitutes data. The bill imposes new restrictions on the use of data by captured companies and at the same time requires these companies to share data, including customer data, with certain competitors. The FTC is given the power to define what constitutes data, including what kind of information about a customer a company could be required to share with others. (Section 2(b))
This bill would give unprecedented authority to bureaucrats at the FTC and DOJ allowing them to micro-manage the American economy and pick winners and losers in the marketplace. No government agency should be given such unrestrained powers.
About the authors
Neil Bradley is executive vice president, chief policy officer, and head of strategic advocacy at the U.S. Chamber of Commerce. He has spent two decades working directly with congressional committee chairpersons and other high-ranking policymakers to achieve solutions.