Big tech skepticism is growing, with 50% of Americans now supporting the federal government breaking up the digital giants. However, while more Americans are concerned about the power and influence of these companies, that number pales in comparison to the number of Americans who regularly use the services provided by big tech. For example, 81% of Americans between the ages of 18 and 34 use Amazon Prime. Among older age groups, this number drops to between 60% and 68%.
The misconstrued hostility to big tech has spurred action in Washington and many proposals that would fundamentally change how these companies operate. Current proposals, including the Platform Choice and Opportunity Act (PCOA) and the American Innovation and Choice Online Act (AICOA), exclusively target Amazon, Meta, Twitter, Microsoft and Apple by designating them as covered platforms and imposing significant restrictions on their operation. Unfortunately, such targeted actions create an unequal regulatory environment and could also destroy the substantial welfare these companies provide to consumers.
PCOA and AICOA are two bills considered by Congress and have received significant bipartisan support. If passed, the PCOA would create significant barriers to mergers and acquisitions and the AICOA would prohibit self-preference.
Both bills seek to impose significant restrictions on arbitrarily defined technology platforms. The legislation applies this term to businesses, including those that facilitate sales from third-party sellers, enable content creation through social media sites, and host databases and online queries. The term doesn’t make much sense in practice because it arbitrarily combines various businesses under one umbrella.
Recognizing the unique benefits the digital space offers, many brands and companies across all industry sectors have moved online in an attempt to connect with more consumers, creating an intertwined ecosystem where many markets converge. overlap.
One example is Amazon’s partnership with the Haus Laboratories cosmetics line, founded by Lady Gaga. Hosting the Haus cosmetics line has put Amazon in direct competition with other beauty brands and platforms like Sephora and Ulta Beauty. Although they are not tech giants, their online presence has turned these more traditional retailers into formidable competitors. For example, in 2020, Sephora made $5.9 billion in global sales and Ulta Beauty made $6.2 billion in 2021.
Although these companies compete in the same market, the AICOA specifically targets only Amazon, creating an unequal regulatory environment. The AICOA states that Covered Platforms, such as Amazon, may not “unfairly privilege the Covered Platform operator’s own products, services or industries over those of another business user on the Covered Platform in a way that would materially harm competition on the Covered Platform”.
Both Sephora and Ulta Beauty have their brands of cosmetic lines that directly compete with their third-party sellers, as does Amazon. While Amazon would be limited in ranking its products, companies like Sephora would not be covered by the same limitations and would be free to choose their products and services themselves. For example, Sephora currently classifies many of its items under an “only at Sephora” label, which competitor Amazon would not be allowed to do.
Additionally, the PCOA would limit mergers and acquisitions equal to or greater than $50 million and companies competing with big tech.
In 2020, Coty – the parent company of cosmetics brands like COVERGIRL, Rimmel and Burberry – acquired a 51% stake in Kylie Cosmetics for $50 million, even though Kylie Cosmetics is a direct competitor to many of Coty’s existing brands. While Amazon would be banned from such mergers, its beauty competitors will not. Therefore, the proposed rules create an uneven regulatory level playing field where some winners would enjoy an additional market advantage.
As traditional businesses strengthen their online presence to increase their competitiveness, the definitions and parameters separating online platforms into a separate category become redundant. Proposed legislation that follows these definitions and parameters requires a few companies to follow different rules. It does not mean anything.
Limiting self-preference and mergers for Amazon while not doing the same for competitors ultimately favors one group of consumers over the other and undermines Amazon’s promise of two-day eyeliner .