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Congressional Misfire Will Crush Small Businesses

As Congress considers legislation to forcibly intervene in product design decisions in the digital economy, America’s digitally-powered small businesses should be deeply concerned. Many lawmakers are picking sides on behalf of some big companies over others. In their zeal to tear down digital leaders, they are blind to millions of small businesses that those platforms support with free and innovative services that will be collateral damage if over-regulation forces digital small business tools to become more expensive or less effective.

As the economy emerges from the COVID-19 pandemic, small businesses that are the most at risk and the slowest to recover do not need to suffer more because Congress misfires.

Here are some real-life small business impacts of “big is bad” legislation:

  1. Could outlaw platforms’ ability to elevate their own services and products over similar ones provided by competitors, forcing Google Search to ban Google My Business, Google Maps, and YouTube videos in search results, though these are tools that small businesses utilize for their business and are able to keep updated efficiently for free.
  2. May force platforms to end free services and increase prices of today’s affordable digital tools, resulting in less accessible and more expensive tools and services, and creating costs and difficulties for small businesses trying to reach new customers. 
  3. May force Amazon Marketplace to become a separate company, thereby losing the efficiencies and savings for third-party sellers and driving up costs for warehousing and shipping.
  4. May force Facebook to spin off Instagram as an independent company where small businesses would lose the benefits of platform integration and access to capital.
  5. Would force Amazon, Google and Facebook to remove data from their systems whenever a customer requests, thereby diminishing the quality of search results and targeted advertising and making it harder for small businesses to get noticed by consumers.

And here are the surprising details you need to know:

S. 2992 – American Innovation and Choice Online Act / H.R. 3816 – American Choice and Innovation Online Act

Stated Goal: Prohibit self-preferencing and discriminatory conduct by covered platforms, and for other purposes. 

What It Means: This legislation could have very wide-ranging implications, significantly changing product innovation for digital businesses and activities. Impacts could include:

  • Apple’s App Store having less control over product security and data harvesting apps.
  • Google’s displays of Maps and Google My Business pages – perhaps leading to search results that feature randomized selections of Yelp, TripAdvisor and other third-party paid listings instead of self-edited and free-of-charge Google My Business listings.
  • Amazon’s Marketplace – whether it exists as a powerful sales tool or looks like a street corner flea market with seller-selected payment technologies and no customer protection.

H.R. 3825 – Ending Platform Monopolies Act 

Stated Goal: To promote competition and economic opportunity in digital markets by eliminating the conflicts of interest that arise from dominant online platforms’ concurrent ownership or control of an online platform and certain other businesses. 

What It Means: This bill could force large digital companies to split different lines of business into different companies. For example:

  • Google might have to separate Workspace (small business email, files, and cloud storage), YouTube, Google Ads and search into separate businesses. Amazon might have to turn its owned stores and products, its fulfillment technologies and services, and its third-party seller marketplace into three separate companies (which may not even be technically possible). Facebook might have to make Instagram a separate company.
  • These forced corporate breakups would create a logistical nightmare of login/security and interoperability issues for everyone currently using multiple platforms from the same parent company. 
  • Small businesses would lose the benefits of digital platforms’ size, scale and interconnectedness, which today, for example, enables one small company’s single purchase of digital advertisements to reach optimal audiences across many media properties for very low prices. Breaking companies apart would raise prices, complicate purchasing transactions, and require multiple transactions instead of a single bundle.

H.R. 3849 – Augmenting Compatibility and Competition by Enabling Services Switching (ACCESS) Act

Stated Goal: To promote competition, lower entry barriers, and reduce switching costs for consumers and businesses online. 

What It Means: While “data portability” is attractive on its surface, it is much more complex than transferring a simple phone number and your device from one carrier to another. 

  • The digital economy is powered by data and data science. When this legislation leaves platforms with less data, the impact will be less effective and more expensive digital advertising and digital marketing – and that will hurt small businesses the most. 
  • There are legal, privacy, and technical issues with transferring data. What happens when scam artists persuade people to transfer all their Facebook data to a sham service that’s really a big fraud scheme?
  • If digital advertising is less effective then social media will no longer be free, fewer people will be online and marketing will change significantly.

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