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U.S. Senate Legislation Will Hurt Small Businesses

Congress has helped millions of small businesses during COVID, with the Paycheck Protection Program (PPP) and targeted assistance for restaurants and other businesses for example. But now, two years into the pandemic and amidst another surge, Congress is about to whack small businesses, because they seemingly are not paying attention. 

Later this month the U.S. Senate Judiciary Committee – led by Senators Amy Klobuchar of Minnesota and Chuck Grassley of Iowa – will vote on legislation intended to hurt Facebook, Google, Amazon and Apple. But, in fact, the companies that will suffer the consequences of this legislation aren’t big; they’re the small and medium-sized businesses that power the American economy.

The American Innovation and Choice Online Act (S.2992) has been touted as ensuring small businesses have choices when they work with big digital platforms. But, the bill as written will actually eliminate choices and opportunities, including the tools that small businesses value most.

The sponsors of S.2992 believe they are helping small businesses by banning big digital platforms from “self-preferencing” – a common practice that can best be described as a company selling their own products alongside other brands. In physical stores, this phenomenon is immediately apparent whenever you walk into your favorite retailer and you see their store brand on shelves alongside national brands. Online, that shelf may be a screen on your smartphone, but the practice is the same – retailers are motivated to ensure the best quality, most competitively priced items are easy for you to find. But proponents of the Senate legislation fail to understand how banning “self-preferencing” could completely change the way digital platforms support small businesses. Here are a few examples of how restricting self-preferencing would actually harm small businesses the most:

1.  Amazon Prime + Fulfillment by Amazon

The combination of Amazon Prime + Fulfillment by Amazon (FBA) is an extraordinary opportunity for small sellers. Consumers love Amazon Prime, the membership program that guarantees one- or two-day delivery. Originally Amazon Prime was only available for products sold by Amazon. But then Amazon opened up its store to outside sellers, a practice that was completely unconventional at the time. Today, even the smallest sellers can be a Prime seller, simply by having products delivered to Amazon warehouses and letting FBA handle your logistics and your packing and shipping, which makes it possible to meet the Prime-guaranteed delivery times. FBA even handles product returns seamlessly, which helps customers and sellers.

With Prime + FBA, small sellers don’t have to store products in their garage; fight with bubble paper, boxes and mailing labels; suffer shipping challenges because you are the smallest customer of a large delivery company; or manage returns. Many small sellers say that FBA reduces headaches, saves money compared to comparable services, and helps their business grow faster. 

What’s the “self-preference”? In order to be a Prime seller you must use FBA, and that advantages FBA over DIY or independent logistics services. Amazon requires this because FBA helps Amazon meet guaranteed delivery times that are critical to the Prime magic that customers love and pay for. Without guaranteed delivery times, Prime as we know it would be gutted or could only remain available to products that Amazon sells. That would hurt small sellers significantly. 

2.  Google Business Profile

Another digital combination that works brilliantly for small businesses is Google Search + Business Profiles + Maps. The free Google Business Profile service allows small businesses to populate the standard presentation that is now displayed at the top-right of many Google search results. By confirming the business location, hours and other important data, the business manages its own presentation, and can also respond to online reviews and ensure that customers have accurate information about the business.

The preferences in this combination are that Google Search results will never put a third-party map, reviews or other information in your Business Profile, or in a more advantageous position on the results page. You control it; it’s free, and it’s powerful for consumers so it drives new business.

3.  Preferencing in Search Results

Another S.2992 provision undermines the independence and consumer-friendliness of search services, which have always innovated in response to consumer demand. Search preferences benefit small businesses in many ways:

  • When Amazon Prime consumers search for products, the results typically feature Prime sellers because history has proven that Prime customers want to purchase from reputable and reliable Prime sellers. 
  • Consumers like when Google searches return local, small and highly-rated businesses, and generally dislike when results feature third-party aggregators instead of links to actual business websites. 

If S.2992 means that Amazon cannot favor Prime sellers in Prime consumers’ search results, or that Google Search cannot favor Google Business Profiles that a small business manages for accuracy and efficiency, that would be absurd for consumers and would squarely undermine high-value benefits that small businesses gain from these platforms.

It’s easy to bash big, successful businesses, but U.S. Senators should consider who pays the price. Many elected officials claim Amazon is a monopoly and say there are no competitors able to win small sellers’ allegiance. But research documents that an overwhelming majority of Amazon sellers also sell on eBay, Walmart.com, Etsy and Target.com. Millions of small businesses, including Amazon sellers, also operate online stores powered by Shopify or WooCommerce. They do this because the evolving tools and availability of e-commerce options provide new opportunities to grow their businesses. 

As the calendar turns to 2022, and the pandemic continues to churn, Congress should continue helping small businesses by promoting loans, additional capital, training, and other creative solutions. But it is disingenuous to give aid with one hand while simultaneously passing legislation that hurts small business with the other. If Congress really wants to help small businesses, it should pay attention to the risks of collateral damage resulting from so-called antitrust reform and protect millions that thrive with the support of technology digital platforms.

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