Last-minute Christmas shoppers have a friend in free one- or two-day shipping with Amazon Prime membership and other quick-delivery services. No longer do holiday procrastinators have to wade through messy aisles or scour empty toy shelves to find last-minute presents.
Fast guaranteed delivery is a gift within itself. But, some members of Congress may (unintentionally) cause this benefit to disappear if their efforts to crack down on Big Tech are successful.
Federal lawmakers considering the antitrust legislation floating around in the House and Senate should think carefully about the unintended consequences for consumers. Otherwise, they may be responsible for the end of the kinds of services that benefit small and medium-sized businesses as well as American households.
As we’ve written about before, federal lawmakers in both the House and the Senate have introduced various bills targeted at reigning in Big Tech companies–namely Facebook, Apple, Google, and Amazon.
Lawmakers are operating from a commonly-held belief that these companies are too big for our country’s good and that they are engaging in practices that limit market competition.
The “big is bad” argument is weak and quite ironic coming from the federal government. Size does not connote illegal, unethical, or anticompetitive behavior. The anti-competitive argument is shaky as well given that so many small and medium-sized companies have grown precisely because of these platforms. NetChoice, an association of tech companies, has a great primer on this.
However, after years of investigations, hearings, and reports, which we have reported on, Congress is on a bipartisan path to sock it to Big Tech. A bill by Senators Amy Klobuchar (D-MN) and Charles Grassley (R-IA) is the latest and most prominent effort in this crusade.
Their American Innovation and Choice Online Act, the companion to a House bill, would implement a number of restrictions on business practices that these tech companies employ, even if they are common practices across industries or are helpful to smaller businesses and consumers.
The bill would prohibit tech companies from bundling services together and offering consumers a discount, allowing their products or services to appear above others in search results, or promoting products and services from specific demographics of sellers such as black-owned and veteran-owned businesses. The bill also creates a host of privacy concerns over our data online and erodes security on smartphones against harmful activities like hacking and viruses.
As my colleague Carrie Sheffield wrote after the bill was introduced:
Yet, the conveniences and accessibility that small businesses depend upon may be at risk by this new antitrust bill. Instead of creating a more equal playing field for big and small companies to compete, the American Innovation and Choice Online Act creates hurdles for small businesses that run counter to antitrust objectives.
What does this have to do with Amazon Prime?
In short, this bill would effectively ban Amazon from offering Prime services including free and fast shipping.
The bill makes it illegal for platforms covered by the bill to “condition access” or “preferred status or placement” on the purchase or use of the platform’s other services. In other words, it would ban Amazon from labeling its products as a Prime item and eligible for that fast and free shipping, allowing those Prime items to appear in search results, and preventing Amazon from fulfilling orders for merchants. Taken together, this would effectively kill Amazon Prime’s free shipping.
A helpful post on Medium explains:
But what makes Prime’s free shipping possible is a program called Fulfillment By Amazon (FBA), through which small sellers pay Amazon a per-product fee (shown here) in exchange for Amazon storing, picking, packing, and shipping small merchants’ products — so that it can get to shoppers fast.
… But what Amazon says is that in order to guarantee to the customer that a Prime product arrives within two days, Amazon needs to handle the fulfillment of that product itself. Otherwise there are too many shipping and logistics uncertainties left to chance. In other words, Amazon Prime’s free two-day shipping and Fulfillment by Amazon aren’t separate services; Fulfillment by Amazon makes free fast shipping possible.
Americans have come to depend on innovative services like fast and free delivery and access to an array of goods at varying price points.
Antitrust efforts such as this bill, are not protecting consumers, but reducing their choices and driving up prices. Smaller businesses would also suffer as they lose access to the services that help them to be competitive in the marketplace.
Given the pandemic, inflation, and the many other issues that households and businesses face, they don’t need harmful federal policies making matters worse.