A new bill introduced Monday (Oct. 18) in the U.S. Senate would prevent dominant online platforms like Apple, Amazon, Google and Facebook from using their market power to stifle competition.
Sponsored by Sens. Amy Klobuchar (D-MN) and Charles E. Grassley (R-IA), the bipartisan American Innovation and Choice Online Act would make it illegal for the dominant platforms to engage in the widespread practice of “self-preferencing” — i.e., favoring their own products and services over those of competitors in search results. It’s a companion bill to one passed in June by the House Judiciary Committee, which is awaiting a vote in the full chamber while its sponsors attempt to rally the support necessary for passage.
The Senate bill would prohibit other conduct deemed to be “harmful to small businesses, entrepreneurs and consumers, but that do not have any pro-competitive benefit.” These would include requiring a small business to buy the dominant platform’s products or services to secure preferred placement on the platform as well as “misusing” a small business’ data to compete against it more effectively — for example, by using that data to manufacture and sell competing goods at a lower price point.
The American Innovation and Choice Online Act could have implications for Apple’s App Store, which has been the subject of complaints by Spotify, Fortnite developer Epic Games and other companies that have accused Apple of engaging in anti-competitive behavior, including by preventing app developers from directing customers to purchase methods outside of Apple’s in-house payment system. Competitors have alleged that Apple’s practice of taking a 30% commission on third-party subscriptions purchased through the App Store for apps making over $1 million a year — and a 15% commission for apps making less than $1 million, part of the small business program the company announced last November — has hurt consumers, as companies are then forced to pass those extra fees onto their customers.
In a statement, Spotify head of global affairs and chief legal officer Horacio Gutierrez hailed the new Senate bill. “Gatekeeper platforms use their power to distort markets by manufacturing self-serving advantages at the expense of American consumers and competitors. They offer users fewer, less innovative choices and insulate themselves from competition, which leads to higher prices for consumers.” He added that Spotify looks “forward to Congress bringing an end to these discriminatory practices for the sake of consumer choice and the digital economy.”
If the legislation is passed, tech giants engaging in anti-competitive conduct could face harsh penalties, including fines of up to 15% of revenue generated in the period during which the company in question was found to have broken the law.
“American prosperity was built on a foundation of open markets and fair competition, but right now our country faces a monopoly problem, and American consumers, workers, and businesses are paying the price,” said Klobuchar in a statement. “As dominant digital platforms — some of the biggest companies our world has ever seen — increasingly give preference to their own products and services, we must put policies in place to ensure small businesses and entrepreneurs still have the opportunity to succeed in the digital marketplace.”
“As Big Tech has grown and evolved over the years, our laws have not changed to keep up and ensure these companies are competing fairly,” added Grassley. “These companies have continued to become a larger part of our everyday lives and the global economy, controlling what we see and how we engage on the internet. Big Tech needs to be held accountable if they behave in a discriminatory manner.”
The American Innovation and Choice Online Act comes amid a host of recent legislative and regulatory volleys aimed at reining in tech giants, both in the U.S. and abroad, that have specific implications for the music streaming business. In April, European Union regulators accused Apple of violating antitrust laws via anti-competitive practices designed to hurt Apple Music’s competitors in the region.
And last month, a federal judge ruled that Apple violated California laws barring unfair competition by preventing third-party app developers from directing customers to alternative payment methods. That decision, which ordered Apple to allow developers to include links to other payment methods in their apps within 90 days, was the result of a lawsuit filed against Apple in August 2020 by Epic Games, which accused the tech giant of violating antitrust law. The suit stemmed from Apple’s decision to boot the Fortnite app from its App Store after Epic encouraged users to pay the game developer directly in order to skirt Apple’s service commission.
That ruling followed a settlement Apple reached in August with a host of small developers who also accused the company of breaking antitrust law. With that settlement, Apple established a $100 million fund for app developers that made $1 million or less for every year they had an App Store account between June 4, 2015, and April 26, 2021. It also loosened restrictions by allowing developers to contact users about alternative purchase options — though it has continued to prohibit most of them from doing so within the App Store itself (in September, Apple announced that beginning next year, it would allow select apps it had designated as “readers,” including Spotify and Netflix, to include in-app links to external sign-ups). In a statement issued in the wake of the settlement, Spotify’s Gutierrez accused Apple of failing to address “the most basic aspects of their anticompetitive and unfair App Store practices” and of “attempting to distract policymakers and regulators and slow down the momentum that’s building around the world to address their behavior.”