On May 25, 2022, following markup in the Judiciary Committee, Senator Amy Klobuchar introduced an amended version of the American Innovation and Choice Online Act (“AICOA”), an antitrust bill we previously reported on that aims to curtail self-preferential conduct by certain online platforms. The revised bill now carves out telecommunications providers and financial service companies from the bill’s prohibitions, and reduces potential penalties for violations. Additionally, the revision now creates an exception to the bill’s technical interoperability requirements “where such access would lead to significant cybersecurity risk.” Although critics complain the revisions do not go far enough to address the bill’s shortcomings, Senator Klobuchar and other bi-partisan supporters are pushing for a Senate floor vote this summer.
Senate Bill Refresher
The AICOA, similar to that of its House counterpart the American Choice and Innovation Online Act, prohibits “covered platforms” from engaging in a range of self-preferential conduct, including preferencing a covered platform’s products over other branded products while consumers are shopping on the platform. The bill defines “covered platforms” as those: (1) with at least 50 million monthly active users (or 100,000 business users); (2) having annual market capitalization or U.S. net sales exceeding $550 billion; and (3) that serve as a “critical trading partner” for its business users.
The bill prohibits a range of specific acts such as: (1) restricting or impeding the same level of access or interoperability with the platform, operating system, hardware and software features available to the covered platform; (2) conditioning access to the platform on the purchase or use of other products or services; (3) using platform-generated data to support the covered platform’s own products or services; (4) restricting business users’ access to or use of platform-generated data; (5) restricting the uninstallation of applications, changes to default settings or steering users to the covered platform operator’s products or services; (6) restricting business users from communicating with users to facilitate business transactions; (7) treating the platform operator’s products and services more favorably in connection with any user interface; (8) interfering with a business user’s pricing of its goods or services; (9) restricting users from interoperating or connecting to any product or service; and (10) retaliating against complainants.
The AICOA was first introduced in October 2021 by Senator Amy Klobuchar, Chair of the Senate Judiciary Antitrust Committee, and Senator Chuck Grassley (R-IA), Ranking Member of the Senate Judiciary Committee, to early, bi-partisan support from the Senate as well as the Justice Department. In January, the bill passed the Senate Judiciary Committee with a 16 to 6 vote. Since then, many lawmakers have voiced concerns regarding the bill’s vagueness and its potential impact on the targeted U.S. companies’ global competitiveness.
Key Takeaways of the Revised Draft
1. Financial Services and Telecommunications Companies Are Now Out of Scope
In the previous version of the bill, an “online platform” was defined as a website or mobile application, operating system, digital assistant, or online services that “facilitates the offering, advertising, sale, purchase, payment, or shipping of products or services, including software applications, between and among consumers or businesses not controlled by the platform operator.” (emphasis added.) The new draft narrows the scope and defines an online platform as a website or mobile application, operating system, digital assistant, or online services that enables “the offering, advertising, sale, purchase, or shipping of products or services, including software applications, between and among consumers or businesses not controlled by the platform operator.” The removal of language regarding facilitating payment effectively removes financial services companies from AICOA’s purview.
In addition, the revised version of the bill now specifically states that “online platforms” “does not include a service by wire or radio that provides the capability to transmit data to and receive data from all or substatially all internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service.” This explicit carveout in section 2(9)(B) even goes so far as to exclude incidental capabilities used to enable the operation of a communications network, cementing the idea that companies who transmit and receive data via wire or radio are not covered by this bill.
2. Fines Lowered From 15 to 10 Percent of U.S. Revenue
The revised draft also reduces fines that may be imposed on an online platform that engages in unlawful conduct. The previous draft stated that any person who violates this act would be liable for an amount no greater than “15 percent of the total United States revenue of the person for the period of time the violation occurred.” This has been lowered to 10 percent.
3. Exception for Significant Cybersecurity Risks
Likely in response to criticism that the bill’s interoperability provisions would create significant cybersecurity risks, the amended draft included a specific exception to the requirement that covered platforms may not restrict competing business users from interoperating with the platform, operating system or other hardware or software features “where such access would lead to a significant cybersecurity risk.”
4. The Bill Was Modified but Largely Remains the Same
While the revised draft of the bill omits certain industries and reduces potential penalties, the bill largely preserves its core purpose – to give federal antitrust agencies the authority to issue civil penalties and injunctions against “covered platforms,” similar to the accountability standards prescribed by the European Union’s Digital Markets Act.
Impact of the AICOA
At this time, the AICOA is not yet scheduled for a floor vote, although Senator Klobuchar indicated that she hopes the bill will go to a vote this summer. While the proposed bill is limited to defined “covered platforms,” this type of legislation aimed at a specific type of company, sets a precedent that could have broad consequences for other firms with significant market positions in other industries.
Crowell & Moring LLP will continue to monitor these and related developments.