What’s New: On Thursday, the Senate Judiciary Committee (SJC) will be “marking up” the American Innovation and Choice Online Act (S.2992).

Why This Matters: This bill would significantly change U.S. antitrust law and dramatically impact U.S. national security concerns.

Key Points:

• Senators Amy Klobuchar (D-MN) and Chuck Grassley (R-IA) introduced S.2992 and it’s currently being cosponsored by 11 others — Senators Durbin (D-IL), Graham (R-SC), Blumenthal (D-CT), Kennedy (R-LA), Booker (D-NJ), Lummis (R-WY), Hirono (D-HI), Warner (D-VA), Hawley (R-MO), and Daines (R-MT).

• A “mark up” is when the committee meets to debate, amend, and rewrite the legislation. Once completed, Senate Majority Leader Chuck Schumer (D-NY) can then bring the bill to the Senate floor debate and a vote.

• Currently, the bill has a narrow focus on a small number of “big tech” companies, with its rules applying only to those who (1) have 50 million monthly active users or 100,000 monthly active business users; (2) have sales or a market capitalization exceeding $550 billion; and (3) are a “critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform.”

• Ostensibly, the legislation wants to prevent leading tech companies from leveraging their position to unfairly benefit their own products and services.

• A few of the major muscle movements from the text include (1) an explicit prohibition against privileging a platform’s own products and services; (2) mandates platforms be “interoperable” with one another; and (3) makes it illegal for tech companies to discriminate in the application or enforcement of their terms of service against competitors who use their platform.

What We’re Thinking:

• You can be angry and not be suicidal. Republican supporters are clear that they are at least partially motivated by concerns about “big tech” hurting conservatives online and enforcing “woke” orthodoxies on the general public. These views are broadly shared and, for the sake of argument, we’ll concede them without caveats. But, any effort to bring these companies to heel cannot do so at the expense of our national security — which this bill does and which we will explain further.

• “Preferencing” isn’t just about shelf space. Critics will often say it’s wrong for Amazon to preference its Amazon Basics brand over competitors who are using its platform to sell their products. While we could make an argument that this is no different than Costco placing its Kirkland brand merchandise on valuable eye-level shelves, the bill’s proposed remedy is confusing and could actually harm cybersecurity. For example, Google’s Threat Analysis Group (TAG) is reportedly tracking more than 270 government-backed bad guys that are operating in more than 50 countries. In just the last year, TAG has issued more than 50K warnings and uses this threat information to make products like Gmail safer. But, the bill’s opaque language makes it possible that this type of proactive cybersecurity would be seen as preferencing Google’s services over other cybersecurity offerings and therefore a violation of the law. That’s nuts.

• Interoperability and “sideloading” could hurt individual and national cybersecurity. Requirements that tech platforms build their products and services in such a way that they are interoperable with everyone else necessarily defaults to the lowest common denominator on cybersecurity standards and will lead to a rapid race-to-the-bottom. Similarly, the legislation’s requirement that companies like Apple allow users to download software and apps from sources outside of the company’s app store will also massively degrade user cybersecurity. Currently, if you want your app to be available for iPhones (only 14% of the global smartphone market, by the way), then you have to be in the Apple app store. But, you can only be in this app store if you meet the company’s stringent security requirements. S.2992 deems this practice “unfair” and illegal. Other app stores have much lower security requirements and other mobile operating systems allow this type of “sideloading” of apps. The result? There’s been a proliferation of fake programs in less secure app stores, include Chinese clones of WhatsApp, Telegram, and Signal — all of which have fooled users into downloading them and funneling their private data back to the Chinese Communist Party. Apple’s “walled garden” strategy, on the contrary, also constrains what data is collected by developers and how this data can be used — something most privacy-minded Republicans would seemingly support.

• China won’t play by these rules. Foreign tech companies will not be bound by these rules and so, if passed, S.2992 will hamstring American companies while leaving global competitors with greater agility. This bill is about more than a few U.S. tech companies being brought down a peg; it’s about us voluntarily ceding critical technological and economic advantage to countries like China at a time when leading in key technologies and tech markets is critical for our nation’s long-term thriving.

• We’re not thinking about the long-game. Large tech companies will be the chief suppliers of next-generation warfighting capabilities like artificial intelligence, robotics, and quantum computing. Last year, Alphabet, Amazon, Apple, Facebook, Intel and Microsoft alone spent a combined $140 billion on research and development (R&D), not including acquisitions. The Pentagon’s R&D budget for the same year was $109 billion. Why were six U.S. companies able to outspend and out-innovate the U.S. government? Because they are profitable. And they are profitable because they are big. Pushing the frontiers of science and pioneering game-changing technologies is expensive. The resources and talent to do these things are highly valuable and desperately scarce. It’s no coincidence, then, that the companies that have found ways to attract billions of customers — and the profits that come with them — are the ones at the center of these innovations. Do we really need to dismantle them in order to address our other concerns? We don’t think so.

• Economic security is national security. Going after our technology companies, particularly a targeted shot at certain big ones, sends the wrong message to startups and investors alike; it tells them that if you are innovative enough to be successful and grow significantly larger, you may be targeted for different treatment. That is simply not the approach we’ve taken as a nation to concerns about competition. Instead we’ve outlined the conduct we think is problematic or undermines competition and we’ve sought to prohibit this conduct. To now say that different rules apply if you get to a certain size simply punishes success without dealing with the actual problem. This undermines not only the companies that are likely to be investing in R&D over the next decade and generating some of the key innovations that will contribute to our national security, it also undermines a central proposition that has created a robust tech ecosystem in this country:  take risk, innovate, fail fast and often, and when you succeed, reap the rewards so long as you don’t exploit your position to gain unfair advantage. 

What Should Be Done:

• Ideally, we should build a tailored solution. As written, the bill is too broad, too opaque, and chock-full of unintended consequences. S.2992 could seriously damage American security and no amount of political revenge on “big tech” is worth that risk.

• At the very least, the Committee should delay the mark up and hold public hearings before proceeding further. The mark up on S.2992 was originally scheduled for next week. This was changed on Friday of last week and new bill text was dropped this morning. In addition to the points laid out above, there are dozens of other questions about this bill that need to be understood and answered. And it’s not just us who have these concerns — 12 national security leaders warned Congress in a letter that it needs to better understand the national security implications of antitrust bills currently under consideration. The authors include a former Secretary of Defense, former Director of National Intelligence, former CIA executives, and a former White House Homeland Security adviser. Unless we are willing to dismiss these individuals as techie shills, shouldn’t we at least consider their warnings via public hearings and testimonies? Isn’t that the way the process is supposed to work?