Blumenthal Calls for Passage of Legislation to Stop Big Tech Self-Preferencing

[WASHINGTON, D.C.] – U.S. Senator Richard Blumenthal (D-CT), a member of the Senate Judiciary and Commerce, Science, and Transportation Committees, spoke on the Senate Floor today to urge Senate passage of bipartisan legislation to stop the tech industry’s self-preferencing.

“Big Tech companies own the railroads of our digital economy, but they also compete with the economies relying on those railroads to get their products to consumers,” said Blumenthal on the Senate Floor.

Blumenthal is a co-sponsor of the American Innovation and Choice Online Act, which would establish commonsense rules preventing dominant digital platforms from harming competition, online businesses, and consumers, and a lead sponsor of the Open App Markets Act, antitrust legislation to promote app store competition.

“The app market is a place where these harms to consumer and competition are starker than anywhere else,” Blumenthal continued. “Two companies, Apple and Google, dictate the terms of this important market. They do it exclusively. And yet they have those dual roles. First as gatekeepers of the dominant mobile operating systems and their app stores, and second as participants on those app stores. And as with the railroad tycoons, Apple and Google abused that gatekeeper status to preference themselves and their business partners, driving up their own profits and consumer costs while shutting down competition and stifling innovation.”

“Congress needs to ensure that new entrants and smaller companies can compete on fair terms,” said Blumenthal. “Today's digital tycoons need new rules of the road that will protect other businesses like laws protected small farmers and small businesses against the railroad tycoons.”

The video of Blumenthal’s remarks is available here and the full transcript is copied below.

U.S. Senator Richard Blumenthal (D-CT): Thank you, Mr. President. I thank my colleague from Hawaii for that very powerful explanation for why we are here today, and I thank Senator Klobuchar for her incredibly important and impactful leadership in this area as the Chairman of the Subcommittee on Antitrust of the Judiciary Committee. She has led informative and profoundly significant hearings, and now she has brought to the floor with many of us as cosponsors along with Senator Grassley this major piece of legislation, the American Innovation and Choice Online Act.

And I would just begin by restating what a number of my colleagues have said. These complaints about inflation are really totally misplaced as applied to the Build Back Better legislation. In fact, the Build Back Better legislation will drive down costs for Americans, make child care affordable and accessible, make preschool free and universal for all Americans, lower the cost of prescription drugs for the first time -- a major piece of legislation to lower the cost of prescription drugs for Americans, and lower costs as well for energy and housing. The ripple effects of these major steps in reducing costs for everyday Americans will be profound and enduring, and to my colleagues who say on the floor today that this bill is changing or complex, yes, it is complex because it is big and impactful in lowering costs. And, yes, we've listened to Americans in making improvements to the bill, and we will continue to listen to Americans.

Now, inflation also is tied to the bill that's before us, the American innovation and Choice Online Act. Competition is the lifeblood of our economy. Competition is the way that prices are kept competitive in benefits to consumers. Competition among businesses is the key. And today in our digital marketplaces, Big Tech, in effect, controls access to consumers.

Go back to an earlier time in our country's history. After the Civil War we saw railroad tycoons use their monopolies to favor big repeat businesses with costs to average Americans. They imposed discriminatory terms on farmers and other businesses that needed access to the rails in order to get their products to the public. And the American people wanted to do something about it. Congress did in 1887. Congress responded by passing the Interstate Commerce Act, which stopped railroad monopolies from offering less favorable terms to smaller businesses and farmers.

The analogy is not completely exact because we're dealing now with Big Tech. But the principle is the same. Think of it as the Big Tech companies controlling the means of delivery of goods and services. They are the modern-day railroads. And in our digital markets, they are dominant gatekeepers with total control of essential online platforms. But, even worse, they have another role -- as marketers of their own products on those platforms. In other words, Big Tech companies own the railroads of our digital economy, but they also compete with the economies relying on those railroads to get their products to consumers.

Just a couple weeks ago in the Commerce Committee, the Subcommittee on Consumer Protection, which I chair, a whistleblower from Facebook described to the disgust and dismay of most Americans how Big Tech is pushing destructive and toxic content on children and how they know it and profit from it and, in fact, know from their own research and studies what the effects are of online bullying and eating disorders and other harms that are conveyed. And Americans asked me, as they did many of my colleagues, what are you going to do about it? There are solutions on privacy, on tools for parents, on other means of holding Big Tech accountable, and one of them is to make sure that antitrust laws are enforced and approved so that there are competing apps that offer safer means of reaching children and other consumers.

Now, the app market is a place where these harms to consumer and competition are starker than anywhere else. The mobile app market has grown into a significant part of the digital economy. In 2020 alone, U.S. consumers spent nearly $33 billion in mobile app stores, downloading 13.4 billion apps. We are all dependent on our phones as our gateway to our work, our social lives, and education. But two companies, Apple and Google, dictate the terms of this important market. They do it exclusively. And yet they have those dual roles. First as gatekeepers of the dominant mobile operating systems and their app stores, and second as participants on those app stores. And as with the railroad tycoons, Apple and Google abused that gatekeeper status to preference themselves and their business partners, driving up their own profits and consumer costs while shutting down competition and stifling innovation. Higher costs, less innovation means consumers are deprived of the benefits of competition.

And as with the railroads, Congress needs to ensure that new entrants and smaller companies can compete on fair terms. Today's digital tycoons need new rules of the road that will protect other businesses like laws protected small farmers and small businesses against the railroad tycoons, and these rules of the road need to address the anticompetitive discrimination and self-preferencing across our app economy.

I have heard from app developers who have been unable to tell their own customers about lower prices, unable to inform their own customers about better prices, from app developers whose ideas have been co-opted by Apple and Google under their kill or copy strategy and who are kneecapped by the onerous 30% rent fees charged to them. And if app developers don't like the terms, there is simply nowhere else for them to go.

So I am indebted to Senator Klobuchar and Senator Blackburn for co-authoring another bill with me. In August, I was proud to introduce the Open App Markets Act which would address anticompetitive discrimination and self-preferencing. I believe that it is critical that we pass that bill as well as this one to set fair, clear, and enforceable rules to protect competition and consumers within the app market. Like in the app market, there are essential gatekeepers in our digital markets with enormous power and key conflicts of interest. Amazon alone, for example, controls as much as 70% of all United States online marketplace sales. If you're a third-party business, apps can stop you from contacting your own customers, Amazon can rank its own products ahead of you in the search, Amazon can make sure that when a consumer asks Alexa to buy a particular product, the consumer receives Amazon products. Amazon can use its asymmetric access to data to engage in a copy and kill strategy. It can replicate your successful product, make the products themselves often more cheaply given their massive size, and then rank the products at the top of the search bar.

In effect, they can make it impossible for you to compete on product quality for a price. We have a rare opportunity to improve this abuse of power. We should seize that opportunity with bipartisan support and help protect American consumers and businesses. Thank you, madam president. I yield the floor.

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