Why do big banks, credit cards, and incumbent telecom companies get a special pass in the Senate’s “competition” bill?

by | Jun 27, 2022

Trevor Wagener

Viewers watching Last Week Tonight with John Oliver on Sunday received nearly half an hour of propaganda in favor of the latest version of Senator Amy Klobuchar’s American Innovation and Choice Online Act (S. 2992). Oliver failed to mention the curious contradictions evident in the updates to the bill, made in an effort to gain support from senators opposed to the bill.

Notably, the only real change to the bill was new language that explicitly exempts big banks, credit card companies and incumbent telecommunications companies from a regulatory vehicle that has now undeniably become a witch hunt against Amazon, Apple, Meta and Google.

What’s more, it’s a complete reversal of policy. Senator Klobuchar and other bill champions, including Senate Judiciary Committee Chairman Dick Durbin, have long expressed concern about the purported lack of competition in the banking, credit card and telecom industries. In early May, Senator Klobuchar suggested that better antitrust enforcement could address stated concerns about high swipe fees.

So why would bill proponents now grant these industries immunity? Getting an anti-tech bill through Congress in any way possible is everything politics shouldn’t be.

Senator Klobuchar’s stated goal for the bill has been to protect small businesses and consumers, to preserve competition, and to “level the playing field.” If that were true, then S. 2992 would apply to all industries equally – not exempt a handful of entrenched players while regulating a select few members of the new economy.

Here’s what happened behind the scenes: the bill’s previous versions applied to any online platform, including any engaged in “payments.” Then a widely distributed report noted that the bill would also impact at least 13 other major U.S. companies, including Bank of America, JPMorgan Chase, Mastercard, Visa, Comcast, AT&T, and Cisco. Telecom and financial services lobbyists started raising concerns with senators, so Klobuchar removed the word “payments” from the bill and added a clause stating that the definition of “online platform” “does not include a service by wire or radio.”

It’s clear that the real aim of the bill in the short-term is to punish Amazon, Apple, Meta and Google – not to protect small businesses and consumers from harm. In the long-term, studies have found that the bill would regulate nearly every leading U.S. firm above a certain size – except those behemoths that are now explicitly carved out.

In 2018, Sen. Klobuchar expressed opposition to the AT&T-Time Warner merger in her effort to fight consolidation in the telecommunications industry, and she has previously built a platform around her strong support of “a free and open internet.” Senator Durbin, the bill’s co-sponsor, has stated that “Visa and Mastercard control around 80 percent of the credit and debit card market” and explicitly acknowledged that credit card fees “are structured in a way so they are not subject to competitive market pressures.”

Amazon, meanwhile, makes up less than 4% of U.S. retail and receives nearly the same share of online retail sales as Walmart (which is coincidentally not targeted by S. 2992). Apple owns around half of the U.S. smartphone market (and far less in other markets), while AT&T owns about half of the U.S. wireless market. And yet Apple is under the bill’s domain while AT&T is excluded.

Add to this that Google’s, Amazon’s, and Apple’s earnings have all dropped in 2022; Visa and Mastercard, meanwhile, have both seen earnings growth, as have Comcast and AT&T. If Senators Klobuchar, Durbin, and others are truly concerned about competition, why are they going after companies that are becoming less competitive, while granting immunity to those whose earnings are growing?

Small businesses will suffer from the bill and its carve outs, based on the comments of the bill’s own supporters. Last year, U.S. merchants (including many small businesses) paid out “a staggering $77.48 billion in credit card fees and $28.06 billion in debit card fees imposed by Visa and Mastercard,” according to the Senate Committee on the Judiciary.

By contrast, the tech firms targeted in the bill offer numerous free or discounted services to startups and small businesses, including services that reduce barriers to entry for new entrants and directly enhance competition. Many of these services would have to raise their prices in order to comply with the bill. It is clear that this bill has little to do with protecting small businesses or preserving competition and more to do with deal making at any price.

Trevor Wagener is director of research and economics at the Computer & Communications Industry Association. From 2019 to 2021, he was deputy chief economist of the U.S. Department of State.


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