As a reaction to the concerns of Big Tech, Congress is currently considering S2992, the American Innovation and Choice Online Act. The measure was developed with the right intentions, but once implemented will be devastating to tech startups and small businesses.
S2992 seeks to throttle the largest tech companies, Meta, Alphabet, Amazon and Apple. The legislation would eliminate “self-preferencing.” Self-preferencing is when a platform bumps up its own products in searches or a marketplace. For example, Google bumping up Google Maps in search results, Amazon bumping up its products under the brand name Amazon Basics, or an Apple iPhone that comes preloaded with Apple Apps such as Safari or Maps.
On its face, the legislation sounds good, but experts predict this legislation will cost small businesses about $500 billion over the next five years, or approximately $1,712 on average to every small business in the country in lost revenue every month. Enacting this legislation could increase the cost to advertise on Facebook and Instagram. Amazon would not be able to provide free two-day shopping on Prime products. And Google would no longer be able to show Google Map results and local business reviews. If this legislation is enacted, users will no longer be able to search “coffee near me” or “gas stations near me” in Google. Digital advertising and social media have allowed small businesses to reach new customers in ways that were once reserved for companies with large marketing budgets. Small business owners rely on these platforms to survive, and consumers crave their simplicity and use.
Here in New Jersey, small businesses are the lifeblood of our economy. The 937,436 small businesses here make up 99.6% of all businesses in New Jersey and about 50% of the state’s employees. According to a New Jersey Small Business Development Center survey, a majority of Garden State business owners have incorporated digital technology in their operations, with 71% saying they use technology to interact with their customers on a regular basis. This legislation may not put Starbucks or Wawa out of business, but it could hurt your neighborhood coffee shop or dry cleaners who rely on social media ads and Google search to attract you and your neighbors to their small business.
In addition to the challenges to small businesses, experts are also concerned about the effect this legislation would have on the tech startup community. Cameron Miller of Syracuse University and Liad Wagman of Illinois Institute of Technology argue the passage of S2992 will disrupt major technological platforms that startups rely on, such as app stores and online marketplaces. The new regulations will cause startups to spend more time and money to hire additional developers to manage the increased security burdens. Without the capital that established and entrenched companies hold, tech startups will face more hurdles to bring their product to market and run out of capital before their product can succeed in the market.
With the burdens to small businesses and the stifling of tech startups, the American Innovation and Choice Online Act is wrong for the economy. Between inflation and an imminent recession, this is not the right time to throttle the economy. Federal representatives, please vote no on the American Innovation and Choice Online Act.
Aaron Price is the president and CEO of TechUnited:NJ and the founder of the Propelify Innovation Festival.d