A famous scene in the 1990s comedy movie Half Baked has a young Jon Stewart musing about how different everyday activities can be while one is high on cannabis. “I love Al Pacino, man. You ever see Scent of a Woman?” “Yup,” his dealer says. “You ever seen Scent of a Woman—ON WEED? That’s the way to see it, man!” Stewart continues: “You ever see the back of a $20 bill, man?” “No, I don’t know you,” says the now-wary dealer. “You ever see the back of a $20 bill—ON WEED?! There’s some weird shit in there, man!”
This scene may well have inspired Sen. Amy Klobuchar’s (D-MN) new antitrust bill, the American Innovation and Choice Online Act. The Senate version, to be introduced next week, joins an already-introduced House version (H.R. 3816), which would ban online retailers from giving preferential treatment to their private brand products.
Sure, you buy store brand products all the time at the grocery store and from Costco, but have you ever bought store brand products—ONLINE?! The distinction between in-person commerce and online commerce is silly. It’s 2021. Nearly every business, big or small, has at least some online presence, and they have for a while.
Sellers sell and buyers buy. Whether in person, by phone, by mail, or online, all are just different means to the same end. People tend to use whichever method has the lowest transaction costs to get together and make transactions. That’s it. The rest is details, like the man in the bushes on the back of Jon Stewart’s $20 bill, who may or may not have a gun.
Klobuchar and her eight Senate cosponsors have an average age of 66, so most of them may not get even my own dated cultural reference to Half Baked. In fact, the only two sponsors under age 60 are Josh Hawley (R-MO), 41, and Cory Booker (D-NJ), 52. No wonder nearly every congressional hearing on tech issues has at least one “series of tubes” or “Senator, we run ads” moment. Whatever one’s feelings about the tech industry, one should think carefully before giving politicians the power to regulate what they do not understand.
For more tech-savvy members, maybe they are grasping at straws for reasons to regulate companies they dislike, and this was the best they could find.
Whatever the case, the online-offline distinction does not matter for consumers, and it gets blurrier every year. Amazon is opening more brick-and-mortar stores, while Walmart and Target are expanding their online offerings. Sen. Klobuchar’s bill would freeze in time a false dichotomy, and cause consumer harm right in the middle of a difficult economic recovery.
How would the bill work in practice? It would not ban online companies from selling their private brand products, but it would ban them from giving their own products special treatment. Google, for example, would probably not be able to show Google Maps in its search engine, or at least not as a leading search result, which could lead to a lot of frustrated drivers. Amazon’s Prime program might go away entirely. At the very least, Amazon’s house brands would become harder to find and might not qualify for free shipping. There would be plenty of consumer aggravation, and no consumer benefits.
Meanwhile, house brands at physical stores would remain untouched. For decades, store brands such as Costco’s Kirkland have benefited from discounted prices, preferential marketing, and prominent shelf space. Those markets have remained highly competitive, but now that this same business practice is happening online, it is somehow different?
Nobody has yet offered a convincing explanation of why that is the case, let alone why commerce at a physical store is fundamentally different from commerce on a website or app, and therefore should be regulated differently.
The American Innovation and Choice Online Act is clearly not about consumer protection. For progressives, it allows them to express an ideological distaste for big businesses and pursue antitrust-unrelated issues like income inequality. For conservatives, it gives them a way to express their culture war grievances against tech companies—which is about as antitrust-unrelated as it gets.
The bill is also a golden opportunity for rent-seekers. For traditional retailers, it is a way for government to hobble their competitors. That might not be what antitrust advocates intend, but that is how antitrust works in in the real world. The American Innovation and Choice Online Act is only the latest instance of a long tradition of regulatory capture in antitrust policy.
For antitrust policy ideas that are more than half-baked, see CEI’s dedicated antitrust website and Wayne Crews’ and my paper “The Case against Antitrust Law.”