The American Innovation and Choice Online Act Deters Big Tech

This leaves a lot of uncertainty about how exactly the law would turn out. In that zone of uncertainty, the tech companies have issued dire warnings.

Perhaps the most terrifying point of contention is that the law, if passed, would kill Amazon Prime. According to eMarketer, more than 150 million Americans, more than half of the adult population, are Prime members. That’s a lot of people who hate to lose their “free” two-day shipping. (Of course, it’s not really free if you have to pay a subscription fee.)

The bill does not mention Prime anywhere in the text. But according to the Chamber of Progress, an industry lobby group funded by Apple, Amazon, Meta and Google, the ban is implied. Adam Kovacevich, the group’s CEO and former Google policymaker, says the problem revolves around something called Fulfillment by Amazon, or FBA. Amazon isn’t just a retailer, it’s a marketplace. Most of the products sold on come from third-party sellers who rely on Amazon’s marketplace to reach customers. In order for those sellers to qualify for Prime shipping, they must use FBA, which means they must store their inventory in Amazon’s warehouse and have Amazon handle a two-day delivery.

In fact, these sellers have to pay for FBA. The Senate bill prohibits a company from making “preferred status or placement on the covered platform” conditional “on the purchase or use of other products or services.” Kovacevich argues that this would kill Prime, as you can’t have Prime without FBA. “The guarantee of shipping within one or two days is inseparable from having as much control as possible over the shipping and fulfillment process,” he says.

But the bill doesn’t ban FBA altogether. It just says that Amazon can’t force sellers to pay for its fulfillment program to get the Prime label. If the bill were to become law, the company would have to let third-party sellers choose other logistics service providers.

“What the bill would do in that case would be to force Amazon to develop a system in its marketplace so merchants can choose alternative fulfillment partners like DHL or FedEx or USPS or whatever,” said Sumit Sharma, senior researcher at Consumer Reports. “And then they have to make sure that what they show in the search results isn’t affected by who fulfills the order, as long as I receive it within a day or two. They can still have a Prime membership.”

Amazon might say this is impossible, but some sellers are already able to manage fulfillment themselves, through a program called Seller Fulfilled Prime. (Currently, the Amazon website says, “Seller Fulfilled Prime is not accepting new registrations at this time.” It doesn’t indicate when the program will reopen.)

Opening up Prime fulfillment would at the very least create the opportunity for competition as logistics companies would have a chance to win over sellers. That helps explain why Amazon would be against the bill. Amazon doesn’t publicly disclose what portion of its revenue comes from FBA fees, but according to a report by the Institute for Local Self-Reliance, an anti-monopoly group, it was about $57 billion in 2021 — an increase of just $3 billion in 2014.

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