The American Innovation and Choice Online Act Scares Big Tech

This leaves plenty of uncertainty around how exactly the law would play out. Into that zone of uncertainty, the tech companies have poured dire warnings.

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

The bill doesn’t mention Prime anywhere in the text. But according to the Chamber of Progress, an industry lobbying group whose funders include Apple, Amazon, Meta, and Google, the prohibition is implied. Adam Kovacevich, the group’s CEO and a former Google public policy executive, says that the issue revolves around something called Fulfillment by Amazon, or FBA. Amazon isn’t just a retailer, it’s a marketplace. A majority of products for sale on Amazon.com come from third party sellers who rely on Amazon’s marketplace to reach customers. For those sellers to qualify for Prime shipping, they have to use FBA, meaning they have to store their inventory in Amazon’s warehouse and have Amazon handle two-day delivery.

More to the point, these sellers have to pay for FBA. The Senate bill prohibits a company making “preferred status or placement on the covered platform” dependent “on the purchase or use of other products or services.” Kovacevich argues that this would kill Prime, because you can’t have Prime without FBA. “The guarantee of one- or two-day shipping is sort of inextricably linked with having as much control over the shipping and fulfillment process as possible,” he says.

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

“What the bill would do in that case would be to force Amazon to develop a system on its marketplace so that sellers can choose alternative fulfillment partners, like DHL or FedEx or USPS or whatever,” says Sumit Sharma, a senior researcher at Consumer Reports. “And then they’ll have to ensure that what they show in the search results is not influenced by who’s fulfilling the order, as long as I’m getting it within a day or two or whatever. They can still have Prime membership.”

Amazon might say this is impossible, but it already allows some sellers 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 gives no indication of when the program will reopen.)

Opening up Prime fulfillment would create at least the possibility of competition, as logistics companies would have a chance to win sellers’ business. Which helps explain why Amazon would oppose the bill. Amazon doesn’t publicly break out the share of its revenue that comes from FBA fees, but according to a report by the Institute for Local Self-Reliance, an anti-monopoly group, it amounted to roughly $57 billion in 2021—up from just $3 billion in 2014.

www.wired.com

Leave a Reply