Impact of the American Innovation and Choice Online Act on Businesses' Data Utilization in Online Platforms

The American Innovation and Choice Online Act (AICOA, S. 2992) is a piece of legislation that has been making waves in the tech industry. The Act, which is set to be discussed in the Senate Judiciary Committee's next business meeting, aims to enhance competition and consumer privacy by imposing restrictions on how covered platforms use and share personal data.

The Act's focus on data usage is expected to increase user control over how their data is used by major online platforms. Covered platforms would be prohibited from intermixing or cross-using personal data collected from one part of their ecosystem with other services without consent. This move would limit large platforms’ ability to conduct extensive consumer profiling or targeted advertising by pooling end-user data across multiple services.

For competition, the Act imposes obligations against self-preferencing (favoring own products/services) and third-party access restrictions, which are common anti-competitive concerns with gatekeeper platforms. Such rules could open the market for competitors and improve consumer choice by requiring dominant platforms to treat business users fairly and allow interoperability or data sharing when appropriate.

Sen. Klobuchar, one of the Act's proponents, has argued that Amazon's practices are hurting "small innovators" not just other big brands. She gave an example of Amazon using data from its platform to introduce its own car trunk organizer that competes with those sold by a small U.S. company. The Act would make it unlawful for covered platforms to use non-public data generated by the platform to offer their own products or services.

However, the Act does not explicitly state its goal of protecting consumer privacy in the context of data access for business users. This has raised concerns about potential negative implications for consumer privacy if it makes it unlawful for covered platforms to impose limits on how business users can access data from their customers.

The Act may also restrict platforms from limiting the use of data by business users to operational purposes, such as fulfilling and shipping orders. This could potentially prevent new sellers from entering the market and offering consumers cheaper or better products if it prevents competition based on insights gained from data.

The Center's recent report on data portability explains that allowing users (including business users) the ability to access their data can have a pro-competitive effect. However, the two data provisions in the Act could potentially reduce available data for consumer-friendly competition.

The Act's implications align with a broader regulatory trend imposing structural and operational constraints on "gatekeeper" online platforms designed to curb their market power, promote consumer privacy, and foster competitive digital ecosystems. However, the exact impact on business models and consumer experience will depend on enforcement and how platforms adapt.

It's worth noting that the Act does not address the many more sources of data available to businesses beyond online platforms. Businesses can collect data from various sources, including social media, customer service agents, customer feedback surveys, trade shows, and more, to improve their products and design new ones.

The AICOA (S. 2992) may be marked up and passed out of committee without a public hearing by the end of the month. As the Act moves forward, it's crucial to continue the discussion about its potential impacts on competition, consumer privacy, and the tech industry as a whole.

Impact of the American Innovation and Choice Online Act on Businesses' Data Utilization in Online Platforms