Why are the big banks, credit cards and incumbent telecommunications companies getting a special pass in the Senate’s ‘competition’ bill?



Trevor Wagener

viewers are watching Last week tonight with John Olivier received on Sunday almost half an hour of propaganda in favor of the last version of the senator by Amy Klobuchar US Online Choice and Innovation Act (S. 2992). Oliver failed to mention the curious contradictions evident in the updates to the bill, made in an effort to garner support from senators opposed to the bill.

Notably, the only real change to the bill was new language that explicitly exempts large banks, credit card companies and incumbent telecommunications companies from a regulatory vehicle that has now undeniably become a witch hunt against Amazon, Apple, Meta and Google.

Moreover, it is a complete reversal of policy. Senator Klobuchar and other champions of the bill, including the chairman of the Senate Judiciary Committee Dick Durbin, have long worried about the alleged lack of competition in banking, credit cards and telecommunications. In early May, Senator Klobuchar suggested that better enforcement of antitrust laws could address concerns expressed about high swipe fees.

So why would proponents of the bill now grant immunity to these industries? Pushing an anti-tech bill through Congress in any way possible is everything politics shouldn’t be.

Senator Klobuchar’s stated purpose for the bill was to protect small businesses and consumers, to preserve competition and to “level the playing field”. If this were true, then S. 2992 would apply to all industries equally – not exempting a handful of well-established players while regulating a select few members of the new economy.

Here’s what happened behind the scenes: Previous versions of the bill applied to all online platforms, including those that made “payments.” Then a wide distribution report noted that the bill would also impact at least 13 other major US companies, including Bank of America, JPMorgan Chase, Mastercard, Visa, Comcast, AT&T and Cisco. Telecommunications and financial services lobbyists began raising concerns with senators, so Klobuchar removed the word “payments” from the bill and added a clause clarifying that the definition of “online platform” “does not include a wire or radio service”.

Clearly, the real purpose of the bill in the short term is to punish Amazon, Apple, Meta, and Google, not to protect small businesses and consumers from harm. Long-term, studies found that the bill regulate almost all major US companies above a certain size – except for behemoths which are now explicitly excluded.

In 2018, Senator Klobuchar opposition expressed to the AT&T-Time Warner merger in its effort to fight consolidation in the telecommunications industry, and it has previously built a platform around its strong support for “a free and open internet.” Senator Durbin, co-sponsor of the bill, has declared that “Visa and Mastercard control approximately 80% of the credit and debit card market” and explicitly recognized that credit card fees “are structured so as not to be subject to competitive market pressures”.

Amazon, meanwhile, accounts for less than 4% of US retail and receives almost the same share online retailers like Walmart (which, coincidentally, is not covered by S. 2992). Apple owns about half of the U.S. smartphone market (and far less in other markets), while AT&T holds about half of the US wireless market. And yet Apple is under the domain of the bill while AT&T is excluded.

Add to that that from google, from Amazonand Apples revenues all fell in 2022; Visa and MasterCardmeanwhile, have both seen earnings growth, as have Comcast and AT&T. If Senators Klobuchar, Durbin and others are genuinely concerned about competition, why are they going after companies that become less competitive, while granting immunity to those with rising revenues?

Small businesses will suffer from the bill and its exclusions, based on comments from the bill’s own supporters. Last year, US merchants (including many small businesses) paid “$77.48 billion in credit card fees and $28.06 billion in debit card fees imposed by Visa and Mastercard,” according to the Senate Judiciary Committee.

In contrast, the technology companies targeted by the bill offer many free or discounted services to startups and small businesses, including services that lower barriers to entry for new entrants and directly improve competition. Many of these services would have to raise their prices to comply with the bill. It is clear that this bill has little to do with protecting small businesses or preserving competition, but rather with bargaining at all costs.

Trevor Wagener is director of research and economics at the Computer & Communications Industry Association. From 2019 to 2021, he served as Deputy Chief Economist of the US State Department.