Top 3 Ways AICO Would Break Prime

Amazon released a warning this week about the consequences that Senator Amy Klobuchar’s [D-Minn.] radical antitrust legislation, the American Innovation and Choice Online Act. In their statement, they alert members of Congress that the passage of this bill will lead to a significant decline in Amazon Prime services that 200 million consumers have grown to rely on as a part of their daily lives. Here are the top three ways in which the American Innovation and Choice Online Act would break Amazon Prime:

  1. The bill would eliminate Prime’s free two-day shipping guarantee.

The legislation would force Amazon to use other logistics providers to ship Prime products to consumers. However, Amazon has already tried this approach. When this approach was in place, there were significant delays in delivering Prime products within the two-day delivery window. This legislation would denigrate the quality of Amazon Prime services without any recourse for improving them. As a result, consumers and small businesses that rely on Prime services to quickly, affordably, and conveniently access products that may be tough to buy in their communities will struggle. The trickle effects of this measure would slow down economic activity for not just Amazon, but all companies that rely on their service.

Photo Credit: Todd Van Hoosear, CC BY-SA 2.0, via Wikimedia Commons
  1. The bill would prevent Amazon from employing functions on their website that allow for a customer-oriented experience.

Through the legislation’s broad restrictions on self-preferencing, essential search features that make it easier for consumers to use Amazon’s website, such as ordering results by Prime eligibility, would be banned. This would hinder the ability of consumers to find cheaper versions of products. Given the rising costs of goods, generally, creating an environment that would limit the ability of companies to even offer consumers affordable goods is likely to have two damaging effects: 1) it will trick consumers into pay more money for products when there are cheaper options available and 2) it will disincentivize third-party sellers from using Prime to price their goods cheaper. These effects combined will lead to a further increase in prices for goods. Inflation is already at a 40-year high as a result of the policies pursued by the Biden Administration and their Democratic Congress. This bill would only exacerbate that issue.

  1. The bill would prevent Amazon from continuing to list and distribute the products of third-party selling partners.

The fines for each incident of breaking the broad restrictions on self-preferencing are so large that Amazon is warning that it would be “difficult to justify the risk of Amazon offering a marketplace in which selling partners can participate.” The effects of Amazon ending their practice of opening their market of 200 million monthly users to other businesses would have a vastly damaging effect across the mainly small- and medium-size businesses that take advantage of this service. Such businesses could never achieve the same reach on their own. If Amazon were to suddenly deny them access to their platform, their sales would immediately plummet. Competition and cheaper prices would dissipate from the market, as less businesses would be able to achieve the market scale necessary to compete or offer those cheaper prices. These measures in totality would therefore significantly worsen our current economic crisis.