The United States was a startup. Like the 90% of startups that fail over the course of their first five years, its odds weren’t good. In the words of the musical Hamilton, the Continental army was “outgunned, outmanned, outnumbered, outplanned.” Our early democracy is often referred to as an “experiment.”
And yet the U.S., by embracing the values of risk-taking, freedom, resiliency and entrepreneurship, has the most unicorns and the most startups in the world today. So why is our government now – especially now as our economy is struggling through the many consequences of the pandemic – proposing policies and legislation that will sabotage America’s small businesses?
Last week, Senators Amy Klobuchar and Chuck Grassley announced the American Innovation and Choice Online Act. The bill is ostensibly aimed at certain large American companies, but it would actually hurt the small and medium-sized businesses that use digital tools and services from the targeted companies (Amazon, Apple, Google and Facebook) to reach customers and grow their businesses.
Large companies like Amazon aren’t trying to drive small businesses out of business; instead, they’re actively providing them with a platform to succeed. And this isn’t charity; it is a business model – a win-win for both – that is a proven success.
More than half a million American small- and medium-sized businesses utilize Amazon’s marketplace to sell their products; supporting 1.1 million jobs nationwide. Amazon’s business is shaped by the success of startups and small businesses, not their failure; more than half of the sales on Amazon are sold by third-party SMBs.
It’s also worth noting that Amazon is just one of the many tools small retailers have for selling their goods. Thanks to the vibrant nature of retail, my colleague Raymond J. Keating recently noted, “Suppliers have the freedom to price their products as they see fit, and can offer those products offline and via a wide array of online avenues, from their own websites to such marketplaces as Walmart, Etsy, eBay, Facebook Marketplace, Wish, Poshmark, and many others.”
Meanwhile, the companies being targeted by antitrust regulations have allocated billions of dollars over the years toward maintaining this vibrancy. Amazon spends $18 billion a year on learning tools for SMB sellers, like Amazon Small Business Academy. Apple launched its new App Store Small Business Program earlier this year. In 2020, Google unveiled an $800 million plan to help support small businesses affected by the economic disruption caused by COVID-19.
“Big Tech” isn’t a threat to startups; the Senate’s new antitrust bill, on the other hand, is. For one, it is identical to the bill introduced by the House this summer — which has met stiff resistance from Democrats and Republicans in the House because, among many problems, it stifles the growth and innovation of new businesses, making them collateral damage and supercharging FTC Chair Lina Khan’s war against Big Tech.
Small businesses use online marketplaces, like Amazon, because it is an accessible and affordable way to reach millions of customers worldwide without having to worry about overhead costs of a physical store or inventory requirements from a traditional retailer. For example, Anthony and Ronald Alcazar, founders of Mr. Tortilla, tapped into Amazon’s market to promote their healthier alternative to the tortilla. They had difficulty getting into the supermarkets which prioritize big brands, and most have no incentive to give new, disruptive ideas a chance. After they put their product on Amazon, buyers gave them consistently high ratings; they became the number one tortilla seller in the store, and their monthly sales are double what they were a year ago.
Like the House’s bill, the Senate’s bill would force companies like Amazon to separate their marketplace from their own retail offerings. This sounds “good” in theory, but the end of hybrid services would inevitably mean the decline of the SMBs who use and succeed on these platforms.
The Senate’s legislation would also make it impossible for Amazon to offer its Prime free shipping service on millions of products, many of which are from small and medium-sized businesses. Consumers will likely turn to big retailers, none of whom are targeted by the bill and most do not provide the same seamless and robust access to massive consumer markets or promote small businesses nearly as well.
In a recent Axios poll, two-thirds of Americans said they view the success of Apple, Amazon, Google, and Facebook as a good thing for the American economy. The American Innovation and Choice Online Act will be destructive – not only to big businesses but to the millions of entrepreneurs who, over the centuries, made the American “experiment” a thriving success.
Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.
