Legislators are Taking a Closer Look at Big Tech’s Practices and Impact 

By Bridget McCrea
Contributing Writer

For years, big technology firms like Amazon, Google, Twitter and Meta (formerly Facebook) amassed market share by either innovating on their own or acquiring companies like Whole Foods, Instagram, MGM, Motorola Mobility, Zappos and myriad others that have since become part of their burgeoning empires. As that was happening, Big Tech also became the keeper of customer data, and those companies have proven to be reluctant to share with the smaller enterprises they were doing business with.
The prevailing assumption has always been that the data could then be used against the very third-party sellers that platforms like Amazon and Google relied on to supply goods, services and/or information to its customers. This, in turn, created concerns about data privacy and the prospect that an 800-pound online gorilla like Amazon could find ways to, say, create food equipment distribution capabilities and use its accumulated customer data to disintermediate independent distributors.

The situation is complex, to be sure, and is a bit of a moving target right now in that numerous regulators, governmental bodies and elected officials are looking for ways to keep big tech in check on several fronts, not the least of which is the need for better data protection. The National Association of Wholesaler-Distributors (NAW), the U.S. Chamber of Commerce, the Software & Information Industry Association (SIIA), the Computer & Communications Industry Association (CCIA) and many of the companies in question have spoken up about the proposed legislation.

In this article, we break the issue down into plain language, tell what’s happened so far and where things stand now, and talk to experts who share their views on how these developments may impact distributors and manufacturers. They also offer up useful tips on how distributors can protect their customer data while continuing to leverage the power of the marketplaces that they sell through.

Data is the New “Oil”

During e-commerce’s earliest days, when acronyms like “B2B” had yet to be born, a handful of emerging tech companies were quietly building their own platforms and amassing new technology and intellectual property by buying up existing firms. For the most part, they were given free rein to do so in a free-market economy that supports enterprise and innovation. Now, four of these largest companies – Amazon, Meta, Twitter and Google – have come under scrutiny for issues related to data security and sharing by regulators, governing bodies, elected officials and organizations that both rely on and compete with these platforms for business.

The concerns related to data security and sharing are of particular interest to food equipment dealers, who might wish to sell their wares on platforms like Amazon. Unfortunately, these marketplaces keep most of the customer data that changes hands during those transactions.

This puts any company that’s already struggling to maintain its place in the ever-changing selling environment at a distinct disadvantage in a world where data is seen as the “new oil.” The threat is real: in March 2022, the House Judiciary Committee said Amazon has reportedly used merchant data to develop its own products, despite telling Congress that it doesn’t engage in this practice. “Amazon lied through a senior executive’s sworn testimony that Amazon did not use any of the troves of data it had collected on its third-party sellers to compete with them,” the committee stated in a letter to the Department of Justice (DOJ).

“Amazon has declined multiple opportunities to demonstrate with credible evidence that it made accurate and complete representations,” the committee continued. “Amazon’s failure to correct or corroborate those representations suggests that Amazon and its executives have acted intentionally to improperly influence, obstruct, or impede the Committee’s investigation and inquiries.” The issue has since been referred to the DOJ for investigation.

Marshall Van Alstyne, a professor of management for Boston University Questrom School of Business’ information systems department, says the fact that a Big Tech company has been accused of lying about their use of customer data isn’t new news. “That’s been happening for a while now,” says Van Alstyne, who advocates for In Situ data rights (versus legislation that would prohibit merchants from collecting and/or using data) as a better solution to current data privacy concerns.

The idea is to focus more on creating competition through data access versus just breaking up monopolies or large corporations. “Legislation that would prevent platforms from using merchant data to enter markets may reduce unfair competition but it’s not ideal because new competition lowers prices, increases variety and increases quality,” Van Alstyne points out. The In Situ data approach would give merchants the choice of granting or denying permission to use their customer data, thus creating a higher level of competition. For a successful example of this implementation, Van Alstyne points to Europe’s Payment Services Directive 2, an open banking legislation that requires banks to give customers the power to allow third parties to access and manage their funds.

“There’s an enormous quantity of legislation on the table right now,” Van Alstyne points out, “but the most effective legislation would enjoin the use of partner data and entry. After a reasonable period that protects innovation then market level data should become available to all players (platform and other partners and consumers) at the same time, at which point anyone, including other partners and the platform, can enter the market. This protects innovations pioneered by partners but it also then allows fair competition at a future date. So, we get innovation and we get fair competition.”

Coming Under Scrutiny

Big Tech innovations have transformed how people connect to each other and how businesses operate and reach customers, but the rapid pace at which they developed has meant that the inner workings of those innovations were not well understood. Businesses and government groups alike are now calling for some of the practices for how data is collected and shared to be reviewed. Amazon, Meta, Twitter and Google are in the spotlight for now, but other companies are also coming under scrutiny.

Consider this: The Markup, a publication that focuses on how organizations use technology to change society, recently investigated how Amazon works to promote its own products or those made by sellers that are connected to Amazon. For example, the publication found that a small company making coffee grinders worked to increase its search rankings on Amazon, only to have the e-tailer introduce its own competitive “Amazon Basics” version of the product.

The Markup’s investigation revealed that Amazon places products from its house brands and products exclusive to the site ahead of those from competitors – even competitors with higher customer ratings and more sales. Those findings conflict with Amazon’s statements to Congress in 2019 that its search results do not take into account whether a product is an Amazon-owned brand, the publication reports.

This is just one example of the capabilities Big Tech has when it comes to collecting, aggregating and using customer data – and then potentially using that data to copy products and manipulate search results to promote its own brands.

The issue extends outside of the United States and also impacts sellers in other countries. “Amazon.com, Inc. has been repeatedly accused of knocking off products it sells on its website and of exploiting its vast trove of internal data to promote its own merchandise at the expense of other sellers,” Reuters reports. Amazon denied the accusations, but a recent Reuters investigation revealed the company ran a “systematic campaign of creating knockoffs and manipulating search results to boost its own product lines in India, one of the company’s largest growth markets.”

Aaron Weller, a data privacy expert and president of Ethos Privacy, says the pandemic and the correlating massive rise in e-commerce transactions may be driving legislative interest in reviewing Big Tech data privacy and other practices. With their massive reach and online search rankings, large e-commerce marketplaces are often the first place a small to mid-sized company will go for help selling its products online. “Marketplaces offer a level of visibility that a company without a widely-known brand name will gravitate toward,” Weller says. “A lot of them feel as if they don’t have the option of doing it on their own.”

This has created a massive competitive advantage for marketplaces like Amazon and Google, the latter of which runs a lab dedicated solely to “moonshots” – exploratory technologies with little short-term profits that large corporations can afford to experiment with and eventually commercialize (or discard and move along to the next one). Big Tech can also afford to acquire its competitors and firms that can augment their technology stables, like Amazon’s acquisition of Kiva Systems, which makes the robots that run the company’s autonomous warehouses. “Big Tech is able to ‘neutralize’ the competition,” Weller explains, “and gain a foothold in new markets in a way that the typical company can’t emulate.”

Even though there is renewed scrutiny over Big Tech practices, it may be difficult to agree on legislation that would change how they operate, if the past is any indication. According to Weller, the likely areas of contention for a future federal privacy bill hinge on whether federal law should preempt state efforts as much as whether to include a private right of action, the question of whether people can sue companies directly for perceived privacy harms. “I see those are areas of negotiation that lawmakers aren’t even able to get to yet,” Weller says. “When they do, it will definitely trip up progress.

“But these are future issues,” he continues. “Failure to pass comprehensive privacy is more a statement on the lack of political will in D.C. versus a problem with the bills. Nothing is moving and that’s partially due to the sheer number of bills being presented. It’s overwhelming and there is significant overlap.”

What’s on the Table?

In addition to legislation, government officials are looking to tackle the issues arising from Big Tech practices in various ways, including lawsuits. As the DOJ investigates Amazon’s use of merchant data, the agency is also pursuing action against other technology firms. In 2020, for example, the DOJ and 11 state attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to stop Google from unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets and to remedy the competitive harms.

Calling Google the “monopoly gatekeeper to the internet for billions of users and countless advertisers worldwide,” the DOJ says the company entered into a series of exclusionary agreements that “collectively lock up the primary avenues” through which users access search engines.

The DOJ also says Google entered into exclusivity agreements that forbid preinstallation of any competing search service; those that force preinstallation of its search applications in prime locations on mobile devices; and that it uses monopoly profits to “buy preferential treatment for its search engine on devices, web browsers and other search access points, creating a continuous and self-reinforcing cycle of monopolization.” The lawsuit, which is expected to go to trial in late-2023, is focused on restoring competition in search and search advertising markets.

While comprehensive privacy legislation may be difficult to pass, other legislation is being introduced to address competition and consumer choice. Last year, Sens. Amy Klobuchar (D-MN) and Tom Cotton (R-AR) introduced the Platform Competition and Opportunity Act of 2021, which touts promoting competition and economic opportunity in digital markets by establishing that certain acquisitions by dominant online platforms are unlawful. Introduced in both the House and the Senate, the bipartisan legislation is centered on ending anticompetitive acquisitions by making it more difficult for dominant digital platforms to eliminate their competitors and enhance the platform’s market power. In November, the bill was read twice and referred to the Committee on the Judiciary.

The American Innovation and Choice Online Act is another bipartisan effort targeting potential antitrust and consumer choice violations by Big Tech. The legislation is sponsored by Klobuchar and Sen. Chuck Grassley (R-IA), among other elected officials. The bill applies to the largest online platforms, including Apple, Google, Amazon and Meta.

If enacted, this bill will prohibit certain large online platforms from giving preference to their own products on the platform, unfairly limiting the availability on the platform of competing products from another business or discriminating in the application or enforcement of the platform’s terms of service among similarly situated users. According to the Bipartisan Policy Center, the Judiciary Committee passed the bill on Jan. 20, but it has yet to be enacted into law.

In January, NAW released a statement applauding the Senate Judiciary Committee for approving the American Innovation and Choice Online Act to be considered by the full Senate. “On behalf of the wholesale distribution industry, we commend the Senate Judiciary Committee for passing the American Innovation and Choice Online Act which will enact meaningful remedies addressing Amazon’s abuses, its conflicts of interest and poor service to third-party sellers,” said Blake Adami, vice president of government relations. “Currently, competition and innovation are suppressed to the detriment of consumers and small- and medium-sized businesses. Without reforms, some wholesaler-distributors will quite literally be driven out of existence, leaving customers with fewer alternatives and higher prices. We encourage the Senate to quickly pass the American Innovation and Choice Online Act and continue to hold monopolies like Amazon accountable.”

Another House measure that targets dominant platforms, the Ending Platform Monopolies Act, would make it unlawful for a platform operator to own, control or have a beneficial interest in a line of business other than its own covered platform. The bill is meant to promote competition and economic opportunity in digital markets by eliminating the conflicts of interest that arise from dominant online platforms’ concurrent ownership or control of an online platform and certain other businesses. The House Judiciary Committee voted in June to pass the landmark antitrust legislation

Avoiding Overreach

Business groups share the concerns of consumers and companies whose lives and operations are intertwined with Big Tech platforms and services. However, many believe legislation like the American Innovation and Online Act would raise prices, reduce consumer choice, limit small business opportunities and harm the U.S. economy.

“This bill is the definition of the government picking winners and losers in the marketplace, arbitrarily subjecting certain companies to one set of rules and everyone else, including their competitors, to a separate set,” Neil Bradley, the U.S. Chamber of Commerce’s executive vice president and chief policy officer, said in a press release. “It gives federal agencies, including the Federal Trade Commission, which is already engaged in extensive overreach, the power to micromanage a large sector of the economy. In the future, the government will decide whether a company can innovate, lower prices or offer free shipping and other services. And, whether such vigorous competition is ‘unfair.’”

Both the Software & Information Industry Association and the Computer & Communications Industry Association have publicly voiced their concerns about the proposed legislation, with the latter stating that the new regulations “carve out most tech competitors,” including overseas rivals that will gain from the overregulation that the proposed laws may create. “This bill endangers U.S. digital leadership, and puts consumers’ security and privacy at risk,” CCIA President Matt Schruers said in a statement. “Rather than drafting general rules to protect consumers’ welfare, the bill regulates the business models of a handful of companies. This bill is European-style industrial policy, not competition policy.”

Finally, Amazon and Google have released statements regarding the American Innovation and Choice Online Act and the Big Tech-centered regulations as a whole. Brian Huseman, Amazon’s Vice President of public policy, said that the former is being “rushed through the legislative process “without any acknowledgment by its authors of its unintended consequences. “As drafted, the bill’s vague prohibitions and unreasonable financial penalties – up to 15 percent of U.S. revenue, not income – would jeopardize our ability to allow small businesses to sell on Amazon,” Huseman stated.

In addressing what he refers to as the “harmful consequences of Congress’ anti-tech bills, Google and Alphabet Chief Legal Officer Kent Walker says that while an amendment to the Senate bill acknowledges the real security flaws in the legislation by stating that platforms won’t be forced to share user data with companies on the U.S. sanctions list falls short by saying “nothing about provisions that could require sharing data with countless other bad actors and foreign companies. The bill still covers leading American companies, while giving a free pass to foreign companies.”

In a statement, Walker goes on to say that while the Big-Tech bills might help the companies campaigning for them, including some of Google’s major competitors, that would come at a cost to consumers and small businesses. “Moreover,” he points out, “the bills wouldn’t curb practices by our competitors that actually harm consumers and customers.” For example, he says the bills don’t address the problem of companies forcing governments and small businesses to pay higher prices for enterprise software. “And of course, the online services targeted by these bills have reduced prices; these bills say nothing about sectors where prices have actually been rising and contributing to inflation.”

Protect Your Data

What’s going on right now with Big Tech and related legislation and lawsuits is a lot to digest and may leave FEDA members wondering where they stand in the scheme of things, how they’ll be impacted by the outcomes and what they can be doing now to address any data concerns and prepare for the future.

Weller says a good starting point for distributors is to assess your current data and figure out which of it should remain private and under your domain – you know, the stuff that shouldn’t be shared with anyone else under any circumstances. “Know what you have and what should be protected,” Weller advises. Then, be sure to use modern technology like end-to-end encryption and other security tools to keep that data safe. “There are a lot of tools out there that allow you to do that properly – buying them and making them work properly isn’t free,” Weller says. “That’s one hurdle that smaller organizations often need to get over when building and running effective data security approaches.”

Distributors should also make sure everyone in the organization is aware of what data should and shouldn’t be shared with business partners or other interested parties, and they should know that while an online marketplace acts as a conduit to the end customer, it isn’t necessarily always an ally during the sale transaction (as the maker of those coffee grinders mentioned earlier in this article learned the hard way).

“Create a culture where people are aware that the sharing of any customer data is a concern, and that if the information is shared with competitors, the company will lose money and they may even lose their jobs as a result,” Weller says. “Success is about making people aware that protecting customer data is part of their jobs, and what the implications are if that doesn’t happen.”