By PHIL ANDREWS //
Legislation that politicians claim will protect small businesses from the alleged monopoly power of large tech companies will end up depriving entrepreneurs of vital revenue streams and suppressing innovation.
And Black-owned businesses – which depend on digital services to launch, maintain and grow – are sure to shoulder an outsized proportion of these unintended consequences.
Last month, a coalition of New York business leaders – representing businesses from Montauk to Buffalo – called on the U.S. Senate to table the American Innovation and Choice Online Act. The reason? The bill will harm the very businesses, consumers and next-generation innovators that bill sponsors and supporters contend it will help.
The proposal’s collateral damage has been quantified: a staggering $500 billion in lost revenues over five years.
And startups will be saddled with higher costs and reduced access to capital, according to recent research: A trio of reports by the Data Catalyst Institute finds that instead of encouraging competition online, the deceptively named legislation will diminish incentives for innovation and make technology platforms less useful for both small businesses and the consumers that rely on their services.
The bill is aimed at constraining the major digital-platform companies – including Amazon, Google and Facebook/Instagram/WhatsApp parent company Meta – from “self-preferencing,” or driving site traffic to their own services.
Phil Andrews: Collateral damage.
But Data Catalyst finds that the track taken by the legislation’s language will reduce the value and performance on all sides of the platform ecosystem – be they independent sellers who build and grow their businesses on marketplaces or social media; app developers who rely on free resources including payment, privacy and security features; or consumers who want seamless access to low-cost products and services.
Following economic modeling from Dartmouth College Professor of Economics Emeritus John Scott, the bill’s impacts are projected to translate to $500 billion (or $1,712 per small business per month) in the first five years after enactment.
Black entrepreneurs, who have been historically left out of economic opportunities, can build a business from home by launching a brand on Instagram, driving sales to Amazon or Facebook Marketplace, and maintaining a customer base with Google’s reviews, reservations and other business tools.
Many small businesses develop and market their own apps, scale their businesses and attract investments from larger firms – creating jobs and supporting their communities along the way.
But this bill would suppress those Google My Business and Maps platform listings from search results, reduce cross-platform advertising and cut off sellers from integrated services – all while inviting unscrupulous sellers and data miners to platforms, degrading the service for both consumers and serious businesses.
Small businesses have been put through the wringer over the last few years, and minority-owned businesses have been especially strained by the never-ending parade of economic horrors: COVID-19, labor shortages, the supply-chain crisis, rampant inflation and the dark clouds of recession gathering on the horizon. The last thing they need is another disruption, especially one coming from the same politicians who should be focused on solving the very real problems facing our economy.
A lifeline during the most difficult days of the pandemic, digital platforms continue to help small-business owners of all backgrounds operate effectively and reach new customers. Recent surveys show Black and Hispanic entrepreneurs report a higher-than-average impact from (and optimism about) digital platforms as drivers of revenue and enhancers of business operations, compared to the average small-business owner.
They are also more likely to view the use of digital platforms as a way to increase revenue, perform more efficiently and quickly change business strategy. For them, tech tools are vital drivers of growth.
With brick-and-mortar operations severely limited during the pandemic, minority-owned small businesses pivoted their operations online. In fact, it was necessary for them to seek out new ways of doing business, since minority businesses were found to be generally ignored and overlooked in the rollout of post-pandemic government business-relief programs.
Black business owners will tell you that their main concern is inflation and the rising cost of doing business, not regulating the business models of large tech companies – which will, in turn, disrupt the business models of countless small sellers, app developers and innovators.
Our current digital landscape is not perfect, but as written, the proposed legislation will degrade, not improve, the way Black-owned businesses operate online. As pressure mounts on U.S. Sen. Chuck Schumer (D-NY) to bring the bill to a vote, we hope he keeps in mind the 500 billion reasons why small businesses throughout his home state want to see the American Innovation and Choice Online Act rewritten – or abandoned altogether.
Phil Andrews is president of the Long Island African American Chamber of Commerce.
