What Is the American Innovation and Choice Online Act (S.2260)?
Understand S.2260, proposed legislation outlining how dominant tech companies can operate and the government oversight designed to foster online competition.
The American Innovation and Choice Online Act, S.2992, is federal legislation designed to regulate the business practices of the largest technology firms. Its primary objective is to foster a more competitive digital marketplace by preventing dominant online platforms from using their market power to disadvantage smaller competitors. The bill seeks to ensure the success of businesses online is based on the quality of their products and services.
Defining Covered Platforms
The American Innovation and Choice Online Act does not apply to all online businesses, instead targeting entities defined as “covered platforms.” To be designated as a covered platform, a company must meet several specific thresholds, ensuring the law is focused on the largest players in the digital marketplace.
A primary criterion is the company’s financial scale and market presence. The bill stipulates a minimum global market capitalization and at least $550 billion in net annual sales. This is combined with user metrics, requiring at least 50 million U.S.-based monthly active individual users or 100,000 U.S.-based monthly active business users. The Department of Justice (DOJ) and Federal Trade Commission (FTC) can also designate companies that act as a “critical trading partner” for businesses.
Prohibited Conduct for Covered Platforms
The legislation outlines specific business practices that would become unlawful for covered platforms. A central prohibition is against a platform unfairly preferencing its own products, services, or lines of business over those of its competitors. This would, for example, prevent a large e-commerce site from placing its own branded products at the top of search results while demoting similar products from third-party sellers.
Another restriction involves the use of data. The act would make it illegal for a covered platform to use non-public data, generated by the activities of a business user on the platform, to develop its own competing products. For instance, an online marketplace operator could not analyze the sales data of a successful third-party seller to launch its own version of that product.
The legislation also addresses the control that platforms exert over their digital environments. It would become unlawful for a covered platform to restrict users from uninstalling preinstalled software applications on devices. Similarly, platforms would be barred from creating obstacles that prevent users from changing default settings that steer them toward the platform’s own products or services.
Finally, the bill includes a provision against retaliation. A covered platform would be prohibited from taking punitive action against any business user that reports potential violations or raises concerns about the platform’s conduct with enforcement agencies. This protection ensures businesses can report anticompetitive behavior without fear of punishment.
Enforcement and Penalties
The American Innovation and Choice Online Act grants enforcement authority to the Department of Justice (DOJ) and the Federal Trade Commission (FTC). These agencies would be empowered to investigate potential violations and bring civil actions against covered platforms. State attorneys general are also given the power to enforce the law, providing another layer of oversight.
Should a covered platform be found in violation, the legislation authorizes financial penalties. The bill specifies that civil penalties can be as high as 10% of the total U.S. revenue of the company for the period during which the violation occurred.
Beyond monetary fines, enforcement agencies can seek other remedies to address the harm to competition. This includes securing injunctions to halt the prohibited conduct or requiring the platform to divest certain assets or lines of business to restore competitive conditions.
Current Legislative Status
The American Innovation and Choice Online Act, S.2992, was introduced during the 117th Congress (2021–2022) and garnered bipartisan support. In January 2022, the bill was advanced by the Senate Judiciary Committee. However, the bill was never brought to the full Senate for a vote and failed to pass before the conclusion of the congressional session, so it is not currently active.