Online platforms and marketplaces provide consumers direct and instantaneous access to an extensive array of global goods, services, and content. Conversely, they enable producers to reach consumers largely untethered by size and geographic reach. The popularity of online platforms and marketplaces, including those operated by Google, Apple, Facebook, Amazon, and Microsoft, attests to the societal benefits these services offer to consumers and producers alike.

Some US lawmakers and competition authorities consider the growth of these platforms a threat to competition. They claim that online platforms monopolize various segments of the digital economy, including online search, online commerce, social media, mobile app stores, web browsers, and digital advertising. To remedy this alleged competition problem, some lawmakers in the US House of Representatives and the US Senate introduced several bills that would subject certain of these platforms and marketplaces to common carrier, structural separation, and line of business restrictions. Although these bills differ from each other in important ways, they all seek to regulate online platforms and marketplaces that meet a certain threshold.

NERA was retained by CCIA to prepare two studies that take a deep dive into the proposed bills, which are largely silent as to the economic repercussions that would ensue if the bills are adopted. Moreover, there is a void in the public debate as to how the proposed regulation would affect consumers and small-to-medium businesses, including startup companies. The first study examines the reach of the proposed regulation and the second study both quantifies both the direct economic impact on platforms and the ultimate effects on consumers and small-to-medium businesses.

The NERA studies highlight a number of significant findings. First, the proposed bills create significant regulatory risks not only to the primary targets of the bills—Google, Apple, Facebook, Amazon, and Microsoft—but also to no less than 13 additional US companies. The risks emanate from an overly broad definition of an online platform, the extensive regulatory framework that applies to covered platforms, the broad discretions that are granted to competition authorities tasked to determine compliance, and the extensive financial penalties that apply for noncompliance.

Second, the size thresholds likely would force covered platforms to break into independent units that individually fall below the size threshold or to divest prior acquisitions until the core company falls below the size threshold. The structural separations and divestitures would either be compelled by the competition authorities or would be voluntarily undertaken by the online platforms lest they face huge fines and the risk of structural separation in the future anyway. These structural separations are the opposite of mergers. Whereas mergers often create cost synergies that benefit consumers, the forced reductions in scale would create cost inefficiencies for the five firms targeted by the proposed bills. Our empirical analysis demonstrates that the immediate effect of the common carrier, structural separation, and line of business restrictions on these five companies would be approximately $319 billion. These cost increases would ultimately be passed through and borne by the consumers and business users of the platforms.

Third, in the case of Amazon Prime, the proposed bills would require Amazon to divest, discontinue, or fundamentally restructure Amazon Prime membership. We conducted two consumer surveys related to Amazon Prime and found that the bills would reduce consumer welfare by $22 billion per year, which is equivalent to a financial loss of $148.47 per year for each Amazon Prime member in the United States.

Fourth, the proposed bills would not achieve the objectives claimed by proponents and there are no quantifiable benefits. Specifically, the bills would not stabilize prices or decrease inflation as some have claimed. The overwhelming consensus among academic economists is that the bills would not decrease inflation and our own research finds $319 billion in additional costs that would put upward pricing pressure on already elevated retail prices. Additionally, the bills would not increase innovation as some have claimed. To the contrary, the proposed bills would jeopardize the primary driver of innovation as a prohibition on acquisitions would eliminate a target audience of many US startups, thereby reducing market demand to acquire US startups and suppressing startup innovation.