The American Innovation and Choice Online Act Could Harm Deflationary Effects on Digital Goods and Services
Washington, D.C. (03/09/2022) – As inflation rates reach record highs, Congress should be careful to avoid taking measures to make matters worse, CCIA’s “Don’t Break What Works” campaign warned in a statement issued today.
“From the cost of their morning coffee to the gas they put in their car to the groceries they buy for dinner, American consumers are feeling the effects of rising prices in almost every area of their life. As Congress and the Administration attempt to tackle inflation by targeting goods and industries, they should recognize that inflation is not uniform across industries. In fact, digital goods and services are actually a driver in fighting inflation. We encourage Congress to avoid targeting the digital goods and services that can actually be beneficial to reducing inflation and reject flawed policies such as S. 2992 that would break the products American consumers love most,” Chandler Smith Costello, a spokeswoman for the Don’t Break What Works Campaign.
Notably, tomorrow, the Bureau of Labor Statistics will release new data related to the Consumer Price Index (CPI), which measures the changes in prices that consumers pay for goods and services.
Digital goods combat inflation in 3 ways:
∙ As digital goods and services are used more, consumers sometimes pay less for services than they used to. If there are price increases, they tend to happen more slowly – reducing inflation.
∙ Digital goods and services allow for more price transparency and make it easier for consumers to compare prices. Ensuring consumers have price transparency and the ability to compare prices increases competition – further reducing inflation.
∙ Digital goods and services lead to more productivity, improvements to supply chains and lower supply costs – resulting in lower prices for consumers.
To read more about how digital goods and services have a deflationary effect, click here.
What others are saying:
Senator Alex Padilla (D-CA)
“I respect that many consumers like the convenience of self-preferencing that enables them to type something into a search engine and receive answers to their queries right then and there without having to go through additional clicks or additional links. This is now a staple feature across search engines today. Now this may be a simple example, but a lot of what has powered technological innovation over the last couple of decades has been the power and convenience of integrated services working together to the consumer’s benefit. But given the broad language in this bill, here’s a question: Is this committee willing to trust regulators and courts to crack down on harmful self-preferencing practices while allowing activity that benefits consumers?”
Wayne Brough, R Street Institute
“In fact, AICOA restricts covered platforms’ ability to compete and eliminates many practices that are clearly pro-consumer. For example, self-preferencing is prohibited by the covered platforms. This includes activities such as a covered platform offering its own store-brand or “private label” products to compete with other brands sold on the platform. Under these rules, Amazon Basics would be potentially limited in its ability to compete with its rivals.”
“Yet, private labels exist throughout the world of retail and are not covered by this bill. Target, for example, has 48 private labels, and generates roughly a third of its income through the sale of its private label products. Walmart, Costco and all major grocery stores sell private labels that often provide the low-cost option for consumers. This head-to-head competition is a driving factor in keeping prices low and enhancing consumer welfare. The bill does not explain why “Kirkland” is acceptable, but “Amazon Basics” is not.”
The Don’t Break What Works campaign is powered by the Computer and Communications Industry Association (CCIA). Learn more here.