Promoting Competition While Ensuring Continued U.S. Tech Leadership and Innovation

Bottom Line Up Front:

With growing political interest in the role that large technology companies play in society, members of Congress have introduced legislation designed to regulate certain companies that, while perhaps well-intentioned, if enacted into law, could significantly undermine America’s economic and national security, particularly in the context of our expanding competition with China.

• These bills include the American Innovation and Choice Online Act (AICOA) and the Open App Markets Act, that, among others, are notionally aimed at limiting the power of large technology companies.
• Instead of directly addressing concerns raised by the public around “big tech” companies — like protecting free speech and ensuring the availability of key jobs in the modern economy — these bills would modify long-standing antitrust laws to target a small subset of American companies for specialized treatment, essentially making it impossible for these American technology powerhouses to effectively compete globally.

Over two dozen national security experts — including former Secretary of Defense and CIA Director Leon Panetta, former White House National Security Advisor Robert O’Brien, former White House Counterterrorism and Homeland Security Advisor Fran Townsend, and former Principal Deputy Director of National Intelligence Sue Gordon — have argued that the proposed antitrust legislation could undermine ongoing security efforts, expose American data and intellectual property to adversaries, significantly stifle domestic innovation, and hamper the ability of the U.S. to effectively compete against China and other key adversaries.

• The proposed laws raise significant cybersecurity and national security concerns because they may force companies to undermine their own security posture by requiring them to open their systems and software up to foreign competitors, and could also undercut U.S. leadership in the technology arena, disrupting our strong innovation ecosystem and restraining economic growth, all while increasing costs for both American consumers and producers in an already challenging economic environment.
• American companies today invest billions of dollars annually in research and development on cutting-edge areas like artificial intelligence, machine learning, quantum computing, semiconductor chip manufacturing, and the like; these investments significantly outstrip similar investments made by the U.S. government and could be significantly undermined by legislation that makes it less economically efficient for these companies to operate.

Key Issues:

Since Congress began its push on antitrust legislation to regulate “big tech,” national security experts, technology executives, and key members of Congress have voiced significant national security concerns over the proposed legislation.

• In September 2021, a bipartisan group of a dozen former national security leaders — including Secretary Panetta and former Director of National Intelligence Dan Coats — wrote to Congress warning of the potential national security repercussions of new antitrust legislation and arguing that Congress ought take time to study the issue before acting.
• Specifically, these leaders flagged major data security concerns, including the vulnerability of American consumer data and corporate intellectual property under the proposed new regime, as well as the potentially significant negative economic impact of such efforts, including restricting American competitiveness in the technology industry and paving the way for China to assume global technology leadership, thereby significantly threatening American economic and national security.
• More recently, in April 2022, following the Russian invasion of Ukraine, a second bipartisan group of over a half dozen defense, intelligence, homeland security, and cyber officials penned an open letter raising concerns about increasing disinformation and cybersecurity risks of the proposed antitrust legislation and calling for a national security review of any such legislation prior to a floor vote.
• These leaders — including former Acting CIA Director Michael Morell and former White House security advisor Fran Townsend — noted that the proposed legislation could unintentionally “provide an open door for foreign adversaries to gain access to the software and hardware of American technology companies” and could “damage the capability of U.S. technology companies to roll out integrated security tools to adequately screen for nefarious apps and malicious actors, weakening security measures currently embedded in device and platform operating systems.”
• And, just in the last few weeks, over a dozen additional key national security leaders — like former national security advisor O’Brien and former Under Secretary of State for Global Affairs Paula Dobriansky — also flagged concerns that legislation like AICOA would “place U.S. companies at a structural disadvantage vis-à-vis China, leaving our tech industry weakened and vulnerable to the CCP” and would allow China to “quickly surpass and displace [the U.S.] in the tech sector,” leading to “very dangerous consequences for the U.S. and our allies and partners around the world.”
• Senator John Cornyn (R-TX) has explicitly criticized “the potential national security consequences” of current proposed legislation, arguing that AICOA, would “harm American businesses and reward our adversaries, most notably the People’s Republic of China” by “serv[ing] our own companies up on a platter and do[ing] nothing to combat the bad conduct of our adversaries,” while Congressman Eric Swalwell (D-CA) has raised cybersecurity concerns as well, noting that antitrust legislation will allow “thousands of foreign companies — many from countries at odds with American values — to fully integrate and access domestic platforms.”

In addition, other key leaders, business organizations, technology industry groups, political leaders, and even regulators, have noted that ill-conceived antirust regulation can increase consumer prices and undermine our global competitiveness, harming both our economic and national security, a major concern particularly in an era of resurgent inflation and increasing economic pressure from a rising China.

• Results from a study conducted by National Economic Research Associates (NERA) suggest that the antitrust bills could cost the U.S. economy up to $319 billion, with consumers collectively losing nearly $22 billion in consumer welfare per year on certain online purchases alone.
• Senator Diane Feinstein (D-CA) likewise raised concerns that AICOA could “be very dangerous legislation” that “may end up giving a very competitive advantage to large global businesses that narrowly escape being regulated by the bill.”
• And FTC Commissioner Noah Phillips has argued that antitrust legislation would prohibit competition, rather than facilitating it, warning of further price increases that “could come out of such antitrust legislation.”

While certain amendments have recently been proposed to alleviate concerns surrounding proposed legislation, these changes do little to solve, or even address, the core issues in the bills.

• First, several bills, including AICOA, continue to include language that could require American companies to share data and intellectual property with Chinese and other foreign companies.
• Further, the bills, including AICOA, continue to stack the deck against security capabilities put in place by certain companies by restricting their default security protocols and procedures, as well as the use of their own corporate security teams, requiring them to justify the use of such capabilities, which could allow misinformation and harmful content to proliferate and could also expose users to increased exploitation through phishing, malware, and other security threats.
• Indeed, key leaders like former national security adviser O’Brien and Bill Evanina, the former head of the National Counterintelligence and Security Center, have specifically noted that “the revised version of the AICOA…does not ameliorate our concerns.”

To be sure, there are potentially legitimate concerns raised by political leaders on both sides of the aisle, including concerns about the regulation of free speech and the transition to a “gig economy” and its impact on the American workforce.

• However, these bills take an unusual approach to regulation by changing American competition and corporate law to target a handful of specific companies, rather than setting out rules that apply to all businesses.
• In addition, as noted above, language in several of the proposals risk significant consequences, primarily to U.S. technology leadership and innovation, and to our economic and national security by, among other things, requiring certain large U.S. companies to interoperate with and provide access to Chinese and other foreign products and applications in their products, application stores, core software, and cloud systems in a manner that could significantly increase security vulnerabilities.

Moving Forward:

As Congress considers taking further action these bills, it is imperative that members carefully consider the unintended consequences of the proposed legislation.

• At a minimum, as two bipartisan groups of national security leaders recently recommended, Congress ought conduct a deep-dive review of the impact of the proposed legislation on America’s core national security interest.
• Moreover, key provisions that could create major security concerns or force American companies to share data or interoperate with foreign companies and their software should be eliminated altogether.
• Any action should consider the direct and immediate economic welfare of American consumers and workers, many of whom rely on large technology companies for their jobs, particularly in a timing of rising prices and potential economic challenges.
• Finally, any action should account for the impact of increased regulation of one of America’s most rapidly growing and innovative sectors, technology, on America’s long-term ability to compete in the global environment, particularly against a rising China.

While additional legislation may very well be necessary to address some of the potentially legitimate concerns noted above, if the United States wants to maintain our standing as a global technology leader and foster innovation and job growth here in the United States, it is critical that any such legislation be aimed specifically at those issues, not simply target a handful of companies for specialized treatment in a manner that would create new economic and national security vulnerabilities at a time of increased competition with China and other adversaries.