Big Tech and Foes Spar Over Bill to Curb Market Power of Dominant Internet Platforms

Supporters say the internet dominance by a handful of big companies prevents smaller technology companies from gaining market share, stifling innovation. Big technology companies counter that the proposed legislation would prevent them from providing free or low-cost services to consumers and small businesses.

In an ad campaign dubbed “Don’t Break What Works,” that is set to begin Wednesday, the Computer and Communications Industry Association will target the anti-tech efforts, including one sponsored by Sens. Amy Klobuchar (D., Minn.) and Chuck Grassley (R., Iowa). The industry group represents companies including Amazon, Google, Facebook parent Meta Platforms Inc., Apple Inc. and other tech firms.

“Americans turned to tech products to receive deliveries for their favorite products, find directions to local businesses and to connect with loved ones,” CCIA says on a website dedicated to quashing the legislation. “These bills could make all these things harder, more expensive, less convenient and less secure.”

The industry ads will run in Washington at first and later in the home states of the senators on the Judiciary Committee and elsewhere, according to consultants involved, who said the trade group is prepared to spend several million dollars on the campaign depending on how long the legislative battle goes on.

Dozens of smaller tech companies are urging the Senate panel to pass the bill, including the startup accelerator Y Combinator, Yelp Inc. and Sonos Inc.

Dominant technologies companies’ ability to give themselves preferential treatment “prevents companies like us from competing on the merits,” the companies said in a letter to the Senate panel Tuesday.

They cited tactics, such as steering users away from competitors’ services or using nonpublic data to benefit the platform’s own services, that “deprive consumers of the innovative offerings a vibrant market would yield.”

“The part of the private sector that is not Google, Apple, Facebook, Amazon is finally starting to—in the face of potential retaliation—courageously say, ‘Enough is enough,’” said Luther Lowe, Yelp’s senior vice president for public policy.

Lawmakers supporting the American Innovation and Choice Online Act say they are responding to concerns by both the public, businesses and smaller internet companies that say tech powerhouses such as Google and Amazon are unfairly abusing their market power to maintain their dominance. They also say the legislation won’t force tech platforms to jettison popular services as long as they compete fairly.

A new group also launched Tuesday to back the Klobuchar-Grassley bill as a starting point in what it hopes will become a broader crackdown on the largest tech companies. Called the Tech Oversight Project, its backers include organizations funded by eBay Inc. founder Pierre Omidyar and Chris Hughes, a co-founder of Meta.

Outside the tech industry, a coalition, dubbed Small Business Rising, has been recruiting and training business owners to push for the legislation in meetings with lawmakers and staff, according to Stacy Mitchell, who represents the coalition and is also co-director of the nonprofit Institute for Local Self-Reliance.

Tech companies are countering these efforts on their own, often through third-party groups they fund.

Apple on Tuesday wrote to the committee saying the bill would place in jeopardy a popular iPhone feature requiring apps to seek users’ consent to track their internet activities.

The proposed legislation allows such services if they are “narrowly tailored” and necessary to meet goals including functionality, security, or privacy, but Apple said that bar would be hard to meet.

Google’s chief legal officer, Kent Walker, said in a blog post Tuesday that “the vague and sweeping provisions of these bills would break popular products,” for instance by restricting the company from displaying Google Maps directions in search results.

Meta Platforms declined to comment. Amazon said the bills would jeopardize its ability to let other businesses sell on its marketplace, and cited a letter from three such businesses to other Amazon sellers that warned of the sellers becoming “collateral damage” of lawmakers’ efforts.

The Connected Commerce Council, a nonprofit representing small-business owners that also takes funding from Google and Amazon according to its website, has been making the case that antitrust legislation targeting Big Tech would hurt small businesses that use tech platforms’ ancillary services.

The legislation by Sens. Klobuchar and Grassley would make it illegal for an internet platform to advantage its own products and services at the expense of other businesses that rely on the platform. Mr. Grassley is the top Republican on the Judiciary Committee and Ms. Klobuchar chairs the judiciary panel’s subcommittee on antitrust law.

The legislation is being debated in the Judiciary Committee, which has jurisdiction over antitrust matters, privacy rules and many internet issues.

The Senate version of the bill has 12 co-sponsors—six Republicans and six Democrats. A similar bill cleared the House Judiciary Committee in June along with other farther-reaching measures that would force tech platforms to divest ancillary businesses altogether.

Some House Democrats have criticized those measures, including members from California, home to Google, Facebook, and Apple. House Democratic leadership hasn’t brought them up for a vote in that chamber.

The Senate committee also plans to consider legislation that would create new rules governing how companies such as Apple and Google operate their app stores, though a vote isn’t expected Thursday. The bill seeks in part to cut down the fees charged when consumers spend money on other companies’ apps.

The Coalition for App Fairness, a group of companies with popular apps including Spotify Technology SA, Epic Games Inc., Match Group Inc. and others say the bill would boost competition in markets dominated by tech giants.

A version of that bill was introduced in the House in August, but it hasn’t advanced.

Prospects for the bills are unclear. Though many lawmakers in both political parties believe that Google, Facebook, Amazon and Apple have grown too large and powerful, they disagree about possible solutions.

Republican lawmakers generally oppose efforts by the government to impose new regulations on U.S. companies. One key player on antitrust issues, Sen. Mike Lee (R., Utah), has said that current U.S. law already gives enough power to the Justice Department’s antitrust division to rein in companies that have too much market power.

The legislation also faces tremendous resistance from the tech industry’s powerful lobbying teams.

In the past few years, Google, Facebook and Amazon have spent millions of dollars on lobbying in Washington to oppose efforts in Congress to enact strong new industry regulations.

No individual companies spent more on lobbying in Washington than Amazon and Facebook through the first nine months of last year, according to the most recent lobbying-disclosure figures. They each spent about $15 million, according to public lobbying records compiled by the nonpartisan Center for Responsive Politics.

The industry is also a major source of campaign donations to the leaders of both political parties. Employees of Google, Facebook, Amazon and Apple contributed a total of $12 million to Joe Biden’s 2020 presidential campaign, according to a Wall Street Journal analysis of campaign-spending data. Along with Microsoft Corp. , employees of the tech companies were the five largest sources of donations to Mr. Biden’s campaign.

Write to Brody Mullins at brody.mullins@wsj.com and Ryan Tracy at ryan.tracy@wsj.com