October 3, 2023

FTC v. Amazon

“The U.S. Federal Trade Commission filed a long-awaited antitrust lawsuit against Amazon.com on Tuesday… The FTC accused Amazon, a company started in a garage in 1994 and today worth $1.3 trillion, of fighting efforts by sellers on its online marketplace to offer products more cheaply on other platforms. Amazon forces sellers to use its warehouses and delivery services, inflating costs for consumers and sellers, the FTC said.” Reuters

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From the Left

The left supports the lawsuit, arguing that Amazon harms third-party sellers and ultimately consumers.

“Amazon is the apex predator of our platform era. Having first subsidized end-users and then offered favorable terms to business customers, Amazon was able to exploit its digital flexibility to lock both in and raid them for an ever-increasing share of the value they created. This program of redistribution from platform users to shareholders continued until Amazon became a vestigial place, a retail colossus barely hindered by either competition or regulation, where prices go up as quality goes down and the undifferentiated slurry of products from obscure brands is wreathed in inauthentic reviews…

“Amazon’s army of workers also suffered: They are routinely maimed on the job, and on-site infirmaries send badly injured workers back into harm’s way. Its warehouse workers urinate in bottles to keep up with impossibly high fulfillment demands; its drivers are forced to defecate in bags… Speaking for his landmark antitrust bill of 1890, Senator John Sherman said: ‘If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade.’… Amazon is surely the king of our time.”

Cory Doctorow, New York Times

“According to the complaint, Amazon ‘deploys a sophisticated surveillance network of web crawlers that constantly monitor the internet [for] discounts that might threaten Amazon’s empire. When Amazon detects elsewhere online a product that is cheaper than a seller’s offer for the same product on Amazon, Amazon punishes that seller’ by systematically suppressing their search results on its own platform…

“If Amazon’s backdoor price-fixing is the focus of the complaint, it’s probably a shrewd one, because the practice of rooting out rogue discounters for retaliation so unambiguously subverts what we imagine to be ‘market forces,’ to the detriment of both sellers and customers. Both Amazon sellers and consumers alike intuitively grasp that they are paying more than ever for the same crap: Seller fees rose 30 percent during the pandemic alone, as the Consumer Price Index rose 20 percent. Amazon’s gross profits roughly doubled over the same period.”

Maureen Tkacik, American Prospect

“Khan argues that while Amazon claims to not have a ‘most-favored nation’ policy, which would explicitly prohibit sellers from selling their product cheaper elsewhere, it does punish sellers that offer cheaper prices elsewhere by denying them the Buy Box — which is a most-favored nation policy, only in dark glasses and a wig. The result is that even though sellers might be able to sell products on competing marketplaces for less, they are heavily incentivized to keep prices artificially high everywhere for fear of losing the Buy Box on Amazon’s store. That’s how consumers lose.”

Dave Lee, Bloomberg

From the Right

The right is critical of the lawsuit, arguing that Amazon provides value to consumers.

The right is critical of the lawsuit, arguing that Amazon provides value to consumers.

“Since Khan assumed her role, the FTC has prosecuted a number of high-stakes antitrust cases against large businesses. Much of the time, her agency has come up short…

“A district judge rejected the FTC’s argument that United Health Group engaged in an effort to illegally suppress competition… [The] agency slinked away from its attempt to break up Facebook’s parent company Meta after a court allowed the firm to purchase the virtual-reality-content producer Within. Microsoft succeeded in its effort to purchase the software maker Blizzard…

“‘I think chair Khan is ideologically motivated. She wants to change merger law in the U.S. fundamentally,’ said University of Washington law professor Douglas Ross. ‘The problem she has is that many of her ideas don’t improve consumer welfare; some of her ideas would decrease consumer welfare.’”

Noah Rothman, National Review

“The complaint focuses on how hard it is for rivals to reach Amazon’s scale or compete with its huge range of services. But Amazon has succeeded because consumers want those services, and Amazon can provide them better and cheaper than others. We should encourage — not discourage — such conduct…

“To make matters worse, an FTC win would likely have disastrous effects on the Amazon platform. Amazon Prime and the company’s logistics network are what enable it to achieve next-day shipping at trivial cost to consumers. Likewise, Amazon’s house brands are a way of bringing competition to retail segments where consumers don’t know which goods to choose or are overpaying for rival brands. Even a cursory analysis of Amazon brands reveals they lower prices for consumers. If successful, the FTC’s suit would profoundly undermine these central features of the Amazon platform.”

Geoffrey A. Manne and Dirk Auer, New York Post

“While Amazon makes up about 38% of the U.S. e-commerce market, it accounts for about 6% of all retail sales. That’s no monopoly. The FTC implicitly concedes that Amazon competes with smaller retailers by arguing that it forces those that sell on its platform to raise prices on other websites. Amazon is ‘suppressing price competition by disciplining rival retailers who dare to discount,’ the lawsuit says. But does this really hurt consumers?…

“When multiple retailers sell the same product, Amazon highlights the best offer in a ‘buy box,’ which lets customers ‘buy now’ or ‘add to cart.’ The FTC says retailers that want to appear in Amazon’s buy box aren’t allowed to offer lower prices elsewhere. Amazon wants to offer its customers the best deal. If Amazon promoted more expensive products, it might be accused of gouging consumers… The surprise, after so many years of effort, is how weak her antitrust case is.”

Editorial Board, Wall Street Journal

A libertarian's take

“Six years ago, when Amazon was wildly popular but barely profitable, [Khan] wrote you could see predatory behavior if you focused on very particular markets — for example, how Amazon priced best-selling e-books, rather than all e-books. Today, rather than looking at all retail, or even e-commerce, the FTC complaint argues that Amazon has gained utter dominance of the ‘online superstore’ market, a market that seems primarily defined by… describing Amazon. It’s a little like arguing that I have an anticompetitive monopoly over Post columnists named Megan McArdle…

“The complaint makes a decent case that Amazon has enough market power to squeeze the everliving bejeezus out of its third-party sellers. But markets have always been hard on sellers; we want them to be, because the relentless race to sell better, cheaper, faster has driven two centuries of increasing prosperity. To merit getting involved, the government needs to show that sellers are being disadvantaged in some illegitimate way that’s broadly bad for society.”
Megan McArdle, Washington Post

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