(Image credit: NPR)
According to the FTC, Amazon has prevented competition by mandating sellers on its platform to purchase Amazon’s logistics services in order to secure “Prime eligibility”, or the best seller benefits. The parties also allege that Amazon punished sellers by using anti-discounting measures such as burying search results or knocking them off their "Buy Box" feature which allows the shopper to purchase the product. Furthermore, Amazon’s dominance in online commerce leaves sellers with little options but to accept Amazon’s terms, resulting in higher prices and worse services for consumers.
Following the launch of this new case, the FTC Chair Lina M. Khan argued that, “The complaint sets forth…how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service … Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”
This case is a prime example of the national government's ability to intervene in the economy specifically through the use of laws such as the Sherman Anti-Trust act, which serve to prevent monopolies from emerging in the market. This power is mainly granted through the commerce clause, as many corporations (including Amazon) have interstate deliveries and manufacturing, and thus falls under interstate commerce, and therefore is under the jurisdiction of the federal government.
From my perspective, it is invaluable that the government takes action against powerful companies such as Amazon. Domination of the market often leads to lower quality products and excessive greed, as the company has no fear over public reception due to their status as a monopoly. It seems to me that, by suing Amazon over their practices, the FTC serves as a reminder that there are still checks against malicious business practices in an age dominated by corporate lobbying and excessive deregulations.
- Daigo Hayashi
Bibliography:
- Sandhu-Longoria, A. K. (2023, September 27). “monopolistic practices”: Amazon sued by FTC, 17 states in antitrust lawsuit. USA Today. https://www.usatoday.com/story/money/2023/09/26/us-sues-amazon-for-monopoly/70972850007/
- Fung, B. (2023, September 27). US government and 17 states sue amazon in landmark monopoly case | CNN business. CNN. https://www.cnn.com/2023/09/26/tech/ftc-sues-amazon-antitrust-monopoly-case/index.html
- Day, M., & Nylen, L. (2023, September 26). FTC chief Lina Khan aims to end Amazon “illegal conduct.” Bloomberg.com. https://www.bloomberg.com/news/articles/2023-09-26/ftc-chief-aims-to-end-amazon-illegal-conduct-quiet-on-breakup#xj4y7vzkg
- Selyukh, A. (2023, September 26). U.S. sues Amazon in a monopoly case that could be existential for the retail giant. NPR. https://www.npr.org/2023/09/26/1191099421/amazon-ftc-lawsuit-antitrust-monopoly
- Ritchie, J. N. & A., & Staff in the Bureau of Competition & Office of Technology. (2023, September 26). FTC sues Amazon for illegally maintaining monopoly power. Federal Trade Commission. https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-sues-amazon-illegally-maintaining-monopoly-power
9 comments:
From a consumer's perspective, personally, I like Amazon a lot. They offer very quick shipping and hard-to-beat prices. However, from a competitor's standpoint, I can see how there is a lot of trouble. When you talked about the mandate of buying the Amazon logistics service for the best seller benefits, I thought of the mandates and conditions of aid we learned about in class. However, this rule seems a lot more like a mandate because without the best seller benefits, the products are hidden and much less appealing because they don't offer the lowest prices or the quickest shipping. In an article by the NYT, one of the tactics that Amazon used was making the "Buy Box" less appealing, which Daigo noted in his blog. If the product was cheaper on a site besides Amazon, they would remove that buy box and get rid of the best seller benefits which includes fast shipping. From just this tactic, it seems like Amazon is stifling the competition while making the service worse for consumers. And even though I love the cheap prices and fast shipping from Amazon, the competition is suffering because of it. Amazon basically has a monopoly, and it seems fair for the American government to intervene on behalf of the competition. I'm not sure if this is correct, but they would be using the Commerce Clause to regulate commerce.
One thing to note is that the FTC has gone on a mini-rampage of lawsuits in an attempt to rein in Big Tech. So far, judges have struck down their cases against Meta, Google, and Microsoft. A big theme in those cases was a lack of preparation and fairly weak arguments, although the courts generally do seem to have a different view of antitrust law compared to the FTC. Perhaps it will be different this time around because Khan is much more familiar with Amazon (she wrote a paper on why Amazon should be broken up back in 2017).
I think its very important to note that without strict enough regulations, monopolies will always continue to develop, and that's why I think the FTC's actions were incredibly necessary to set a precedent, not only for Amazon, but also for other large companies with the potential to monopolize a space. A claim Daigo didn't mention against Amazon which I found very interesting was that they did not allow third party sellers to list their products at a higher price than they are found on other websites, a rule which, due to Amazon's incredibly large market size, sellers were effectively forced to follow. This effectively made it so that almost every product listed on Amazon was listed at its lowest possible purchase price, making any other websites obsolete for customers. Again, if the FTC were not to step in, these types of practices would simply become common practice among the largest companies in every aspect of commerce, so it was incredibly important to step in and deescalate any monopolization.
(https://www.cnn.com/2023/09/26/tech/ftc-sues-amazon-antitrust-monopoly-case/index.html)
To build on Daigo's note in the FTC's case about Amazon requiring sellers to use its delivery services if they want to be marked for Prime shipping, this essentially requires sellers who want to have success in sales on Amazon to use their service, as around 170 million Americans have Amazon Prime memberships. This expands Amazon's influence beyond just online shopping to also outcompete other warehouses and fulfillment providers, and makes it more difficult for sellers because they have to manage a whole other set of operations. This policy, along with the one mentioned by Zach, essentially reinforce each other to strengthen Amazon's monopoly.
https://www.nytimes.com/2023/09/26/technology/amazon-ftc-lawsuit-antitrust.html
Amazon's insane monopoly is an almost perfect example of when federal intervention is necessary, as the Commerce Clause allows. Other sellers are helpless to outcompete it as it already has such widespread influence and power, and consumers are extremely unlikely to stop using a service that's objectively cheaper and more convenient than other options. However, in the long run, it would be more economically beneficial for consumers to support a range of companies. This illustrates how capitalism and "voting with your dollar" don't always produce the most desirable outcome, as the vast majority of consumers prioritize the short term over the long term.
The formation of almost universal monopolies like those of Amazon (and google to a lesser extent) is pretty terrifying in its economic implications. I also think it's important to note that while the commerce clause *allows* for intervention or regulation on the part of the federal government (what commerce is more interstate than amazon??) there are so many financial incentives for the government not to intervene that it's honestly rather shocking that the FTC is choosing to intervene now. I think Amazon serves as an excellent case study of why competitive economies are near-impossible to revive in the modern day: there is so much infrastructure for production, shipping, and delivery that they have already built up which is almost impossible for any other company to compete with at any reasonable scale. Everyone can claim to want a more competitive economy and to be against economic monopolies that discourage competition, but the reality is that monopolies are comfortable. Our brains now are wired to prioritize short term comfort and dopamine fixes, and this is mirrored by our support of companies that can provide the most immediate burst of gratification. As long as companies are able to do this, we will prop them up economically, and companies with the existing tools to provide this gratification will succeed while less powerful or infrastructurally broad companies will fall to the way side, making the economy even less competitive.
Thank you for all of these comments! I really resonate with what Agastya said about how these monopolies are quite terrifying in an economic sense. (*from here on out this is my complete personal take and it is very opinionated*). At the end of the blog I wrote about how we are in an age of excessive deregulation and growing corporate power in the US, and I wanted to elaborate a little bit about that in response to Agastya's point about the government not having much incentive to actually act in response to monopolies. I COMPLETELY AGREE. The government in the past few decades has been known to let companies get away with their endeavors on the simple fact that they make a huge load of cash off of those corporations. For example, ALEC is a group of corporations and lawmakers that gather and "suggest" ideas for laws to be legislated. In my opinion, they are 100% paying off lawmakers to do so, and ALEC is where the Florida's "stand your ground" law originated, incentivizing purchases of firearms and ammunition. Coincidentally, Walmart, the biggest retailer in ammunition sales, was the one to "suggest" this bill. This small instance is just a small fraction of what corporate power in the US has grown to, and how congressman and lawmakers really aren't that responsive to monopolies as they get paid off (in my opinion) to not do so. In fact, it is also interesting that the main stream media is actually against the FTC in their decision to sue Amazon. I argue that this is because media is actually more corporate controlled rather than politically controlled. Even "progressive" outlets are firing shots at the FTC, and I believe that this is reflective of the overwhelming corporate
powers in the US. So in essence, huge thanks to Agastya for pointing that out!
While a laissez-fraire system is a key component to developing a free and competitive economy, monopolies such as Amazon through multiple competitive advantages threaten to undercut competitor’s, resulting in a less competitive system. While I disagree with over regulation and hindering corporate expansion, small corporations and startups who are voided of market share due to malicious actions taken upon by a larger competitor results in a lack of overall competition, and therefor a lack of innovation. While there e-commerce platform gets the most attention for this, there AWS division has a large marketshare over cloud computing (though to a lesser extent then its e-commerce). Through investments/acquisitions of smaller firms such as Sumo Logic, new cloud computing startups have struggled to overcome AWS competitive advantage with regards to price and technical performance. That being said, competition from IBM, Alibaba, and Google has prevented AWS from becoming a complete monopoly. Still, with only a few firms competing for control such as AWS, startups and small firms will struggle to break through AWS and others competitive advantage. Competition is a must and regulation carries with it drawbacks. The perfect solution to how we should treat Amazon (as well as other large firms) is still unknown and one which I lack an answer for.
Amazon's overwhelming monopoly serves as a compelling case for federal intervention under the Commerce Clause. Competing sellers find it challenging to surpass Amazon's extensive influence, leaving consumers unlikely to abandon a service that offers superior affordability and convenience. Despite the immediate benefits, supporting a variety of companies would be more economically advantageous in the long run.
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