The Federal Trade Commission’s (FTC) antitrust case against Amazon, filed on Sept. 26, is in many ways a departure from accepted antitrust case law and raises a number of questions such as why Amazon is the target and what FTC Chair Lina Khan seeks to achieve with her suit.
While federal agencies have brought antitrust cases against companies such as Microsoft, Google, and other corporations that they feel have become too dominant, courts have typically followed what’s called the “consumer welfare standard,” or the extent to which consumers are harmed, when ruling on these cases.
The FTC is alleging that “Amazon’s ongoing pattern of illegal conduct blocks competition, allowing it to wield monopoly power to inflate prices, degrade quality, and stifle innovation for consumers and businesses.”
“Given Amazon’s monopolies, consumers are forced to pay higher prices for goods sold both on and off Amazon,” FTC spokesperson Victoria Graham told The Epoch Times.
The FTC suit seeks to stop Amazon from “engaging in its unlawful conduct” and to impose fines and other penalties “to restore fair competition and remedy the harm to competition caused by Amazon’s violations of the law.”
However, many analysts are questioning the logic of this case.
“It’s a strange neither-fish-nor-fowl concoction,” Robert Bork Jr., president of the Antitrust Education Project, told The Epoch Times. “In her famous college paper, [Ms.] Khan accused Amazon of using low prices in a predatory way.”
Mr. Bork was referring to Ms. Khan’s paper that argued that Amazon was too cutthroat in reducing prices as a means to eliminate competitors.
“Now, she is accusing Amazon of forbidding sellers from selling products on other platforms with prices that undercut those of Amazon,” he said.
Intentions for US Antitrust Rules
Ms. Khan’s pursuit of Amazon reflects her intention to redefine U.S. antitrust law.In her 2017 paper, published in The Yale Law Journal, she stated that antitrust law is too focused on consumer welfare and that other standards should be applied to justify state action against companies. These new criteria include “our interests as workers, producers, entrepreneurs, and citizens.”
This sounds similar in many ways to the concept of “stakeholder capitalism,” which sits at the heart of the progressive environmental, social, and governance (ESG) movement, and according to which companies must serve wider social and political goals rather than simply generating profits and value for shareholders. The issue in both cases is that things such as profits and consumer prices are easier to quantify and measure, while more nebulous political, social, and environmental goals are subject to interpretation and manipulation.
“If she can somehow beat a company that is utterly consumer-centric and with the lowest prices, on antitrust grounds, she will have enacted a new progressive paradigm in antitrust in which anyone can be sued for anything,” Mr. Bork said.
If the FTC prevails, “consumers should see a more competitive online superstore market which in turn leads to lower prices,” Ms. Graham said.
However, some would argue that consumers may be the ultimate losers. The suit would force significant changes to the Amazon Prime service, which currently has 167 million U.S. members.
The FTC charges that Amazon uses data from other retailers on its site to boost its own brands; that it leverages its Amazon Prime service to box out competitors; and that it penalizes retailers who offer their products at lower prices on other sites. While the suit does give a nod to consumers by alleging that Amazon is driving up prices by limiting price discounts on other sites, that argument is largely an effort to help other retailers.
The suit alleges that Amazon has made it too difficult for other retailers to compete. What the FTC is up against, however, is that so many consumers apparently feel they benefit from Amazon’s innovations in pricing, product offering, ease of transacting, and speed of delivery.
According to a 2021 survey of Amazon customers in the Amazon Consumer Behavior Report, 72 percent of the 2,000 consumers surveyed said they belong to Amazon Prime, a subscription service that includes free shipping and access to streaming of music, movies, and television shows. In addition, as online shopping increases even beyond levels at the height of the COVID-19 pandemic, consumer loyalty to Amazon is at an all-time high.
FTC May Be Playing a Losing Hand
Many analysts believe that the FTC will ultimately lose in court.The horizontal merger guidelines written by the Treasury Department and the FTC in 2010 establish the consumer welfare standard as the essential guideline in determining whether companies are acting in a monopolistic way. It states: “A merger enhances market power if it is likely to encourage one or more firms to raise prices, reduce output, diminish innovation, or otherwise harm customers.”
This document signaled a consensus acceptance of arguments made by Robert Bork, judge and legal scholar (and father of the aforementioned Robert Bork Jr.) in his book “The Antitrust Paradox: A Policy at War With Itself.” In this and other writings, he argued that consumer welfare should be the standard for antitrust law and litigation.
A 2002 report by the American Action Forum (AAF) states that the consumer welfare standard has been the foundation of antitrust policy for the past 40 years because it “is measurable using economic analysis and empirical evidence, facilitating a reliable and objective application of antitrust law.”
“Commandeering antitrust policy as a tool to solve other societal ills including depressed employee wages and harm to competitors risks creating uncertainty, stifling innovation, and slowing economic growth,” the AAF states.
In a New York post op-ed, Geoffrey Manne and Dirk Auer from the International Center for Law & Economics argue that Congress and America’s courts have repeatedly rejected Ms. Khan’s broader view of what antitrust law should entail.
“Legislative efforts to change antitrust law to comport with the vision Khan and her ideological allies put forward have failed to gain any meaningful momentum,” the authors argued. Meanwhile, the U.S. Supreme Court has repeatedly upheld the consumer welfare standard as the basis of antitrust law, they stated.
Another curious element of the FTC’s case against Amazon is the extent to which it quickly became politicized. Attorneys general from 17 states joined the FTC in bringing this case, but virtually all of them were from left-leaning states. The co-plaintiffs include Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.
Is Amazon Causing the Greatest Harm to Consumers?
According to Ms. Graham, the FTC chose to pursue Amazon because “the harm to consumers is apparent as detailed in the complaint.”However, some question why the FTC would take on Amazon instead of, for example, the meat-packing oligopoly that controls about 85 percent of beef processing and has vertically integrated to establish even more dominance over the pork and poultry industries. Cattle ranchers have charged that, as meat prices escalated during and after the COVID-19 pandemic, those price increases benefitted meat packers and weren’t passed on to farmers.
That’s left Americans utterly dependent on a handful of companies for much of their food.
To prevent situations like this, in addition to antitrust law, the 1921 Packers and Stockyards Act1 was specifically written “to assure fair competition and fair trade practices, to safeguard farmers and ranchers ... to protect consumers ... and to protect members of the livestock, meat, and poultry industries from unfair, deceptive, unjustly discriminatory and monopolistic practices,” according to the U.S. Department of Agriculture.
The FTC and the Justice Department have taken no antitrust action in that industry.
There’s also the FTC’s willingness to ignore corporate collusion in various net-zero clubs sponsored by the United Nation’s Glasgow Financial Alliance for Net Zero, which include the Net Zero Banking Alliance, the Net Zero Insurance Alliance, the Net Zero Asset Managers initiative, the Net Zero Asset Owners Alliance, and the Net Zero Financial Service Providers Alliance.
“The biggest question in my mind is why the FTC doesn’t go after the ESG movement in which large and powerful financial institutions, activist NGOs [nongovernmental organizations], and the proxy advisory duopoly are publicly promoting the restraint of trade in the energy sector, which last time I checked is a legal business,” the younger Mr. Bork said.
Several of these activist climate clubs, which are aligned with the ESG industry, have been flagged by conservative state attorneys general as potentially violating federal and state antitrust laws.
Far from joining state efforts to investigate antitrust behavior among Wall Street banks and money managers, the Biden administration has encouraged them to unite behind the global warming agenda. On Sept. 19, the U.S. Treasury Department announced its “Principles for Net-Zero Financing and Investment,” which pushes banks, insurance companies, and asset managers to unite behind UN climate goals.
These principles state that “Treasury and the Biden-Harris administration welcome robust net-zero commitments made by financial institutions. Treasury hopes financial institutions will use the Principles to support the implementation of their commitments.”
