What’s At Stake: The FTC’s Planned Lawsuit To Break Amazon Prime 2-Day Shipping
On Thursday, it was reported that within the next couple of weeks, the FTC plans a “major” antitrust lawsuit against Amazon focused on the logistics services Amazon uses to ship Prime purchases to Americans.
With the lawsuit seemingly on its way, here is a quick preview of what’s at stake for consumers before a formal complaint is filed:
The FTC Case Could Break Up Prime, Which Americans Trust And Love
This case is reminiscent of the anti-tech legislative push for AICOA, which has already been rejected in Congress. The bill has no political momentum this Congress losing five cosponsors—partially because it was broadly unpopular when voters understood what the bill would mean for Amazon Prime.
— Amazon stated that AICOA would “substantially degrade the value and quality of Prime, as many of the products sold in our store today with Prime’s one- to two-day delivery promise would be undeliverable in that time frame.”
Americans have consistently shown they love Amazon and Prime. In a recent Morning Consult list of most trusted brands, Amazon ranked 3rd among the most trusted brands in the U.S. and 1st among tech brands.
— According to the recent Harvard/CAPS opinion poll, Amazon is the most favored institution in America, even slightly edging out the US military.
— In the Axios Harris Poll, which looks at the 100 most visible companies among American consumers, Amazon is No. 8, marking its 15th consecutive Top 10 ranking.
— In the 2023 Boston Consulting Group’s annual Most Innovative Companies report, Amazon ranks Number 3.
Chamber of Progress Tech Policy Director K.J. Bagchi adds that Amazon’s logistics and fast delivery are “one in the same.” “You can’t separate Amazon’s logistics services and Amazon’s guarantee of fast delivery for Prime subscribers – they’re one in the same. A lawsuit forcing the breakup of Amazon’s two-day delivery would be a disservice to consumers, who subscribe to Prime for quick delivery, and to online sellers, who rely on fast shipping guarantees to bring in more orders. The result would be disruptive to the entire online marketplace that both consumers and sellers benefit from.”
— Bagchi says: “Polling released in May by Chamber of Progress finds a majority (59%) of Amazon Prime members think Amazon should be able to require that sellers ship Prime products from Amazon warehouses in order to maintain the two-day delivery window, even if sellers would prefer to ship it themselves. Two-thirds (66%) of voters use Amazon at least on a weekly basis or more, and a supermajority (91%) of Amazon users are satisfied with their Amazon shopping experience.”
CCIA’s Don’t Break What Works initiative explained how the FTC is engaged in political activity to target a company Americans love. “This expected move by the FTC is more evidence that the Commission is pursuing an agenda that in fact runs counter to its stated mission, which is to protect American consumers and not take away products that they love.”
— Don’t Break What Works adds: “The record shows that Chair Khan is personally driven to break up Amazon, and rather than consider how consumers are impacted, the FTC will engage in blatant political and ideological industrial policy through a lawsuit against one of America’s most popular companies. American consumers love Prime, and it’s hard to see how a move to break it and ultimately make it more difficult to access affordable goods is in the best interest of the American consumer.”
The Progressive Policy Institute adds that the lawsuit runs contrary to the interests of consumers and Amazon’s investments in America. “The FTC has abandoned the principle of prioritizing the good of consumers, instead attacking market leaders despite no clear demonstration of anticompetitive practices.”
— They add: “It is especially disheartening to see repeated efforts by the FTC to undermine such a fruitful sector of the American economy. The retail/ecommerce sector has contributed 1.4 million full-time-equivalent jobs to the U.S. labor market since 2014 and, according to estimates from PPI, Amazon invested $46.7 billion in the United States in 2021.“
Former FTC General Counsel Alden Abbott explains that the lawsuit could destroy “hundreds of billions of dollars” in consumer surplus. “A successful divestiture would destroy Amazon plus, destroying hundreds of billions of dollars (just a guestimate) in consumer’s surplus”
The FTC Case Could Break The Amazon Marketplace, Costing Small Business Access To A Valued Store
Bloomberg notes that the FTC could seek “structural” action by forcing a divestiture of Amazon’s logistics service and explains that “The expected allegations are similar to a 2020 report from a US House subcommittee — which counted Khan as a staff member.”
— At the time, Amazon stated the House report could result in “forcing third-party sellers out” and that the rules would “segregate sellers into separate, less visible stores.”
— This would occur because the rules proposed by the House Report and potentially the divestiture considered by the FTC’s case wouldn’t apply if the company didn’t operate a marketplace with sellers.
CCIA President Matt Schruers notes that Amazon “enables small and medium-sized sellers to reach customers worldwide.” “It’s difficult to understand why at a time when Americans are frustrated with rising prices, the FTC is prioritizing a case against a service that consumers love, which enables small and medium-sized sellers to reach customers worldwide.”
Graham Dufault of the App Association adds that small businesses would feel detrimental effects from the breakup of Prime. “Small biz rely more heavily than their larger competitors on integrated svcs provided by online marketplaces. If the FTC declares svcs like Prime illegal, @actonline members will pay more for less effective distribution & inconvenienced consumers.”
— President Morgan Reed adds: “Dismantling service stacks like Prime is bad for consumers and especially small companies who benefit. This isn’t a win for anyone.”