FTC’s case is “absurd,” “mistaken,” and “out of touch,” say experts
After the FTC announced its lawsuit against Amazon this week, experts weighed in to explain the many issues with the FTC’s case and the threats it poses to the vitality of small businesses and consumers across America.
Three key points to consider are:
– Attacking widely used pricing policies at Amazon will harm consumers by raising prices
– The FTC’s suit will break the marketplace for third-party sellers by dismantling Amazon’s logistics and fulfillment services.
– The FTC’s suit ignores the harm it poses to the American economy and their argument against Amazon is unfounded
– The FTC’s suit disregards the purpose of antitrust enforcement and prioritizes Amazon’s rivals, rather than encouraging competition.
The FTC’s case will harm consumers and raise prices.
It was with these crucial points in mind that the recent case brought forward by the D.C. attorney general was thrown out. Experts have continued to speak out in the wake of the FTC’s suit against Amazon, emphasizing the higher prices consumers will face if the FTC gets their way.
– Nearly every other large retailer employs similar strategies as Amazon, CCIA President Matt Schruers notes in a statement against the FTC’s pursuit. He articulates that, “in an environment of ever-rising prices and persistent product scarcity, the FTC is bringing a case against a wildly popular brand best known for getting low-priced goods to your doorstep, by tomorrow. This case is out of touch with the concerns of everyday consumers.”
– The FTC’s case against Amazon is “the latest in a long series of egregious overreach, and should be rejected like countless other cases brought forward by this FTC,” says Scott Brown, Chair of the Competitiveness Coalition. “From lingering inflation, higher borrowing costs and souring views on the labor market, almost every economic metric is moving in the wrong direction, and the Biden Administration is now trying to take away a service relied on by 180 million Americans. Since her time at Yale Law school, FTC Chair Lina Khan has made Amazon her white whale, and today she got her wish. Her stunt is the latest in a long series of egregious overreach, and should be rejected like countless other cases brought forward by this FTC. If it isn’t, the American consumer is in for a world of pain. This is Bidenomics at its finest.”
– The FTC’s attempt to unravel Amazon’s pricing policies is just as flawed as the D.C. AG’s failed arguments on the same issue, describes Project DisCo. “The FTC’s approach to these policies is just as mistaken as its predecessors. Amazon’s policies are not only a common business practice in the retail industry, but they are procompetitive as they incentivize robust competition between sellers and provide consumers with low prices for attractive offerings. Amazon shows the most competitive prices to consumers, giving priority to the lowest price over overcharged products. This benefits consumers and is common practice in retail.”
– “The FTC’s antitrust case against Amazon will hurt consumers, small businesses,” writes Patrice Onuwuka of Independent Women’s Forum. “Regular people care about how government policies will impact them. Most simply, this FTC complaint and recommendations could lead to at least three outcomes: 1. Breaking Amazon Prime – Amazon Prime is a popular and beloved service that is enjoyed by one of their most favorite benefits. A whopping 84.6% of users polled pointed to the free and fast delivery as the platform’s best feature. This lawsuit could force the end of the fulfillment service that makes it possible and break Amazon Prime. 2. Higher prices – It could become more difficult to get a wide variety of affordable products. 3. Chinese companies benefit while U.S. companies lose – Chinese companies like Temu and Shein compete by offering low prices on goods but at slower shipping rates. They don’t have the same regulatory rules that American companies do. If companies like Amazon can’t offer fast and free shipping (see point #1), they lose their competitive edge and their Chinese competitors win.”
The FTC’s suit will break the marketplace for third-party sellers by dismantling Amazon’s logistics and fulfillment services.
– “The company is huge, but depending on how you measure its place in the vastness of American retail, its presence isn’t necessarily overwhelming, let alone clearly illegally monopolistic,” writes NYT opinion columnist Farhed Manjoo of the FTC’s flawed case against Amazon. “The complaint zeros in on three other online superstores — the e-commerce divisions of Walmart and Target, and eBay. (The other relevant market, “online marketplace services,” refers to the money Amazon makes from outside merchants who sell to its customers; here the complaint mainly focuses on a comparison of Amazon to Walmart and eBay.) And it’s true, if you narrow your focus to include only retailers that satisfy all these criteria, Amazon wallops the competition. “Documents and data, both from Amazon and industry analysts, confirm that Amazon’s share of the overall value of goods sold by online superstores is well above 60 percent — and rising,” the complaint says. I find this a little too cute. Amazon all but invented the notion of an online store that sells everything, and it’s been building out that idea for more than two decades; it’s hardly surprising that it dominates the category it pretty much brought into being.”
– The “transformative role Amazon has played in driving down costs for consumers and creating good-paying jobs,” was emphasized in a joint statement from the Progressive Policy Institute (PPI)’s Will Marshall and Michael Mandel. “[T]hese fulfillment centers have become a central hub of job growth in the great majority of states. Nationally, the warehousing industry (which includes most Amazon fulfillment centers) and the local delivery industry added more than 900,000 jobs between 2019 and 2022, with pay averaging $49,000 annually. Moreover, job gains in e-commerce substantially exceeded job losses in brick-and-mortar retail, both nationally and in most states.”
– The FTC’s lawsuit does not take into account the perspectives of third-party sellers on Amazon, says the Connected Commerce Council (3C): “Despite its drawn-out scrutiny of the company, the FTC clearly has not consulted with Amazon sellers to understand their experience in the store. Amazon does not require sellers to use Fulfillment by Amazon (FBA), and small sellers tell us that they frequently win the Featured Offer (formerly known as the ‘Buy Box’) regardless of whether they buy advertising or use FBA services, including when they are competing directly against products sold by Amazon.”
– The FTC’s case mischaracterizes Amazon’s practices and fulfillment services, writes Lauren Silva Laughlin of Reuters. She asserts that even with the FTC’s description of Amazon’s behaviors, “it simply isn’t feasible to sustainably dominate retailing. At the very least, the e-commerce giant hasn’t been able to convince investors that it is cementing its dominance. Investors might be onto something that Khan has missed.”
– The FTC’s demands related to fulfillment are “absurd,” writes Ben Thompson of Stratechery. “It seems eminently reasonable to me that Amazon predicate[s] inclusion in a program defined by a shipping guarantee on letting Amazon deliver your products. Prime was a massive risk at the time, dwarfed only by the many billions of dollars that Amazon has spent since then building out its logistics network. I see no basis on which a government regulator ought to demand that Amazon give out access to the Prime label and bear the reputation risk for 3rd-party delivery services that did not take those risks or make those investments. It’s absurd.”
– The App Association’s President Morgan Reed released a statement on the FTC action against Amazon: “The smallest companies, including our members, benefit the most from today’s digital marketplaces. By taking advantage of bundled services offered through online marketplaces such as reduced overhead costs, immediate global distribution, and most importantly, a fast track to consumer trust, our members can compete in a global marketplace.
As experts grapple with the lasting effects this case will have on third-party sellers who flourish under Amazon’s current logistics system and network, sellers fear for their business’ futures and spoke out in the wake of the FTC’s announcement.
– Jason Hince, believes that if the FTC is successful in their suit, his “Buffalo fat lip balm business will cease to exist.” Hince is the founder of Big Crazy Buffalo, a skincare company that has found success on Amazon, and he worries about the FTC’s desire to block Amazon’s fulfillment and advertising services. Hince and notes that, as a seller and small business, “If you’re gonna spend $1 advertising, you do it with Amazon because that’s where the consumers are.”
The FTC’s suit ignores the harm it poses to the American economy and their argument against Amazon is unfounded
Everyday Americans are still reeling from the consequences of inflation, and if the FTC gets their way, Amazon will no longer be a service families can depend on for affordable goods.
– “Chair Kahn has taken unprecedented steps to expand the role and authority of her agency,” writes former Member of Congress and former Head of the Bureau of Competition at the FTC, Tom Campbell: “Khan’s professed goal is to expand the FTC beyond the precedent of protecting victims from fraud, monopolistic prices, and other direct consumer harms. Now her vision is focused on the FTC becoming a government agency set on restructuring American industry. It’s not about protecting consumers from harm, but about exerting control over anything that can be called big business.“
– The FTC “is ignoring massive inflation and economic struggle weighing on Americans,” explains Carl Szabo, Vice President & General Counsel, at NetChoice. He describes that the FTC wants “to rip apart American companies that are providing affordable goods and services to consumers during this time.”
– “At a time when families need help, it’s really surprising that the FTC would try to break up a service that nearly half of all Americans use to make their lives easier,” says Adam Kovacevich, CEO of the Chamber of Progress. He notes that “The FTC is targeting practices that Amazon’s competitors don’t like competing against – like two-day shipping and low prices for consumers — but which American families love. Breaking up Amazon Prime would only raise prices for consumers, threaten free shipping, and make it harder for families to get affordable goods.”
The FTC’s suit disregards the purpose of antitrust enforcement and prioritizes Amazon’s rivals, rather than encouraging competition.
– “The FTC is seeking to hold back an industry leader until prospective competitors can develop adequate scale to more aggressively contest the ‘online superstores market,'” says ProjectDisco’s Matt Schruers of the FTC prioritizing competitors over competition. “More broadly, there’s no stated consumer harm here. In many ways, the FTC’s desire to artificially designate Amazon as a monopoly by manufacturing an illusory “market” where it only competes with Walmart and Target undermines its entire case, as those competitors – and others who could achieve that scale – are the only companies that could benefit from the FTCs suit. This case is about competitors, not competition — something regulators and courts have long stated should not be the goal of U.S. antitrust policy. As a result, only a handful of companies, and not consumers, stand to benefit from it.”
– The Small Business & Entrepreneurship (SBE) Council calls the FTC’s market definition in the Amazon case “absurd.” “[A]ntitrust regulators have resorted to creating distortive, extremely narrow, unrelated-to-economic-reality market definitions to claim that a business is a monopoly. That is, exclude as much of the actual market as possible to artificially jack up the targeted company’s market share, and then move to hyper-regulate that company as a so-called monopoly.”
– “It will be difficult for the FTC and the states to prove Amazon’s monopoly power and to discredit the procompetitive justifications for the challenged conduct. Retail competition is robust and the proposed narrow markets are ripe for criticism,” explains Geoffrey Mane of the International Center for Law and Economics. “This alleged market is so narrowly drawn that it appears to include just Amazon… and the online stores offered by Walmart and Target. This excludes single-brand online retailers, product-category-specific online retailers, and all brick-and-mortar stores. It beggars belief that these rivals don’t exert competitive constraints on Amazon. After all, no consumers shop exclusively online, and price-comparison services like Google Shopping facilitate shopping across all online outlets.”
– The FTC’s suit makes misguided claims about the state of retail competitiveness, warns Ben Thompson of Stratechery. “I fail, though, to see what exactly is anticompetitive in this story. What I see, much like the Prime program above, is massive investment by Amazon to create an entire category that dramatically increased the amount of commerce, and it’s unclear to me why they can’t conduct normal business activity to ensure they have competitive prices”
– Dan Gallagher of the Wall Street Journal notes that competition in e-commerce is flourishing. This is something the FTC should be celebrating, not punishing. “Competition is also growing of late instead of diminishing. Walmart’s U.S. e-commerce revenue has averaged 39% annual growth over the last four years and is expected to hit nearly $62 billion in the fiscal year ending January, according to consensus estimates from Visible Alpha. Meanwhile, Shopify has more than tripled its revenue over just the past three years precisely by powering e-commerce sales for a variety of large and small merchants looking for an alternative to selling on Amazon.”
– “Now the FTC accuses Amazon of hurting consumers with higher prices, mainly through punishing its marketplace sellers if they offer lower discounts anywhere else,” writes Wall Street Journal reporter Dave Michaels. “Today [Amazon] faces competition from sellers that weren’t major e-commerce rivals in 2017. Walmart’s share of online goods sales has grown in recent years like Amazon’s has, according to the FTC’s lawsuit. Shopping platforms Temu and Shein, which have Chinese roots, are grabbing market share from Amazon by offering lower-priced fashion and other goods.”
– The Wall Street Journal Editorial Board argues that ‘Lina Khan has a weak case against Amazon.’ “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.”