As explained recently in Project DisCo, the FTC’s reliance on narrow market definitions ignores how consumers actually shop and the competitive nature of the retail landscape.

FTC’s market definition vs market reality

In its case against Amazon, the FTC restricts the relevant market to that of “online superstores,” asserting that these are “distinct from, and not reasonably interchangeable with, brick-and-mortar stores” (FTC Complaint para. 140). The FTC claims that only Walmart.com, Target.com, and eBay.com compete with Amazon, while other retailers and the physical stores of those companies do not.

Today’s retail space stands in direct contrast to this definition. Firms of all sizes engage in “omnichanneling” – selling products in both digital and physical retail formats. Consumers frequently switch between online and physical stores, with 84% of Amazon Prime members having a “paid membership to at least one brick-and-mortar big box superstore.” The broader retail market, where firms compete aggressively across both digital and physical channels, is far more dynamic than the FTC acknowledges.

— As we have discussed before, research shows that retail firms are blending physical and online offerings to capture more of the consumer market. For example, both Walmart and Target have made substantial investments in digital technologies and have seen success because of it. Furthermore, physical stores compete directly with digital ones – this can be seen by the fact prices charged by brick-and-mortar retail channels tend to correspond closely to those charged online.

The FTC is actively considering harming consumers’ choice and increasing prices  

The FTC’s narrow market definitions could have serious implications. By providing artificially narrow and broader definitions and distorted market realities, the FTC risks “chilling a dynamic and competitive market with misplaced enforcement actions.” 

This would reduce consumer options and increase prices, which are currently kept down because of the robust competition between both online and physical retail firms. Disputing Amazon’s offerings by arbitrarily defining the market will diminish competition in the retail space and leave consumers with higher prices and lighter wallets. These are exact outcomes the FTC is supposed to prevent. 

— As Former SEC chair Jay Clayton articulated, the view that you must “hurt the corporation” to help consumers is “absurd.” Competitive companies are what drives down prices and helps consumers. 

The court must carefully evaluate the FTC’s market definitions and use a fact-based analysis of the retail sector to avoid harming competition and consumers.