For the Federal Trade Commission (FTC) to take a drastic action like launching a landmark lawsuit demanding that a major U.S. business sell off some of its assets, you would hope that the agency would have an ironclad case, complete with well-documented violations of the law and clear harm to consumers. Unfortunately, the FTC’s suit against Amazon is just more of what consumers have come to expect from FTC chair Lina Khan — a hollow crusade underpinned by little more than bafflement that others do not find “big equals bad” to be a convincing legal theory.
The FTC’s lawsuit accuses Amazon of being a “monopolist” that uses its market power to hike prices on consumers. That’s a curious assertion given that as recently as 2017 Khan was complaining that Amazon’s crime was that its prices were too low, offering prices that were impossible for competitors to match. To Khan, apparently, Amazon is a Schrödinger's monopoly — simultaneously using its supposed monopolistic power to subject customers to prices that are both too low and too high.
Other charges in the FTC complaint are similarly perplexing. For example, the FTC claims that Amazon is gatekeeping access to its coveted “Prime” label by forcing third-party sellers to use Amazon’s fulfillment service to receive it. But while that was true at one point, it no longer is — third-party sellers can currently use other fulfillment and logistics services provided they are able to deliver goods on time.
Yet another argument that the FTC makes is that Amazon is improperly favoring advertisers by allowing “sponsored” results to appear before the top results. Setting aside how this is common practice in brick-and-mortar stores as well, this complaint infantilizes consumers by pretending that they are unable to scroll past two or three clearly marked “sponsored” results if they don’t want those products.
But while many of the FTC’s accusations are specious, they reflect a growing tendency in Khan’s FTC to lower the bar for what constitutes a “monopoly” to the point that few large businesses can limbo under it. It’s just the latest example of a newly politicized FTC fighting battles “on behalf of consumers” that consumers have never asked them to fight.
Amazon is undoubtedly a huge player in the online retail marketplace, with a market share of greater than a third of the U.S. e-retail market. But just because Amazon is large does not mean that it lacks competition. Established brick-and-mortar retailers like Walmart, Costco, and Target have all begun significant online retail operations, while eBay and Etsy remain strong in the purely-online marketplace. A consumer could, if they wanted, easily forswear Amazon and still have plenty of feasible options.
What’s more, Amazon isn’t just competing against online retailers. Ultimately, online platforms are just a different means of buying the goods offered by brick-and-mortar retailers. Even if Amazon was the only company offering retail goods online, which is far from the case, it would still have to offer goods at a price that was competitive enough to prevent consumers from simply driving to a store.
The FTC’s complaint asks all the wrong questions. While the FTC is focusing its attention on questions like “is Amazon too big?” or “how large is Amazon’s market share?,” these questions are irrelevant until a far more important question is answered: “are consumers being harmed by Amazon’s practices?”
Consumers who continue to shop at Amazon rather than at the many other retail options available to them are answering that question with their dollars. Consumers aren’t crying out to be saved from Amazon because they don’t need to be.
Rather than promoting competition, the Khan-led FTC’s habit of attacking the most successful businesses purely for being successful only hurts competition and consumers. This is yet another case that should only serve to discredit Khan’s “size-based” rather than “consumer-based” theory of antitrust action.
