Five years after Lina Khan declared Amazon to be a monopoly in the Yale Law Journal, the Chairman of the Federal Trade Commission has finally got her wish. Last week, the FTC unveiled its much-anticipated case against Amazon, claiming that the e-commerce giant has abused its market position to stifle competition and increase prices. But, as with other recent cases against Big Tech, Khan’s ideological crusade against bigness has required the Commission under her direction to bend over backwards and concoct market definitions that defy reason.
Market definitions stand at the heart of antitrust litigation, acting as the lens through which antitrust enforcers discern competitive landscapes. These definitions determine the boundaries of competition and the relevant players; legally dictating who competes with whom. It can be difficult to draw a bright line between markets, especially for online industries, where traditional boundaries often blur. While the nature of online industries requires antitrust enforcers to define the new boundaries for novel, digital markets, narrow or static definitions have led to misplaced interventions, potentially stifling innovation and entrepreneurship.
We first saw this phenomenon two years ago with the FTC’s case against Facebook, which alleged that Facebook had used anticompetitive means to maintain a social media monopoly. But the FTC could not reasonably assert that Facebook had a monopoly over the whole of the incredibly diverse market for social media. Instead, it claimed Facebook held a monopoly over the market for “personal social networking services.”
This specific classification disregards the vast, interconnected ecosystem of online communication platforms, from professional networking sites such as LinkedIn to multimedia sharing platforms such as TikTok and YouTube. To isolate Facebook as a monopolistic entity in this narrowly defined "personal" realm overlooks its true competitors and the dynamic nature of digital competition. This selective view is not only misguided but also denies the fluidity with which users transition between platforms based on preference, functionality, and content.
Now, in the case of Amazon, the FTC has once again concocted an unreasonably narrow market definition in order to align its “big is bad” philosophy with the stringency of antitrust laws. Instead of claiming Amazon operates in the broad market for retail e-commerce—of which Amazon has approximately 40 percent market share, well below the threshold for antitrust action—the FTC claims that Amazon holds a virtual monopoly over the markets for “online superstores” and “online marketplace services.”
Distinct from other online retailers, the FTC’s complaint against Amazon defines “online superstores” as e-commerce sites that offer “a broad swath of goods” and offer tools to help users quickly search and find a variety of items. The FTC also defines “online marketplace services” as businesses that “facilitate sellers making online sales to U.S. shoppers without having to directly operate an online store,” distinct from other online vendor services, which allow third-parties to manage their own storefronts.
Both of these definitions are so narrow that they fail to accurately portray the reality of e-commerce. Amazon does, in fact, compete with many other businesses not covered under the FTC’s narrow definition While Amazon does provide a unique service to consumers, it competes with other e-commerce sites like Wayfair for consumers’ business. Similarly, while Amazon provides a unique service to third-party sellers, it competes with other platforms such as Shopify and Etsy that provide other sales services for third-parties.
While market definitions are often the most litigated piece of an antitrust case—and these market definitions are sure to be challenged in court—arbitrarily defining markets to fit ideology risks penalizing successful companies not for anti-competitive behaviors but for their sheer success and adaptability.
Amazon has undoubtedly engaged in some questionable corporate tactics, but such a narrow viewpoint of digital markets as the FTC contends fails to capture the fluidity of digital competition and penalizes success rather than genuine anti-competitive behavior. Instead of ensuring a level playing field, these interventions might deter future innovators, fearing they might become victims of their success. For a nation that prides itself on fostering innovation, it's imperative to ensure that regulatory oversight doesn't become an inadvertent shackle.