Federal Trade Commission (FTC) Chair Lina Khan shot to notoriety with a 2017 article in The Yale Law Journal, “Amazon’s Antitrust Paradox,” where she charged that vigorous antitrust action should be taken against the company. She asserted this while acknowledging Amazon had low profits, was continually reinvesting in its businesses, and providing low-priced, i.e., competitively priced, items to its customers.
On September 26, part of Chair Khan’s grand, career-defining vision was realized when the FTC announced it was suing Amazon for “illegally maintaining monopoly power.”
Her article and its formative role in the FTC’s lawsuit are highly problematic for two reasons.
First, there are major ethical issues. No one being considered for or joining the FTC as a commissioner should be able to push a preconceived agenda against an individual company.
Second, there are numerous fundamental errors and omissions in the article about the public impact Amazon is having, including the five below.
Misplaced concern about the percentage of online sales. In her article, Ms. Khan said, “By some estimates, Amazon now captures 46% of online shopping, with its share growing faster than the sector as a whole.” The idea then as now that Amazon was destined to control a higher percentage of online commerce is wrong.
Amazon’s percentage of U.S. online sales has declined and is now 38 percent. The company has numerous domestic and international competitors, many of which galvanized their online sales practices during the pandemic. It was not pre-ordained in 2017 that Amazon would have higher and higher shares of online shopping. Nor is it today.
Vast number of businesses. Ms. Khan acknowledges that Amazon is much more than a retailer, saying, “It is a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading provider of cloud server space and computing power.”
She then argues that Amazon controls or seeks to control the “structure and dynamics” of markets to establish “a dominant structural role in the market.” The notion that Amazon can somehow control the supply and distribution channels for various business lines misses a basic point. The U.S. economy offers a wide variety of competitive options for Amazon’s many and varied businesses. Relative to the U.S. economy, Amazon is tiny.
International dynamics. A glaring omission is Ms. Khan’s failure to discuss that Amazon is a global company and that it faces vast international competition. In 2022, 23 percent of Amazon’s sales, or $118.0 billion, were international. Amazon must not only compete against Alibaba and other foreign-based e-commerce companies. It must continually innovate and provide world-class, cutting-edge services and products or face economic peril.
Rise in independent sellers. In 2022, independent sellers, most of which are small and medium-sized businesses, accounted for 60 percent of Amazon’s retail sales. This is a significant increase from 50 percent of sales in 2017 and shows that independent businesses continue to thrive five years after the dire warnings of Ms. Khan.
Changing the goalposts for what is antitrust behavior. Ms. Khan laments in her article that for antitrust enforcement, “Economic factors that are easier to measure – such as impacts on price, output, or productive efficiency in narrowly defined markets – have become disproportionately important.”
Yet if there are no clear, tangible effects of alleged antitrust behavior there are likely no victims and, thus, no actual harm. Between the lines of what Ms. Khan said in 2017 and the FTC’s September lawsuit is the brazen assertion that it takes the elite with unique training and credentials to identify and say when economic harm has happened and then take radical legal action.
This amounts to an economic elitism that gives carte blanche to bureaucrats to harass and manipulate American companies. It is a Trojan Horse for government command and control over the U.S. economy. As such, the courts should dismiss the Amazon case, and Ms. Khan’s article should be relegated to academic discussion, if that.
