In 2023, the Federal Trade Commission (FTC) filed an antitrust suit against Amazon, alleging that the company employs “unfair” business practices. The FTC alleged that these practices have driven up online retail prices — notwithstanding the fact that Amazon offers lower prices than competing marketplaces. This claim — like many others made in the agency’s complaint — wilts before elementary economic analysis. Instead, the FTC’s case seems rooted in the notion that “big is bad” — i.e., that Amazon, as the largest online marketplace, deserves punishment for its success, irrespective of the effect on consumers. This dubious notion undergirded the Biden administration’s antitrust agenda, of which there was no more enthusiastic standard-bearer than the FTC.
In the latest news, it seems that the FTC solicited aid in its pursuit of Amazon from the marketplace’s Chinese competition. The agency “has been building its antitrust case…on the strength of testimony from Temu, a Chinese-owned online marketplace that connects customers directly with manufacturers in China and that competes directly with Amazon” explains Daniel J. Gilman of the Internation Center for Law & Economics. The FTC made its overtures to the Chinese company before President Donald Trump took office and appointed a new chair, Andrew Ferguson, displacing the Biden-appointed Lina Khan.
As outlined in its complaint, the FTC is irate that Amazon withholds certain privileges from sellers that list the same goods on other marketplaces at lower prices. Reportedly, the agency approached Temu after third-party Amazon sellers that had listed products more cheaply on the Chinese site discovered those privileges revoked.
The business rational for this policy seems simple — so simple, in fact that the government’s blindness to it suggests the presence of ideological blinders. Amazon’s algorithms are fiercely meritocratic, privileging high product quality — reflected in consumers’ preferences — above all else. Consumers rely on the marketplace to suggest the best products at the best prices; and knowing that better deals cannot be found elsewhere, they benefit from the ability to make economically sensible purchasing decisions from the results of a single search, conserving time that they might otherwise spend hunting around the internet at large. In short, dependability is Amazon’s greatest promise.
Biden-appointed antitrusters have bolstered their cases by leaning on motivated testimony provided by the direct competitors of the targeted company. “Talking to competitors is not itself odd, even if it can be a fraught exercise: competitors are often very good sources of both information and bias,” Gilman writes. “But the consultation with the Chinese firm…seems tailor-made for a low signal-to-noise ratio and input that may be very hard to verify, not to mention at odds with U.S. policy in several areas.” It should not be forgotten that the Biden FTC also worked with foreign regulators to crack down on U.S. businesses that had committed no crime under U.S. law. As he pivots FTC policy, Chair Ferguson should rely on the competitors of the agency quarries with circumspection and the opinions of overseas technocrats not at all.
For its affordability, convenience, and trustworthiness, Amazon remains robustly popular with Americans. One 2023 pollfound that 63 percent of platform users describe themselves as “very satisfied, and 93 percent as “satisfied.” A quarter said they use the planform daily and two thirds weekly. Little wonder: JPMorgan Chase pegged the consumer value of a $139-a-year Prime membership at as much as $1,000. Even in inflationary times, online commerce has wrought lower prices. “According to the Digital Price Index (DPI), which measures prices of goods sold in the digital economy, a good that was $100 in 2014 would cost $84 in 2022, a decrease of 16 percent,” economist Art Laffer reports.
Amazon may be just one star in the cosmos of the digital economy, but it is a gas giant. Its business model has created remarkable — and unduplicable — value. Recognizing this, consumers made clear their own endorsement by giving Amazon their business, and regulators have little business gainsaying their judgement. With both their suffrages and their retail spending, the American public has voted decisively to reject the myopic theories championed by the Biden FTC.
This outgoing gambit by the Biden FTC is reason enough for Chair Ferguson to ensure that antitrust law is no longer used to punish politically disfavored companies.
