Split up Amazon, Prime and AWS? If Biden's FTC breaks up Bezos' company, consumers lose.
Lina Khan is not tired of losing. Fresh off her latest defeat in court in pursuit of antitrust enforcement against Microsoft, President Joe Biden’s Federal Trade Commission chair is reportedly ready to launch the fight of her career to break up Amazon.
Since Khan began work in 2021, the FTC has put Amazon on constant defense, but it has all been a prelude to her goal of forcing the company to split.
To consumers, the entities of Amazon, Amazon Prime and Amazon Web Services are ubiquitous and synonymous. The overall business includes online retail, physical stores, subscription services, advertising services, cloud computing, logistics and third-party seller services. Each component supports and serves the others, resulting in incredible efficiency, lower operating costs and, in turn, steep price cuts for consumers.
It’s no wonder that Amazon enjoys almost as high of public approval and trust as the U.S. military, 72% favorable according to a 2021 Harvard-Harris poll. That's a shocking statistic given the broader trend of institutional distrust in this era.
Biden’s FTC thinks consumers need to take one for the team when it comes to sacrificing their savings, in both time and money, that Amazon creates.
Khan’s vision of what constitutes a monopoly is not what most people, or the law, recognize. Her antitrust framework, denounced by former Sen. Orrin Hatch, R-Utah, as “hipster antitrust,” considers predatory pricing, consumer rip-offs and a lack of competition as an old-fashioned way to think about antitrust.
It’s all well summarized in a 2018 profile in The Atlantic, where Lina Khan observes with disdain the lower avocado prices in an Amazon-owned Whole Foods. Consumers and their revealed preferences are the problem the FTC really seeks to solve in their coming attack on Amazon.
Amazon has become a part of the American landscape
To most Americans, Amazon is no longer just a company; it’s part of the scenery where they reside. Amazon vans are in each neighborhood, and a box emblazoned with the Prime logo could be due on your own doorstep any minute now. This is what happens when you have 200 million consumers worldwide signed up for a service that makes their lives easier.
Maybe you’re someone who resents the world that I’ve described; maybe you see Amazon’s omnipresence as dystopian. You’re entitled to that opinion, but fighting on those terms is not what the FTC was created to do.
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The FTC of today is engaged in a war on “the curse of bigness,” a sentiment expressed by Supreme Court Justice Louis Brandeis in 1934, and it is true that Amazon’s business is very big.
Even if you’re not a loyal Amazon customer, though, we all know someone who has found work with the company, upgraded to a better TV at a better price on Prime Day, or used Amazon’s web services that power millions of websites for businesses worldwide.
Khan’s lawyers at the FTC say Amazon “forces” merchants to use its distribution services and requires them to lower their prices to benefit from a coveted spot within the Amazon marketplace. They’ll have to prove it and prove that merchants have no other avenue by which to do business if not for Amazon’s terms.
Some of Amazon’s practices may appear heavy-handed or self-preferential to regulators, but they don’t constitute anything remotely close to consumer harm, the rubric by which antitrust doctrine has been followed for a century. There are no cartels, no robber barons and no secret deals that raise prices for consumers. If anything, Amazon’s incentive system for vendors on its platform seems purposefully designed to deliver on founder Jeff Bezos’ self-described "obsession” with consumers.
We’re all the winners here. Why can’t Khan and the FTC let it go?
Federal Trade Commission should focus on Amazon's real problems, not its popularity with consumers
Let’s give her agency some credit, however, as there are relevant and concerning issues that the FTC has addressed in cases where Amazon has been in the wrong.
Fake reviews pollute the online commerce platform and deceive consumers into buying things they wouldn’t otherwise buy. The FTC is taking worthwhile action there.
Ring, Amazon’s home security doorbell product, has supplied police departments with countless hours of neighborhood surveillance footage, raising important privacy concerns for consumers and unwitting neighbors.
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But rather than focusing solely on how consumers are harmed by specific bad practices, the FTC is overstepping its mandate. It’s part of a broader case against Amazon, with the goal of disassembling the company and its services so many of us enjoy.
That’s because for Khan the FTC exists to fight “the curse of bigness,” and only sometimes will that overlap with consumer interest – as was the case with her failed bid to block Microsoft from acquiring Activision-Blizzard.
American consumers deserve a free economy with robust competition, plentiful choices and services that add value to their lives.
If Khan and her fellow commissioners were mindful – rather than disdainful – of the choices that consumers willingly make, they’d focus on bad actors instead of such a trusted brand doing right by its customers.
Yaël Ossowski is deputy director of the Consumer Choice Center, a consumer advocacy organization that promotes less regulation of businesses in the United States and other countries.