According to The Wall Street Journal (Feb. 3, 2023) tech giant Amazon may soon face an antitrust lawsuit by the Federal Trade Commission (FTC).
For years, Amazon has faced criticism for its business model which is seen by regulators and (some) politicians as "anticompetitive" --- whether it is the accusation of preferencing its own products in its online store, or that the bundling of Prime services that allows it unique competitive advantages compared to its competitors.
Information about a potential FTC suit comes exactly a year after Sen. Amy Klobuchar, D-Minn., tabled the American Innovation and Choice Online Act, a piece of legislation targeting Big Tech firms for antitrust and "consumer choice" violations.
As a policy analyst for an organization that has "consumer choice" in its name, this writer believes it's important to set the record straight on many of the claims made about these types of antitrust actions.
For one thing, many of the presumed antitrust cases today have little to do with the history of antitrust law.
This is not the Aluminum Company of America, which prior to 1940 held an almost pure monopoly on the entire aluminum supply chain.
Amazon's e-commerce business represents less than 40% of e-commerce market share, and given that e-commerce only represents 15% of all retail in the United States, it makes Amazon a curious monopolist with a remarkable market share of … 6%. Or take Prime Video, which accounted for cable competition, representing only 7% of all television consumption.
Granted, the world is moving online --- both e-commerce and streaming are going to grow considerably in the next few years.
However, as services move online, the field will become more crowded.
In streaming services, TV networks increasingly opt for online content on a subscription model, and are likely to create alliances to gain market share. Take Disney, whose Disney+ subscription bundles sports through ESPN and documentaries through National Geographic, both services that adapt to an online presence.
In business it is often about being first, but being first doesn't grant a successful business model for eternity. The first smartphone was released by IBM, the first laptop was a Toshiba, or take the first successful social media platform MySpace, long believed to be some sort of natural monopoly.
Consumers can choose not to use Amazon's services, in fact for many it's a matter of principle to shop at small-scale competitors, as is their prerogative.
What appears strange is that the government seeks to take away from Amazon's success story merely on the basis that its competitors haven't been quick enough to adapt.
All it takes to see that Amazon's modus operandi is achievable is to compare it to other markets. In countries such as the Netherlands or Turkey, where Amazon's e-commerce is a newcomer, local platforms have a stronghold.
Take Turkey's Trendyol, which aside from being an e-commerce giant with its own delivery service network, also delivers food and groceries, has a second-hand clothing site, sells insurance and dispatches maintenance workers.
Trendyol competitor Hepsiburada not only has an e-commerce business, but also delivers flowers and sells flight tickets. Turkish food and grocery delivery company Getir – which also operates in New York and Chicago – also connects users with taxis, provides short-term rental cars and provides a job-finding website.
Amazon's service bundling isn't unique, in fact it's a rather mild version of what can be observed internationally.
Whether Amazon Prime can scale up to this level of an all-encompassing service provider is to be seen, but even if it was, then it is very likely that Walmart or Target will also have developed their own bundle competitors, or that foreign competitors will become stronger on the U.S. market.
In fact, competition is what drives innovation for consumers, so instead of trying to regulate them away, let them fight it out between themselves.
Bill Wirtz is the senior policy analyst at the Consumer Choice Center, focusing on new technology, agriculture, trade and lifestyle regulations. He recently published "No Copy-paste: What not to Emulate from Europe's Agriculture Regulations." Read Bill Wirtz's Reports — More Here.