Amazon anti-trust breakup on the way?

[Joe Vasicek]

A team of Federal Trade Commission investigators has begun interviewing small businesses that sell products on Amazon.com Inc. to determine whether the e-commerce giant is using its market power to hurt competition… The interviews indicate the agency is in the early stages of a sweeping probe to learn how Amazon works, spot practices that break the law and identify markets dominated by the company. The length of the interviews and the manpower devoted to examining Amazon point to a serious inquiry rather than investigators merely responding to complaints and going through the motions, antitrust experts say.

https://www.bloomberg.com/news/articles/2019-09-11/amazon-antitrust-probe-ftc-investigators-interview-merchants

Some of the merchants quoted in the article share how the FTC was particularly interested in how Amazon's advertising services pressured them to raise prices.

[Arches]

A team of Federal Trade Commission investigators has begun interviewing small businesses that sell products on Amazon.com Inc. to determine whether the e-commerce giant is using its market power to hurt competition… The interviews indicate the agency is in the early stages of a sweeping probe to learn how Amazon works, spot practices that break the law and identify markets dominated by the company. The length of the interviews and the manpower devoted to examining Amazon point to a serious inquiry rather than investigators merely responding to complaints and going through the motions, antitrust experts say.

https://www.bloomberg.com/news/articles/2019-09-11/amazon-antitrust-probe-ftc-investigators-interview-merchants

Some of the merchants quoted in the article share how the FTC was particularly interested in how Amazon's advertising services pressured them to raise prices.

Put me down as unimpressed, at least with regard to the US market. I've been seeing articles like this on a regular basis for at least a decade. There are lots of antitrust investigations of Amazon but they never lead anywhere because its almost impossible for a general retailer to corner the market in the classic antitrust sense. Anybody can set up an online store, and many have, including Walmart, Target, Ebay, etc. Amazon just happens to attract customers much better than they do.

The key question for a judge will usually be how does a monopoly corner the market so it can artificially raise prices for consumers. For a long time now, academics and lots of Amazon's competitors have been throwing theories against the wall to see what sticks. So far, nothing has. That's mainly because Amazon is relentlessly driving prices down for consumers, not up.

The most recent antitrust theory I've seen involves house brands. Most retailers have had them for a long time, including Amazon. The theory seems to be that Amazon is giving its brands preferential ad placement on product pages, and it's using lower prices on house brands to kill the sales of name brand products sold by manufacturers and middlemen.

Keep in mind that Amazon generally has the right to exclude whatever products it wants as long as it doesn't discriminate using a handful of suspect criteria like race or sex to decide who it will do business with.

The OP mentioned a concern about Amazon raising prices, but the Bloomberg article puts it differently, and it matters. The article says, "Amazon, which faces little competition online, has been raising fees and selling advertising—forcing merchants to raise prices."

My response is, so what? Amazon can exclude products entirely, and it can also charge middlemen and manufacturers whatever price it wants for the privilege of listing their products in the Everything Store. Similarly, Amazon can charge whatever price it wants for the privilege of running ads on the Everything Store. And it can give its own products ads that aren't available to anyone else. That's just business.

Please note that my lack or enthusiasm for these antitrust claims against Amazon is based on US law. In other countries, the laws can be quite different, and Amazon may run into serious problems in Europe, for example. It already has with regard to books, where many European countries have set up special pricing rules to protect small bookstores.

[Joe Vasicek]

Thanks, Arches.

Another element to this that may or may not be relevant is the billionaire rivalry between Jeff Bezos, who owns Amazon and the Washington Post, and President Trump, who has set himself up agaist the "****," has publicly fought with Bezos over Twitter, and is taking other steps to oppose the big tech giants of Silicon Valley, especially regarding anti-conservative bias. The FTC is part of the executive branch of the federal government, which President Trump controls. If Trump is reelected to a second term in 2020, how does that affect the likelihood of an anti-trust breakup of Amazon?

[Arches]

Thanks, Arches.

Another element to this that may or may not be relevant is the billionaire rivalry between Jeff Bezos, who owns Amazon and the Washington Post, and President Trump, who has set himself up agaist the "****," has publicly fought with Bezos over Twitter, and is taking other steps to oppose the big tech giants of Silicon Valley, especially regarding anti-conservative bias. The FTC is part of the executive branch of the federal government, which President Trump controls. If Trump is reelected to a second term in 2020, how does that affect the likelihood of an anti-trust breakup of Amazon?

You're exactly right that there's plenty of bad blood between Trump and Bezos. A few years ago, I would've said that it wouldn't matter. Large Federal bureaucracies like the Federal Trade Commission and the Department of Justice are filled mostly with career staff who were very careful to avoid obvious political influence on their decisions. Those days are gone, at least as long as the present administration is around, and maybe forever.

One key factor in antitrust cases is that the company involved can fight a breakup plan in court. A few years ago, I would've said that the vast majority of judges work hard to avoid obvious political favoritism. Those days may be gone, too. The president and senate have been working with religious zeal to appoint new Federal judges, many of which have made no secret of their strong political views.

At the end of the day, though, I think the case law is strongly in Amazon's favor. Congress would probably have to pass a new antitrust law to give Amazon serious problems.

That's not as true for the other big tech companies like Google, Facebook, and Apple, but even there, I don't see big breakups in the future. I think it's more likely they'll get hit with big fines for abusing their customers' privacy. Amazon could get hit for that, too, but I haven't seen any evidence that Amazon reveals or sells private information to anybody.

[Bill Hiatt]

Thanks, Arches.

Another element to this that may or may not be relevant is the billionaire rivalry between Jeff Bezos, who owns Amazon and the Washington Post, and President Trump, who has set himself up agaist the "****," has publicly fought with Bezos over Twitter, and is taking other steps to oppose the big tech giants of Silicon Valley, especially regarding anti-conservative bias. The FTC is part of the executive branch of the federal government, which President Trump controls. If Trump is reelected to a second term in 2020, how does that affect the likelihood of an anti-trust breakup of Amazon?

Trump dislikes Bezos. There's no question about that. The question is how far Trump's big-money backers will want him to take antitrust actions. Typically, those aren't popular with big business, which is one of Trump's major constituencies. He can be stubborn, but he does also back down when faced with opposition from supporters, at least in some cases. Even companies that hate Amazon might not want precedent set that could be used against them down the road.

[RPatton]

Thanks, Arches.

Another element to this that may or may not be relevant is the billionaire rivalry between Jeff Bezos, who owns Amazon and the Washington Post, and President Trump, who has set himself up agaist the "****," has publicly fought with Bezos over Twitter, and is taking other steps to oppose the big tech giants of Silicon Valley, especially regarding anti-conservative bias. The FTC is part of the executive branch of the federal government, which President Trump controls. If Trump is reelected to a second term in 2020, how does that affect the likelihood of an anti-trust breakup of Amazon?

Trump dislikes Bezos. There's no question about that. The question is how far Trump's big-money backers will want him to take antitrust actions. Typically, those aren't popular with big business, which is one of Trump's major constituencies. He can be stubborn, but he does also back down when faced with opposition from supporters, at least in some cases. Even companies that hate Amazon might not want precedent set that could be used against them down the road.

I don't know... there's been some interesting interviews on NPR that leads me to think that this isn't about the administration, but instead that they might have enough to push the break up of Big Technology, including bringing in regulations. A lot of trends are making an appearance that are scaring think tanks and research groups.

One of the trends is the increased rate of decreased new creations (this is sort of more in the patent and trademark, but the trends seem to trace back to Big Technology and Amazon specifically). Less new ideas are being introduced because not only are they fighting against Chinese companies, but Amazon is co-opting those ideas and then possibly using unfair tactics to push their own branded creations ahead of others. (The guy being interviewed hinted that this trend is the most dangerous.)

From what I've read and heard in interviews, this is something that won't just go away with an administration change or because of an administration decision. On the surface, it makes sense to think that this is being driven by the current administration because of the animosity between Bezos and Trump, but I don't think that's happening here. There are a lot of moving parts in Big Technology and despite most people thinking this is politically motivated, it's been lobbied for by groups who are non-partisan and groups from both sides of the aisle.

And then considering some of the decisions coming down from the Federal District Courts, and I think the DoJ is just waiting for the right moment to pounce. With each decision that goes against a Big Technology company, they are losing more and more of the protections they've used to hide behind. Once those protections are weakened enough, I see settlements in the future for Apple, Amazon, Google, and Facebook.

[Post-Doctorate D]

The problem is that the politicians are more likely to make things worse than make them better.  Instead of breaking up some of these companies for being monopolies, they will probably end up introducing a bunch of regulations that will end up making it harder for anyone else to try to compete rather than increase competition.

I am reminded of the sales tax situation in the U.S.  When Amazon and other companies were smaller, they actively opposed states trying to implement collecting sales taxes from out-of-state merchants.  But, when they got larger, they flipped around and supported the collection of such sales taxes.  They were in a far better position to be able to manage the accounting headaches it would require and those headaches would be one more burden upon any fledgling competitors.  So, they supported it knowing it would help reduce competition for them.

I can imagine that sort of scenario repeating itself and any efforts to "regulate" Amazon, Google, Facebook and others will manage to cement their positions as juggernauts and further reduce the possibility of competition.

One of the trends is the increased rate of decreased new creations (this is sort of more in the patent and trademark, but the trends seem to trace back to Big Technology and Amazon specifically). Less new ideas are being introduced because not only are they fighting against Chinese companies, but Amazon is co-opting those ideas and then possibly using unfair tactics to push their own branded creations ahead of others. (The guy being interviewed hinted that this trend is the most dangerous.)

Amazon probably learned this trick from Google.  Google gave/gives away "free" web analytics that you can install on your website so you (and they) can track your visitors and all that.  But that gives them behind-the-scenes information about websites they otherwise wouldn't have.  So, they know what converts, they know what people are looking for, what people are buying and so on.  And people didn't think they would use that information to build their own products or determine ad prices and so on?  LOL.

[Arches]

Thanks, Arches.

Another element to this that may or may not be relevant is the billionaire rivalry between Jeff Bezos, who owns Amazon and the Washington Post, and President Trump, who has set himself up agaist the "****," has publicly fought with Bezos over Twitter, and is taking other steps to oppose the big tech giants of Silicon Valley, especially regarding anti-conservative bias. The FTC is part of the executive branch of the federal government, which President Trump controls. If Trump is reelected to a second term in 2020, how does that affect the likelihood of an anti-trust breakup of Amazon?

Trump dislikes Bezos. There's no question about that. The question is how far Trump's big-money backers will want him to take antitrust actions. Typically, those aren't popular with big business, which is one of Trump's major constituencies. He can be stubborn, but he does also back down when faced with opposition from supporters, at least in some cases. Even companies that hate Amazon might not want precedent set that could be used against them down the road.

I don't know... there's been some interesting interviews on NPR that leads me to think that this isn't about the administration, but instead that they might have enough to push the break up of Big Technology, including bringing in regulations. A lot of trends are making an appearance that are scaring think tanks and research groups.

One of the trends is the increased rate of decreased new creations (this is sort of more in the patent and trademark, but the trends seem to trace back to Big Technology and Amazon specifically). Less new ideas are being introduced because not only are they fighting against Chinese companies, but Amazon is co-opting those ideas and then possibly using unfair tactics to push their own branded creations ahead of others. (The guy being interviewed hinted that this trend is the most dangerous.)

From what I've read and heard in interviews, this is something that won't just go away with an administration change or because of an administration decision. On the surface, it makes sense to think that this is being driven by the current administration because of the animosity between Bezos and Trump, but I don't think that's happening here. There are a lot of moving parts in Big Technology and despite most people thinking this is politically motivated, it's been lobbied for by groups who are non-partisan and groups from both sides of the aisle.

And then considering some of the decisions coming down from the Federal District Courts, and I think the DoJ is just waiting for the right moment to pounce. With each decision that goes against a Big Technology company, they are losing more and more of the protections they've used to hide behind. Once those protections are weakened enough, I see settlements in the future for Apple, Amazon, Google, and Facebook.

I agree that there was considerable worry in some quarters about Big Tech before Trump, and there will be worry afterwards. Where I think you might be mistaken is in lumping all of Big Tech together and lumping all of the worries together.

Companies like Google and Microsoft are much different than companies like Facebook and Twitter and also much different than companies like Amazon and Walmart. Each type of business presents different concerns and potential defenses.

My point is that going after retailers like Amazon or Walmart on antitrust grounds is a waste of time in the USA. The retail marketplace is too diverse, and the potential for monopoly control to raise prices too unlikely. If Amazon pushes up prices on its site, then Walmart can easily take away market share with lower prices. And it's never been easier to price compare online.

The place where most of the Big Tech companies seem most vulnerable to government investigations and new laws is in the area of privacy. But there again, the big online retailers tend to keep customer data to themselves. It's companies like Google and Facebook who try the hardest to make a buck off their customer's personal lives.

[Demon_Lord]

 

This is one of the most interesting threads I read in this forum in a long time. All of you have a very informed perspective of the situation.

Reading your posts, I remembered  a documentary mini serie from the History Channel called The Men Who Built America, which details how the whole anti monopoly thing stared. But also, the lives of these powerful men who didn't follow any rules, because rules didn't exist back then. Here is a link to the trailers if you guys want to check it out.

https://www.history.com/shows/men-who-built-america/videos/the-men-who-built-america-monopoly?playlist_slug=men-who-built-america-season-1-preview-list

There is also a political factor in their stories.

Also, I'm very familiar with President Trump, because I was born and raised in New Jersey, in a city in which he owned many properties for years. But I had no idea of who Jeff Bezos really was until recently. I mean, I knew who he was, as the founder of Amazon, and we even shared the same Alma Mater, but there is more to him than I imagined. A very interesting person for what I found out.

We spend hours following the fates of AR and MSE to try to learn about Amazon, and I think that we need to know more about Jeff Bezos, specifically about how he thinks, etc. Because maybe we would understand how Amazon works better. He not only created Amazon, he wrote the algorithm, and even if today is maintained by others, the main code and rules are still ruled by him.

Anyway, I'm going to post another thread later in the private forums to keep this about the anti-trust issue. BTW Jeff Bezos knew this Anti Trust thing was coming. I watched an interview where he talked about the possibility of it. I'm going to see if I can find it.

Edited to add:

OK I found the interview. OMG! He was asked and answered the same topic of Trump breaking down Amazon that is being discussed in here.  I tried to queue the moment, but if it doesn't work, it is about 22:30.

=1341

[RPatton]

BTW Jeff Bezos knew this Anti Trust thing was coming. I watched an interview where he talked about the possibility of it. I'm going to see if I can find it.

Honestly, there is no one who follows business who didn't know this was coming and then the DoJ leaked the anti-trust investigation, which coincided with some other event I can't remember, but the timing was super coincidental. Like Amazon knew about the leak ahead of time. (Which, honestly, I would hope they did.) I think he 3rd District's decision came down that Amazon couldn't claim independence from sellers and could be sued over liability issues (not that they were liable, just that they couldn't use the defense of running a flea market anymore). The court specifically used Amazon's advertising services as one of the reasons their defense didn't hold up. Then the leak hit the press. And guess what, Amazon's advertising services is a part of that investigation. In between all that, the account termination drama. A huge problem is that I think so many authors only see Amazon as a book store or as being KDP, and in the scheme of things, KDP is likely a very small drop in their proverbial bucket.

Amazon's reach is broad and they are everywhere. It's too big to be ignored. And even if in the past, pricing for consumers has been the main go of anti-trust investigations, it's certainly not the only aspect of the current anti-trust laws. They aren't targeting Amazon as a retailer (although that might be one of the prongs of their investigation), they are looking at Amazon as a tech company. Remember when the internet went down on the east coast? Large business lost their websites for hours. That was AWS. And that is a problem directly related to anti-trust legislation. No one company should have that large of an impact. Not saying it would happen, but the idea is that AWS has US corporations by the dangly bits. Don't agree to someone Amazon demands? Fine, they'll turn your internet off. Same with Google, except they will choke traffic to your site. Apple lost an appeal to throw out a a class-action law suit about deliberately slowing older model phones down so people would be forced to upgrade. so they'll get hit with the same big stick. And Facebook is just... well frankly, Facebook has been incredibly irresponsible. If Facebook hadn't had so many problems in such a short time as they have, I doubt we'd be talking about anti-trust laws and Big Tech. Facebook opened the door and they'll be taken down with the rest of them just out of principle.

This investigation has nothing to with pricing, but instead everything to do with single companies having a major impact on a significant number of consumers and other businesses, either directly or indirectly.

[Demon_Lord]

I felt concerned when I learned that the government was hosted by Amazon Web Services (AWS). Because I think the government should have their own servers, without any outsourcing.


Now, lets see who gets the The Defense Department $10 billion government cloud contract. That will be interesting to see. It's codenamed Jedi.

[Arches]

Amazon's reach is broad and they are everywhere. It's too big to be ignored. And even if in the past, pricing for consumers has been the main go of anti-trust investigations, it's certainly not the only aspect of the current anti-trust laws. They aren't targeting Amazon as a retailer (although that might be one of the prongs of their investigation), they are looking at Amazon as a tech company.
This investigation has nothing to with pricing, but instead everything to do with single companies having a major impact on a significant number of consumers and other businesses, either directly or indirectly.

The only place where I disagree with you is the suggestion that Amazon has a problem with "current antitrust laws." Actually, there are no current antitrust laws. The Sherman Antitrust Act was passed in 1890. The Clayton Antitrust Act was passed in 1914. The Federal Trade Commission Act was also passed in 1914. The Robinson–Patman Act was passed in 1936, and the Celler–Kefauver Act was enacted in 1950. These antitrust statues are all over fifty years old, and the big ones are more than a century old. They just don't cover the kinds of issues raised by modern tech companies.

What Amazon and other new companies might have a problem with are other kinds of consumer protection laws, but the modern age of data mining has evolved much faster than the legal framework to protect privacy and social media. Amazon is huge but it has major competitors who are also huge in the retail store and Amazon Web Services.

If Amazon tries to use its market power to turn off some company's internet access, it's relatively easy for that company to find a new cloud hosting company like Microsoft or Google or IBM or Oracle or SAP or Dropbox or many others. Amazon's accidental server shutdown was a big temporary problem, but it wasn't an example of Amazon cutting customers off for some perceived competitive advantage. It was a simple stupid mistake, and if those companies had thought Amazon was taking advantage of them, they would have immediately switched to another company providing a similar service.

That's unlike Facebook, or Twitter or Google which effectively control a certain kind of service for customers. So, yes, these big tech companies should be scrutinized, but antitrust laws are not likely to have much impact on Amazon.


{Fixed the quote. t.}