Antitrust Focus on Consumer Welfare and Low Prices

Market power is not the US law’s criterion for antitrust prosecution. In a Yale Law Journal article, Lina Kahn laments that “the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy.” Moreover, “current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive.”

Online platform markets such as those operated by Amazon, Google, eBay and others create conditions favoring what some may deem to be predatory pricing, and when the platform is an intermediary, “integrating across business lines positions these platform operators to exploit information collected on companies using its services to undermine them as competitors.”

Examples of this kind of conflict on a shared platform are plentiful. “Google often pushes its products – from Pixel phones to Nest smart thermostats” – to the top ad spot above its search results 91% of the time, according to an analysis by the Wall Street Journal. Competitors who pay for inclusion in the search platform are not accorded the same advantages.
Competitors to Amazon are concerned that they may be denied similar advantages when they sell their products through the Amazon platform. Amazon offers paper and electronic books, electronics, Netflix, Amazon Prime Video, Hulu, films, television shows, original programming, apparel, web services in the form of hosting servers with software, cloud space, financial services, and credit and loans to its sellers and customers.

Sellers who use “Fulfillment By Amazon” tend to be ranked higher in Amazon search results than sellers who use other delivery methods, and “Amazon disproportionately promotes its own [private label clothing] brands over competitors’ brands in the carousel labeled “Customers Who Bought This Item Also Bought.”

Amazon’s entry into groceries was signaled by its purchase of Whole Foods. That purchase heightened the grocery retailers’ concerns over being edged out of the business.

Amazon’s expansionary moves can be misread. In 2016, Amazon’s purchase of 40 cargo jets and 4,000 truck trailers cause a ripple of fear within the shipping business, and Amazon obtained a freight-forwarding license that enables Amazon “to sell space on container ships traveling between Asia and the U.S. and Europe.” Amazon now operates 28 sorting centers, 59 delivery stations that feed packages to local couriers, and more than 65 Prime Now hubs stocked with best-selling items that can be rushed to customers around the world.

Some were convinced that Amazon would launch into competition against FedEx, UPS, and the US Postal Service. Offering shipping to others may eventually become an Amazon line of business, but wise observers expect that that expansion will take 10 years for it to make economic sense. Amazon says its purchase of a transport fleet was necessary to bring industry to a level that could handle its shipping needs. Demand for fast shipping has skyrocketed as a result of the 63 million Amazon Prime subscribers who are keenly interested in fast delivery.

In the US, “antitrust doctrine views low consumer prices, alone, to be evidence of sound competition,” and that works for Amazon because it emphasizes low consumer prices. That could change, of course. “Weak U.S. antitrust scrutiny of powerful tech platforms has been more an issue of political will than lack of legal foundation.”

Unlike U.S. regulators, Europe seems less concerned about low prices for consumers. Antitrust monitors focus on avoiding abusive power. The European Commission charged Google with abusing its dominant position in search to steer traffic towards Google Shopping and away from competing comparison shopping services. Amazon may eventually come closer raising some antitrust concerns, but for now it seems to have chosen the right pro-consumer theme in its expansion – low prices.

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