Throughout 2020, the federal government and the U.S. Congress have been investigating and suing big tech companies for violating outdated antitrust statutes that date back to the 1890s and erroneously presume big is bad. First, the House Judiciary Committee released its long-awaited report calling for the structural separation of big tech companies, and then the Department of Justice’s Antitrust Division filed a suit against Google. It’s widely believed, following the example set by the European Union, that Amazon will imminently face an antitrust suit brought forward by the U.S. authorities.
While antitrust suits against big tech companies such as Amazon are brought with the express aim of enhancing consumer welfare and protecting their interests, antitrust enforcers must remember misguided enforcement actions could seriously impede the operation of companies that not only ensures consumers have access to a wide variety of products at a low cost but also provides third-party sellers access to a network consumers they would otherwise not have access to.
The EU was the first governmental body that sought to prosecute Amazon for violations of an antitrust statute. The EU alleged Amazon used “very large quantities of non-public seller data” to decide which products to sell themselves at a lower price. The EU’s second allegation holds “Amazon’s business practices…favor its own retail offers and offers of marketplace sellers that use Amazon’s logistics and delivery services.”
The first signs that Amazon was facing an antitrust investigation in the United States emerged in June 2019 when the Washington Post reported the Federal Trade Commission and the DOJ’s Antitrust Division was “quietly divvying up competition oversight” over Google and Amazon.
The agreement stated the DOJ would oversee Google, leading up to its November 2020 suit against Google, and the FTC would have jurisdiction over investigating Amazon.
In a sign that the investigation against Amazon was gaining momentum, it was reported in August 2020 that the attorneys general from California and New York, two of the most active state-level investigators of big tech, would join the FTC’s investigations. The Wall Street Journal reported the FTC-led investigation centered on “Amazon’s practices for selling its products in competition with third-party sellers.” These allegations mirror the EU’s antitrust filing and would suggest a suit is imminent.
What both the EU and probable U.S. antitrust suits fail to consider are the significant benefits Amazon has brought to both consumers and marketplace sellers.
In terms of consumers, Amazon has provided consumers with easy access to over 12 million products at prices often well below those offered by traditional retailers. Amazon has only been able to provide these prices and products because it actively monitors what consumers are buying and how much they are spending on these products. In turn, it has been able to develop its own range of products to compete with third-party sellers’ more expensive alternatives. This model ensures consumers will always save money when purchasing on Amazon.
Without access to data from consumers, Amazon could not efficiently provide the products consumers are demanding at a low cost. If Amazon could not access this data, it would be unable to offer the range of products it does and would undoubtedly have to raise prices.
Amazon has also provided third-party sales to a number of consumers they simply wouldn’t have access to outside of the Amazon marketplace. In October 2020, for example, Consumer Intelligence Research Partners (CIRP) estimated 126 million Americans had an Amazon Prime account. Access to this substantial consumer base allowed third-party sellers to average $160,000 in annual sales a year.
The benefits Amazon brought to consumers and marketplace sellers were on clear display during Prime Day 2020. Amazon estimated that on Prime Day 2020, marketplace sellers “sold more than $3.5 billion worth of products” and saved prime members an estimated $1.4 billion.
If Amazon were to face any significant alteration to its business as a result of antitrust filings, consumers would not only face rising prices, but marketplace sellers could also lose access to a crucial network of consumers.
Amazon has also shown how its levels of innovation have brought significant benefits to consumers. Amazon recently announced it was opening a prescription fulfillment service to compete with pharmacy chains like CVS or Walgreens.
Amazon’s new innovative service is a significant win for consumers because it not only allows access to medications at a lower cost but also allows consumers to have their prescription medicines shipped directly to them at no cost.
Throughout 2020, big tech companies have been subject to increasing antitrust enforcement activities from governments that myopically claim to be acting in the interests of consumers. What these suits often fail to consider, however, is the significant benefits large corporations, such as Amazon, provide to consumers and other businesses.
While it may be too late for Europe, consumers and marketplace sellers in the United States can only hope the DOJ recognizes these benefits and does not follow in the EU’s footsteps.