President Donald Trump"s decision to launch a PR war against Amazon this past week helped drive the Nasdaq to its worst monthly performance since January 2016 (of course, Trump"s involvement was precipitated by an Axios report claiming the president is "obsessed" with finding ways to punish the e-commerce company). But in the interest of stopping the bleeding (as tech shares, and chiefly the FANG stocks grouping of which Amazon is a member, led the market lower in arch), the Wall Street Journal published a story on Saturday - following another round of attacks by Trump - claiming that an anti-trust action against Amazon of the type that Trump has intimated just isn"t feasible, based on a cursory reading of US anti-trust law.
As WSJ reporter Laura Stevens explains, trying to spit up Amazon on anticompetition grounds "would be difficult, requiring an overturn of the principles that have guided US antitrust enforcement for decades.."
The problem, Stevens explains, is that Amazon doesn"t have enough of a monopoly in any one of its business lines (even its core e-commerce business) to run afoul of US anti-trust laws - which were written and passed during the first half of the twentieth century.
Amazon’s rapid growth over more than two decades from an online bookseller to a $178 billion retailer that also has a cloud-computing business, a Hollywood studio, a device business and a grocery store chain has prompted Mr. Trump and some policy experts to question how big is too big.
Current regulations typically only kick into effect when a company is dominant in one market or is hurting consumers—neither of which experts think currently apply to Amazon. While Amazon has about 43% of the U.S. e-commerce market, it is still less than 4% of total U.S. retail, according to eMarketer.
Some people in the business community, including those who know Mr. Trump well, have said that antitrust law has failed its historical purpose when it comes to Amazon, focusing too much on pricing and not enough on concerns that integrated businesses can be anticompetitive, people familiar with the matter have said.
As support for her argument, Stevens cites an article in the Yale Law Review published in January 2017 entitled "Amazon’s Antitrust Paradox". The article was written by Lina M. Khan, and it outlines how to restructure antitrust enforcement in the US. The premise is that recent case law surrounding anti-trust activities in the US focuses too much on whether the company is harming the consumer, rather than zeroing in on anti-competitive practices.
Her basic argument is that antitrust framework has moved from looking at market structure to consumer welfare, something that has led Amazon to escape scrutiny so far. She lays out an argument that if Amazon is practicing predatory pricing in various markets, that can squeeze competition even if it is good for consumers. She argues that restoring an approach that examines Amazon’s power across markets, rather than its impact on consumers, would more adequately address the tech giant’s power.
Ms. Khan and other researchers have recently triggered some debate about antitrust regulation in the policy and academic community, says A. Douglas Melamed, a law professor at Stanford University and previous acting assistant attorney general in charge of the antitrust division at the U.S. Justice Department during the Clinton administration. But many of the theories are too general and operate on potentially problematic and unproven premises.
Because of this, if Trump did want to pass new anti-trust legislation, he would need to push it through a Republican-controlled Congress inclined to peel back stifling regulation - not add more of it. As of now, the Department of Justice has no open anti-trust investigations against Amazon, and the White House communications office has said the administration isn"t planning anything. And in response to Trump"s claims about Amazon not paying enough in taxes, the company has said it collects sales taxes on its own inventory in all 45 states that have such a tax and has voluntarily started collecting taxes in some municipalities (of course, this glosses over the fact that much of the merchandise sold on Amazon is technically sold by third-party sellers).
The thing is, as Bill Simons, former CEO of Walmart US, pointed out during an appearance on CNBC last week, Amazon is engaged in business activities that are clearly anti-competitive. Amazon operates its e-commerce business at a loss, undercutting its rivals and fulfilling its strategy to win by gobbling market share, and relies on more profitable businesses like Amazon Web Services to make up for it. Brick-and-mortar retailers, and other e-commerce companies, literally can"t compete with its prices.
As Simons said, "they"re not making money in retail, they"re just putting retailers out of business."
The real problem isn"t that an anti-trust case can"t be made - it can. The problem is making bringing Amazon to heel politically palatable.
Given Trump"s penchant for touting stock-market performance as the primary barometer for the effectiveness of his administration, even the president might not want to risk tanking one of the market"s most vital workhorses.
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