The Federal Trade Commission and 17 states have filed an antitrust lawsuit against Amazon, potentially impacting its popular Amazon Prime service and its 167 million American members.
This move by the FTC and states is not surprising, considering FTC Chair Lina Khan’s history of advocating for antitrust enforcement against Amazon. Khan has been critical of the company ever since her time as a law student at Yale University.
However, this case resembles Captain Ahab’s futile pursuit of Moby Dick. It is driven more by desire and ideology than a logical evaluation of costs and benefits. Ultimately, the lawsuit is likely to be a wasteful battle that will struggle to succeed in court.
The agency’s allegations against Amazon include using data from third-party retailers to support its own house brands, leveraging Amazon Prime to undermine rival delivery networks, prioritizing its own products over others of better quality, and penalizing retailers who offer lower prices on competitor platforms.
The underlying theme of the FTC’s case against Amazon is that the company should not favor its own services if it harms competitors. The FTC seeks a permanent injunction to promote competition by potentially breaking up the platform.
However, basing a major antitrust case on a paper written by a law student six years ago comes with numerous pitfalls, and consumers are likely to be caught in the crossfire.
While the FTC’s intentions to help competitors are clear, their actions could harm the services that Amazon consumers rely on. Amazon’s cost-cutting efforts and improvements to its platform make it a fierce competitor, which is precisely what antitrust laws are designed to protect.
Even left-leaning antitrust scholars recognize that the purpose of antitrust laws is to safeguard competition, not to rescue struggling rivals. The FTC’s focus on the challenges faced by competitors in reaching Amazon’s scale and competing with its wide range of services fails to acknowledge that Amazon has achieved success by meeting consumer demands more effectively and affordably than its competitors.
Instead of discouraging Amazon’s conduct, we should encourage it. Amazon’s continuous efforts to provide better services and lower prices benefit consumers.
Furthermore, the economic arguments presented in the FTC’s complaint are questionable. Allegations that Amazon serves “junk” ads defy common sense, as no company would intentionally present low-quality ads for unwanted products. This argument contradicts the rest of the complaint and undermines its credibility.
Victory for the FTC in this case would likely have disastrous effects on the Amazon platform. Amazon Prime and its logistics network enable the company to offer next-day shipping at minimal cost to consumers. Amazon’s house brands also introduce competition to retail segments where consumers struggle to make informed choices or overpay for rival brands. A closer examination of Amazon’s brands reveals that they actually lower prices for consumers.
The FTC’s complaint fails to consider these complex tradeoffs, and consumers will ultimately bear the consequences. While FTC Chair Lina Khan may be seeking to reshape antitrust law and policy to give more weight to the interests of small competitors, Congress and the courts have consistently rejected this radical vision. Attempts to change antitrust law in line with Khan’s views have gained little momentum, and the US Supreme Court has made consumer welfare the guiding principle of antitrust law.
Lina Khan is a federal bureaucrat, and it is not her prerogative to override these legal barriers in pursuit of her own agenda. The FTC’s case, as it stands, is destined to fail and may result in significant harm to consumers in its attempt to shift the course of US antitrust policy against the will of Congress.
Geoffrey A. Manne is the president and founder of the International Center for Law & Economics, while Dirk Auer is ICLE’s director of competition policy.
