FTC readies lawsuit that could break up Amazon
politico.com
politico.com
In the case of the FTC's proposal to split Amazon, the FTC has been collecting evidence to support its claims for the past three years, even before Lina Khan took office as the chair. In addition, Amazon has actually pressured third-party retailers by using its dominant position in online shopping. Therefore, I think the claim is more likely to be upheld than in the Activision case.
I think its obvious that Amazon is a company with an market position allowing it to exercise unreasonable control over its markets.
For starters, separate AWS from retail/logistics. (There is something loosely analogous to dumping in a high-margin business entering a low-margin trade.)
It's unclear how sustainable these parts are on their own. The incrementalist move would be to sever the money spigot that is AWS from the lower-margin parts.
https://www.macrotrends.net/stocks/charts/AMZN/amazon/profit...
https://dazeinfo.com/2019/11/06/amazon-net-income-by-year-gr...
Even Walmart and the other retailers have the same 2% to 5% profit margins for their entire existence, without selling high margin web services.
https://www.macrotrends.net/stocks/charts/WMT/walmart/net-pr...
Look back historically at when AWS details were suddenly included in the market earnings around 2015. I encourage you to draw your own conclusions, but I'm convinced they made such a move to keep investors happy despite the economic reality of razor thin profit margins in retail.
Then there's how much of Amazon retail is actually powered by AWS.
Scalable software is a high profit margin business.
AWS is not subsidizing Amazon retail and logistics. AWS and Amazon video and other digital products is why Amazon is worth $1.3T while Walmart is worth $428B. The profits are in the digital products.
I don't either. Hence the caution. The deference to the status quo. It would be a mistake to over-sever and destroy a valuable, value-producing business out of haste. Perhaps the other legs' enduring advantage is merely an artifact of cheap internal capital. Perhaps not.
I don't have a deep understanding of the law in this matter. But I have seen the sustainability of units spun off as part of merger approvals discussed in court cases. (Counterfactual: Internet Explorer not being a viable standalone business wasn't a valid defence by Microsoft.)
> Thats where I'd go first - but I think it's also worthwhile to break the shopping side of the business up to
Splitting up the ecommerce side of the Amazon isn't just worthwhile, it's necessary.
> into amazon eCommerce platform, amazon the seller of goods, Amazon logistics, and amazon fulfillment services as well - that would still leave a bag of leftover parts and businesses.
There's more ways to do a break up than by business function. It might make more sense to just divide it all down the middle to create two successor companies (e.g. one gets half the warehouses, and the other gets the other half). Then you have two peer competitors with all the skills, knowledge, and culture to compete viciously against each other.
The biggest issue there is which one gets that branding, which I think should be solved by neither getting it. They should come up with new identities, and amazon.com becomes a simple ecommerce directory.
Forces the non-AWS units to compete without cheap capital.
> solves none of the concerns raised by the FTC
Sure. So far, I will reflect care for their concerns inasmuch the courts do. (“Pressuring sellers” and merely “setting prices” isn’t illegal under current law. Maybe it should be! But that isn’t the FTC’s job when it brings enforcement.)
and then maybe put the streaming services and media production into it's own entity.
you could even split kindle+audible out, too.
Google, Apple, Netflix, Facebook - you can imagine how a clever competitor can get a foothold to compete in those markets. But Amazon's ownership over the entire physical logistics supply chain through to last-mile delivery is just such a huge moat that keeps getting larger and larger.
Walmart’s website has identical functionality for selling retail goods, including third party sellers. Target is not far behind. Newegg is all third party goods as far as I understand.
Then there is Best Buy, Home Depot, Lowes, Staples, Kroger, Albertsons, Dollar Tree, and myriad other retailers.
Amazon Music is easily replaced by Apple/YouTube/Spotify.
Amazon Video is easily replaced by myriad other streaming services.
Contrast with my choice of smartphone operating system - Google or Apple.
Or choice of operating system in corporate environments with legacy software - Microsoft. Ditto for spreadsheet software.
Even in cloud, AWS is up against Google and Microsoft.
Where is this idea of Amazon being a monopoly coming from? They even earn pitiful profit margins compared to the other tech companies.
Amazon Music and Video are value adds, but not why people give Amazon money.
The killer feature none of those you've listed has been able to achieve is the shipping logistics. This enables their vast selection to be more than just window dressing; contrast this with say Best Buy if the part or item isn't at a local store.
Meanwhile, there have been quite a few previously thriving retailers whom are now either on life support or gone. Anecdotally, I watched several major chains die at the hands of the one upon a time up- and-coming Amazon.com. The number of book stores alone that were killed off is tragic.
https://www.moneytalksnews.com/9-major-companies-face-threat...
https://ilsr.org/fact-sheet-how-breaking-up-amazon-can-empow...
The commenter is responded to compared Amazon to the other big tech companies. Profit margin is an indicator of how much control a business has over its market. You cannot earn high profit margins if your customers can go somewhere else if you increase your prices, which means low profit margins means competitors exist.
Shipping logistics is not a huge thing. UPS/FedEx/USPS do what Amazon’s logistics do. All the other retailers also have warehouses (including their stores) all over the US. You might have to wait 1 or 2 or 3 days longer to receive the item, but it is not huge.
I would guess book stores would have gone out of business anyway, due to the ease of shipping books and the lack of urgency of people needing them. Little reason to pay all the capital and labor costs of running a book store if book buyers do not mind buying online. And of course, ebooks came along anyway.
The big competitive advantage Amazon had in earlier years was they did not have to collect sales tax from customers in most states, and they arbitraged that into gaining market share and allowing them to invest in their logistics and expand without incurring heavy losses. But that has been gone for 5 years since the South Dakota v Wayfair ruling in mid 2018.
Walmart+ is close. But prime shipping is not that big of a competitive moat. I order from all the other retailers all the time, and stuff comes in 2 to 3 days also.
None of the companies you list are monopolies. Google is the closest in terms of market share but even that is a weak case. It is impossibly easy to get to Bing or DuckDuckGo, and there is the obvious, massive lateral threat that is chatgpt and other llm’s.
Amazon is about 40% of the e-commerce market. Much much less of retail.
The wave of consolidations that has been basically non-stop since the Reagan administration has left us with way too few competitors in way too many markets. We in tech are just particularly blind to it because of the platform duopoly that has seemed "natural" since the first major platform war between Microsoft and Apple in the '90s—there's this feeling that of course there will be a fight between a small number of competitors, and of course we'll end up with one company holding the lion's share of everything, partly due to network effects.
In a truly healthy, competitive economy, we wouldn't even be able to list the number of prominent online or brick & mortar retail companies in the "top tier" on both our hands.
https://dazeinfo.com/2019/11/06/amazon-net-income-by-year-gr...
https://www.macrotrends.net/stocks/charts/AMZN/amazon/profit...
If their reports claim AWS profits are now offsetting losses in retail, then I guess their retail division has started losing money in the last few years for some reason. Which is odd given COVID landing in their lap.
You are ignoring the much bigger retailer that has owned a similarly complex and integrated logistics supply chain for decades. Walmart. And they do it with a lot more stuff.
So no one is too big to fail or compete.
Google is still what everyone thinks of when they want to search the web, despite how bad its results have gotten in recent years. Even actual alternative search engines, like DuckDuckGo, are still very minor players in comparison.
Google (err Alphabet) is so completely dominant in search (93.125 world marketshare) and video (97.42%), and not far behind in mobile operating systems (70.89%) [and I found both of these numbers by using Google]. Of course marketshare on its own is not a particularly strong argument for breaking a company up, but Google could be a lot more evil than Amazon, if it wanted to.
Google really doesn't have enough room to be evil even if they tried - they've already exhausted most avenues that they could and failed. Imo, Google is actually under threat - if someone were to credibly show in detail how useless Google Ads actually are or how flawed/falsified their performance metrics are (perhaps via internal leaks a la Facebook, etc), Google could easily end up losing a lot of ad customers.
Sears, JCPenney, Bed Bath and Beyond are just a few dominoes to have already fallen.
Walmart, Target, Home Depot, etc. embraced the 21st century and are doing just fine. Others like Chewy only came about as a result of the new trends.
BB&B bought its way into bankruptcy by taking on debt to fund a multi-billion dollar stock buyback; external competition (including Amazon but primarily Walmart) was a secondary factor.
It is not Amazon, it is online shopping in general. They never were going to survive a world where their competition can sell the same goods without having all the capital and labor expenses of a storefront.
A few of the big ones will survive due to convenience, but the niche stores where you do not need the product today or tomorrow have no competitive advantage against a website, outside of a few high end stores where richer people can afford to pay extra for the shopping experience.
As a training ground for aspiring Congresspersons, yes. As an executive agency, no.
Khan started her term learning to manage. She is now losing case after case on account of sloppiness [1] and overreach. Her ideas are good. But she seems to want to write new laws, not enforce them. The right person in the wrong seat spells incompetence.
> Start with the fact that Corley's son is a Microsoft employee who stands reap massive gains in his stock options if the merger goes through
It's Activision whose stock stands to gain from this, not MSFT.
We look at Microsoft and Internet Explorer as some kind of fast victory, and sure it was a gross monopolistic practice. However, Microsoft willingly caved due to Bill Gates personal embarrassment in the court room.
However, Amazon's entire business model works because it is or needs to be a monopoly. If they have to break up and share the pie, it will be devastating and so no way they don't fight and hold things up in courts.
Boards the country over become more emboldened.
I have trouble seeing Khan's continuation at the FTC as anything but an olive branch to Big Tech. Activision is a recent failure. The glaring one was Facebook, where the FTC did "not even provide an estimated actual figure or range for Facebook's market share at any point over the past ten years" [1]. That's the judge! In his opinion!
[1] https://casetext.com/case/fed-trade-commn-v-facebook-inc#p4
They already lost one with Activision and Microsoft.
https://www.ftc.gov/news-events/news/press-releases/2022/12/...
However the FTC abilities may be limited because of two situations. First a surpreme court case that could limit federal agencies in general, likely because of the conservative majority.
https://www.reuters.com/legal/federal-agency-powers-crosshai...
Two, Trump has said if he is elected he will increase the power of the executive branch.
Trump and Allies Forge Plans to Increase Presidential Power in 2025
https://www.nytimes.com/2023/07/17/us/politics/trump-plans-2...
"Mr. Trump intends to bring independent agencies — like the Federal Communications Commission, which makes and enforces rules for television and internet companies, and the Federal Trade Commission, which enforces various antitrust and other consumer protection rules against businesses — under direct presidential control."
But your concern is that the head of the FTC, after making serious effort within the law to rein in Big Tech, fails Biden will give her a cabinet position.
"Both sides..."
What does this mean? You want the FTC to be more toothless? Because that's what removing it from the executive and placing it under the legislature does: it turns it into a fact-finding outfit with zero enforcement powers.
Sure. This isn't a hot take. The legislature can order the executive to take specific actions. It does so all the time. The reason every society in history separates or delineates its executive functions is because many tasks of government require faster action than a deliberative body can continuously commit to.
Congress (big and slow) granting agencies (small and faster) limited rule-making powers increases the agencies' power. The executive granting the Congress limited executive powers (e.g. prosecuting contempt of Congress) doesn't confer an equal power transfer. The executive branch of any system is built to amplify and focus power; the legislature, to distribute it. That executive power, if vested in the Congress, would dissolve across the body.
An FTC under the Congress would have the same authority as any Congressional subcommittee: infinite in theory, but relatively toothless in practice.
Because its every action would be subject to Congressional rules and procedure. It's part of the Congress. That's what putting it under the legislature means.
> why does the FTC need to act so quickly?
Injunctions? Compelling testimony? Conducting investigations? You're confusing Congress with a sovereign Parliament.
No, they can't. Congress isn't sovereign, but it isn't bound by any prior Congress. You could create an exception to parliamentary procedure for the agency, like we do for e.g. CBO, a legislative agency, but it wouldn't be able to actually do anything.
> the same manner that the current FTC does not need to ask for presidential approval
The FTC was created as an independent agency by the FTCA of 1914. A law passed by the Congress and signed by the President. It exercises Article II powers freely and limited Article I rule-making powers delegated to it by the Congress.
When the FTC takes executive action, it does so as an independent agency. When it invokes its rule-making authority, it's subject to all manner of checks and balances, from the President through the courts all the way to the Congress. Inverting that makes the agency useless. It would have rule-making authority similar to the Congress (i.e. subject to full passage and Presidential veto) but none of the executive powers.
I'll admit, this is one of the more creative ways of de-fanging an unpopular agency that I've seen. (I still can't tell if it's parody criticism of Chevron.)
There is nothing in the Constitution that explicitly prohibits legislative power being delegated to the executive nor vice versa. The Courts are sorting this out, people are upset, they're tabling stupid suggestions--whatever.
What you're failing to grasp is how those transfers weaken the power and shape it to their vessels. An agency has less rule-making power than the Congress has in legislating. It also exercises it subject to the rules and restrictions of the executive branch. (You can't FOIA the Congress.) Moving Congress's power to the FTC changes that power; the same if you move enforcement to a glorified Congressional committee. Every matter of enforcement would either require a full act of Congress, or, could be endlessly dragged out in the courts until the Congress changes and everything resets. (We aren't on the 109th FTC. We are in the 117th Congress.)
Congress delegating its authority to agencies simply results in a more durable transfer of power than the executive deputizing a committee of Congress.
What about other agencies? The EPA for example? Now environment regulations will be a political game and could change drastically as congress swings right and left.
I believe you are misunderstanding the potential change the Supreme Court ruling could have. Each regulation would have to be approved by congress, not appointments.
One year there could be a requirement about emissions from cars then the next none. It would create chaos and damage the country in my opinion.
In 2020 Amazon's political donations were roughly half those of Google and Microsoft, two companies who could more easily qualify as monopolies. Microsoft used to explicitly avoid political donations until the FTC made noise about breaking them up. Meta gets away with donating less because, as Zuckerberg stated on Lex Friedman, they collude with federal agencies to censor wrongthink.
Amazon will remain whole and they're going to have to raise their protection fee to the Federal Mafia.
Amazon both revolutionized and destroyed large parts of physical retail. I'm thinking about whether I want the FTC to win this one.
Google on the other hand is the dictionary definition of a monopoly. Microsoft Windows is a monopoly for consumer desktops. Apple is an annoying brand based monopoly that also made it the most valuable company to ever exist.
What is the FTC trying to tell companies, using low prices to get as much market share as possible is illegal but having a technical edge that makes you the only player is completely fine?
[1] https://www.yalelawjournal.org/note/amazons-antitrust-parado...
> Evidence suggests that Amazon is keenly aware of and interested in exploiting these opportunities. For example, the company has reportedly used insights gleaned from its cloud computing service to inform its investment decisions.374 By observing which start-ups are expanding their usage of Amazon Web Services, Amazon can make early assessments of the potential success of upcoming firms. Amazon has used this “unique window into the technology startup world” to invest in several start-ups that were also customers of its cloud business.375
> How Amazon has cross-leveraged its advantages across distinct lines of business suggests that the law fails to appreciate when vertical integration may prove anticompetitive. This shortcoming is underscored with online platforms, which both serve as infrastructure for other companies and collect swaths of data that they can then use to build up other lines of business. In this way, the current antitrust regime has yet to reckon with the fact that firms with concentrated control over data can systematically tilt a market in their favor, dramatically reshaping the sector.
Is there actual independent reporting on this alleged business practice?
I have heard Amazon folks "refute" this 'myth' a few times -- around the likes of WalMart / Target / BestBuy refusing to use AWS -- assuring customers that AWS and Amazon retail are strictly separate businesses.
But haven't seen real reporting on any specifics. Is it mostly conjecture?
EDIT: The part of the report I quoted has a footnote / reference to this Reuters report (dated 2011) https://www.reuters.com/article/amazon-cloud-idUSN1E7A727Q20...
There is no way of knowing whether a small NDA-gagged analytics team exists inside Amazon that is constantly feeding the C-suit fresh data about competitors and investment opportunities based on AWS data.
I don't know of anything definitive, but there's a lot of anecdotal evidence out there of Amazon swooping into well selling items and crushing the original merchants.
They'd have to be using internal sales data to pick winning products... and possibly even built the Amazon Basics brand off this.
There are even more private label brands on Amazon.IN ... "Solimo" and "Presto" ... they sell everything from soaps to furniture to clothes to appliances -- look virtually indistinguishable at a glance from established brandname products and for much lower prices, and prominently pushed as recommendations.
The "seller" of most of these items is usually not Amazon themselves but named Appario retail or Cloudtail India but their profits are surely flowing to same pockets.