The News: The Federal Trade Commission is expected to drop a lawsuit on Amazon in the near term, aiming to break up the tech powerhouse into smaller units. The retail giant is set to meet with the FTC to argue its case against the potential lawsuit. Read the full article from Reuters.
Amazon to Meet with FTC Amid Claims of New Antitrust Lawsuit
Analyst Take: While I understand the FTC’s desire to address Amazon’s massive growth, I don’t see this lawsuit going anywhere big. In fact, if it’s not careful, I’d say the FTC is going to start looking a little incompetent if it doesn’t start making better choices with its tech battles. What we need from the FTC is an agency that is responsible and independent—not one that proactively seeks ways to undermine the U.S. Tech Sector and overall U.S. competitiveness.
A little background. Led by under chair Lina Khan, the FTC has been investigating Amazon on numerous issues since at least 2019. Issues under scrutiny include things like abuse of power in the online marketplace, possible consumer privacy violations, and even Amazon’s purchase of robot vacuum iRobot. On the consumer privacy front, concerns are largely related to Ring and Alexa devices—i.e. the idea that Alexa “spies” or eavesdrops on users to gain important user data. (Check here for all the ways Alexa is watching you.) There are also reports that the lawsuit will focus on rules that block lower pricing on competitor websites, and other Amazon policies that are believed to cause sellers to use Amazon’s logistics and advert service. In other words, Amazon doesn’t just take a cut of the sale, it also makes money from delivery and advertising—a triple dip that the FTC finds unacceptable.
On one hand, I can understand the concern. By some counts, Amazon controls 45 percent of the U.S. ecommerce market. Over 80 percent of Internet users aged 18-34 have a Prime account. It’s currently valued at some $1.3 trillion. For its part, Amazon certainly isn’t struggling to gain a foothold in the global marketplace. At the same time, FTC under chair Khan seems to have had it out for Amazon for quite a while. Back in 2017, she wrote a paper identifying Amazon as a monopolist that needed to be controlled. In it, Khan points out issues like predatory pricing and infrastructure control that may allow Amazon to undermine its competitors. Six years later, Khan still seems to have the same issues in mind.
Why the Amazon lawsuit won’t stick: It’s not for lack of trying. The FTC is said to have interviewed lots of witnesses, including former CEO/founder Jeff Bezos, as part of its research, and they’ve collected millions of documents to support their case. Still, the lawsuit lacks teeth for one huge reason.
Ultimately, though Amazon is a powerful marketplace, it is not the only marketplace open to U.S. retailers. There are numerous multi-billion-dollar retailers competing with Amazon every day, and merchants are free to choose where they sell their goods—Amazon or elsewhere. Could the case result in better pricing for sellers? Possibly. But that’s about as far as it will go, in my opinion. And if it does go to trial, litigation will take years, the burden of proof will fall squarely on the FTC, and the FTC’s track record here isn’t stellar.
That’s not to say the FTC is fully impotent here. Yes, they recently lost their attempt to block Microsoft from purchasing Activision, as well as their attempt to block Meta’s purchase of a virtual reality app, Within. But Khan has confirmed she will continue to bring “risky cases” forward in an effort to keep legal doctrine from becoming stale. Her belief: bringing the cases forward will advance her cause, whether the FTC wins the cases or not. In other words, it’s going to take more than a few expensive losses to deter Khan from taking on Big Tech. Making a big name for herself by taking on big name cases may be all the reward Khan is looking for.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
