The FTC Has a Weak Case Against Amazon

The FTC Has a Weak Case Against Amazon
An Amazon logo appears on an Amazon delivery van in Boston, on Oct. 1, 2020. (Steven Senne/AP Photo)
Jeffrey A. Tucker

Do you have some sense that Amazon is a powerful company, more so than ever since lockdowns? Many people do, and this is why the Federal Trade Commission’s (FTC) antitrust investigation against the company is likely to be popular.

Many friends of mine absolutely refuse to deal with them. I get that, and I’m all for consumer sovereignty here. If you don’t like them, don’t buy from them.

I’m not quite as scrupulous. I’m more on the side of marveling at how amazing the whole system is. I recall when it started off as a scrappy bookseller, and I cheered it at every advance.

Yes, I’ve been devastated at how the company seems to have made its peace with the Deep State in many ways. The deal with the government’s post office for reduced rates strikes me as rotten, as does its lobbying for state collection of out-of-state taxes. It did this because its distribution centers gave it a competitive advantage over other online merchants.

And I’m even less happy about a sense I have that it seems to use tactics that don’t always seem consistent with market-based competition. This is especially true in recent years.

A major reason is that the federal government, in cooperation with many state governments, made it that way.

Lockdowns were a massive subsidy to the company and not just its ability to deliver anything to your door when you are stuck inside. Its server business also exploded due to new demands for streaming services and more—all forced by dystopian stay-at-home policies.

So with the new Federal Trade Commision push to fine them for antitrust violations, the very government that made Amazon monopolistic now purports to solve the problem it created. That’s rich.

Like the Fed solving inflation, the FDA solving health problems, the EPA solving environmental problems, the FTC will again purport to be the great guardian of the competitive market economy!

It is government policy that deserves a closer look when it comes to corporate consolidation. The entire pandemic response was a massive subsidy to all top-tier companies, and Amazon especially. No wonder the Bezos-owned Washington Post was so fanatically pushing for lockdowns. It meant profits for its owner and main advertisers including pharma.

Sure enough in these crazy times, we have the government itself going after Amazon as a monopolist. The FTC, along with 17 states, sued Amazon on Tuesday. They say the company is a monopolist that “has seized control over much of the online retail economy.” It has done this, the government alleges, by locking in sellers who rely on their ability to sell their stuff but deal ever-higher fees and rule changes.

It’s not an easy case to make. It’s true that the company generates more than $538 billion in annual revenue. That is more than any other public company in the world except Walmart. Its delivery network includes planes, trucks, and nearly 1,300 distribution facilities in the United States alone. This is a big company.

That said, Amazon accounts for less than a third of total e-commerce sales in the U.S. over the last four quarters. That’s not a monopolist if the relevant market here is digital sales. If the market is e-books alone, that is another matter. And this speaks to a major issue. What is the relevant market here? Amazon sells just about everything and competes with just about everybody. There is no metric that can establish the company as a dictator over price. It competes like everyone else.

Indeed, Amazon operates on extremely thin margins, just like everyone else, especially in inflationary times.

The government must prove some kind of exploitation via some kind of economic formula. They have to demonstrate some sort of harm to consumers, other competitors, and society at large. This might have been easy a century ago with Standard Oil (though even that is in dispute) but it is not so easy now.

Why would exploited consumers continue to use Amazon if they are being exploited and there are so many options? Why would producers continue to list their products on the site if they don’t benefit? None of this makes sense.

Plus, antitrust policy in general has always been fraught with difficulties. If you charge too little, that is predatory pricing. If you charge too much, that is price gouging. If you charge the same, that is collusion. There is no way to win this game. This has always been true. Plus, antitrust relies fundamentally on taking a snapshot in time and examining its contents. But the real world doesn’t work that way: the market is a forward-moving process that utterly demolishes the past.

This is why the case against Microsoft many years ago turned out to be so silly. The FTC and Justice Department were obsessed about a browser the company was giving away for free. Only a few years after the case was settled, the Microsoft browser lost market dominance and even its operating system lost its monopoly power. The entire case was a waste on all sides.

The government is forever regulating and policing the past whereas the market is forever building the future.

Have a look at the old poem called “The Incredible Bread Machine” written in 1966. I hope you have the chance to read it. It only takes a few minutes. It makes every salient point. It’s a story of a man who invented a machine to make bread for the whole world for very cheaply. It worked and his company gained nearly all sales, but society and government turned against him. The ending is particularly shocking:

“Five years in jail,” then the judge then said “You’re lucky it’s not worse. Robber Barons must be taught Society Comes First!

Now, bread is baked by government. And as might be expected, Everything is well controlled: The public well protected.

True, loaves cost a dollar each. But our leaders do their best. The selling price is half a cent. (Taxes pay the rest!)

Keep in mind that this was more than half a century ago, and today one dollar bread sounds pretty good. Ironically, Chicago right now is talking about instituting state-run groceries because so many of the private-sector stores have fled the city. It seems like we are following the same trajectory.

This case against Amazon will be tangled up in regulatory investigations for years, during which time the company will be devoting resources to fight off harassment rather than serving customers. It’s hard to see how that is a good thing.

Will anything good come from this FTC effort? Highly doubtful. Will anything bad happen? The markets don’t seem to think so. The AMZN stock price did not move much on the news.

That said, the U.S. desperately needs to restore a competitive economy. And small business certainly need reparations for the lockdown period. This is why they need massive tax breaks, regulatory permissions, and huge effort to give them freedom. They were completely crushed over three years of hell. A free market would be a welcome change.

Amazon is likely much larger than it would be in a genuine free market. A real competitive market is exactly the answer. That doesn’t require FTC action but a gigantic effort of emancipating the whole of American free enterprise.

Have you ever started a business? The first headache you encounter is compliance with tax and regulatory law. There are so many barriers, and all seem designed to demoralize and discourage the great entrepreneurs among us. They hobble enterprise and monopolize commercial gains for the privileged few.

If government really cared about restoring competition, it would address this problem, not punish companies that manage to get big by serving the public, as Amazon has. To be sure, the case is complicated simply because Amazon itself has deployed government in its own institutional interests.

The way forward is not through more government action but ever less such action, so that we can have a level playing field for every business in America. This dream, sadly, seems more far off than ever.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Jeffrey A. Tucker is the founder and president of the Brownstone Institute, and the author of many thousands of articles in the scholarly and popular press, as well as 10 books in five languages, most recently “Liberty or Lockdown.” He is also the editor of The Best of Mises. He writes a daily column on economics for The Epoch Times and speaks widely on the topics of economics, technology, social philosophy, and culture.