Amazon: Monopoly Myth or Market Dominator? The FTC Lawsuit Under the Microscope

  Americans buy a lot of stuff from Amazon, but only a lot of stuff. This raises a problem for those who think Amazon is a monopoly: The company is huge, but its position in the U.S. retail industry can be measured by many measures, and it does not necessarily dominate the market, let alone form a clear illegal monopoly.
  It is true that Amazon is currently the largest online retailer in the United States, but it only accounts for 15% to 20% of U.S. online retail sales. Nearly 50 cents of every dollar Americans spend online on electronics goes to Amazon; but about 3 cents of every dollar Americans spend on groceries goes to Amazon—including the offline chains it has acquired. At Whole Foods Market, 30 cents went to Walmart and its subsidiary Sam’s Club.
  Earlier this year, Amazon announced that its North American market sales in 2022 would be US$316 billion, while Walmart’s sales in the United States during the same period were US$393 billion. The total annual retail sales in the United States is around US$7 trillion, and the shares of these two retail giants in the US retail market are only single digits.
  At the end of the third quarter, the U.S. Federal Trade Commission (FTC) and 17 states filed a lawsuit against Amazon, claiming that it had adopted a series of anti-competitive practices. The lawsuit claims that Amazon strongly prevents sellers on its platform from offering lower prices on other e-commerce sites, and that some sellers are forced to purchase platform advertising and Amazon’s delivery services in exchange for being prominently featured in Amazon’s product display listings. Location. The FTC believes that the different elements of Amazon’s entire strategy are directed toward the same goal — to “prevent competitors from gaining the scale needed to compete effectively with Amazon,” which will ultimately harm the “tens of millions of American households” who shop on and sell through Amazon. “Hundreds of thousands of companies” with products.
  But which competitors are we talking about? This is where this lawsuit gets into trouble.

  Citing Amazon’s dominance of the e-commerce market is the same as citing Chipotle’s dominance of the topping-your-own burrito market.

  Determining the scope of the industry in which a company operates—the “relevant market” in jargon—is a key part of litigation. The size of the tank determines how dangerous the fish is: If the court thinks that the market in which Amazon competes is relatively large, it’s like they think Amazon is in a huge tank, then the company’s market share will appear relatively small and non-threatening. ; But if the court believes that Amazon is in a small tank and determines that its services have few substitutes, it will look like a shark.
  The plaintiff in this case describes Amazon as a great white shark in a tank. They said that Amazon has monopolized the market of “online supermarkets” and “online e-commerce trading platforms”. In these terms, some retail giants do not appear to be relevant competitors to Amazon, such as Home Depot, Costco, and Best Buy. Amazon’s critics have long argued that its growth has come at the expense of local small businesses, but those small businesses don’t appear to be competitors to Amazon either.
  David Balto, a former policy officer in the FTC’s Bureau of Competition, said when talking about the agency’s definition of Amazon-related markets, “I think most scholars who study market competition will Said the FTC needed to go to a ‘competing optometrist’ to get a new prescription for glasses because they were suffering from severe myopia.”
  This lawsuit mainly focuses on Amazon’s comparison with Walmart and eBay. If you narrow the market to only include retailers that meet all of these criteria, Amazon would have an overwhelming competitive advantage. “Documents and data from Amazon and industry analysts confirm that Amazon’s share of the total value of goods sold in large online supermarkets is well above 60% and continues to rise,” the complaint states.
  I find this a bit too clever. It’s no surprise that Amazon, which virtually invented e-commerce, has been evangelizing the concept of online retail for more than two decades and dominates the category it created. Citing Amazon’s dominance of the e-commerce market is the same as citing Chipotle’s dominance of the topping-your-own burrito market. Of course, that’s technically fine, but it doesn’t mean Chipotle dominates the entire fast-food market.
  If the court adopts a relatively broad definition of Amazon’s “relevant market”, then it will be difficult to label Amazon a monopoly. Of course, antitrust law continues to evolve, and Sullivan points to the 1945 U.S. Government v. Alcoa Co. case as a landmark decision. The judgment provides reasonable guidance on how much market share a company needs to occupy to be called a monopoly: 90% share “is sufficient to constitute a monopoly. It is doubtful whether a 60% or 64% share is sufficient to constitute a monopoly. A 33% share certainly does not constitute a monopoly.” “.
  Amazon’s share of the U.S. retail market is far from reaching these figures, and its share of the entire e-commerce market (approximately 40%) is also significantly lower than what the judge said in the above-mentioned judgment. The proposed monopoly questionable share.
  I am glad that the government has finally begun to try to curb the power of large technology companies; Amazon’s rise and continued growth in many fields such as retail, cloud services, logistics and entertainment, etc., have made it a single company. The impact on society as a whole is considerable and sometimes detrimental to employee health and dignity, public safety and labor conditions.
  But the plaintiff’s definition of Amazon’s relevant market will undoubtedly cause endless debates in court, which means that the next battle will never be easy.
  When the government broke up AT&T in the 1980s, the company controlled about 80% of the market. In the 1990s, when the government took aim at Microsoft, the company held about 90% of the market for PC operating systems compatible with Intel chips. If you want to use a mobile phone or an affordable computer, these two companies are basically unavoidable.
  Amazon’s position in the entire retail market is far less strong than AT&T and Microsoft back then, and imposing a definition cannot change this fact.

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