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You Don't Need to Lose Amazon Prime for a Competitive Market

Updated: Mar 31

Gabriel Yossick

If you keep an eye on headlines, you might be seeing a surge of lawsuits on Big Tech. “US v. Amazon”, “US v. Google”, and now, “Epic Games v. Google” just to list a few. These cases all stem from an uptick in antitrust action from the government and private sector. Antitrust policies and laws focus on tackling monopolies and some of the negative effects associated with a concentrated market. In order to reign in these firms, we need to fund the government agencies who regulate monopolies, mergers, and acquisitions, to ensure we can unwind bad precedents that have given monopolies the advantage over other firms.

The latest surge of antitrust policies can be rooted in the recent populist wave against Big Tech (firms like Apple, Amazon, Microsoft, Google, and Meta) from both sides of the aisle. President Biden has selected staunch antitrust appointees to head the Federal Trade Commissions (FTC) and the Department of Justice’s antitrust division (DOJ), both of which are tasked at ensuring the market is competitive. However, antitrust suits are notoriously likely to fail. The government has not won an antitrust case since the turn of the millennia, with private suits having a little more success.

The current framework, in antitrust law, of advocating for consumer welfare maximizes the benefits of consumers by declaring a monopolistic practice that can raise prices to hurt consumers. Recent decisions from the judiciary have twisted consumer welfare to the point that “anything that benefits consumers, and what benefits consumers is lower prices.” Cases like US v. Microsoft Corp. (2001) and Ohio v. American Express (2010), left the government defanged in fighting anticompetitive behavior by requiring future cases to need an insane burden of proof on the government.

Circling back to technology, with the advent of free services (Google and Facebook) or lucrative bundles of goods and services (think Amazon Prime), the Courts have no issue with allowing Big Tech to do as they please. In a drastic hypothetical, each could theoretically own 100% of each market without the court batting an eye. The implications of the distortion of consumer welfare can hurt a market prided on its low barrier for entry.

Amazon, for example, completely revolutionized the book selling business by selling books at an ultra-low price, which hurts publishers and authors as they get lower payouts. Author earnings have fallen by 42% over the past ten years. The publishing market itself is already highly concentrated, with the 5 largest firms owning 80% of the market. If small firms and authors survive the lower revenues, outright competition from Amazon’s e-book service might kill off any remaining competitors. This has fostered an environment when the biggest publishing firms are now using the “Amazon defense” to justify more mergers. The Amazon defense is the idea that mergers should be allowed on the grounds to compete with Amazon, even if the market is highly concentrated.

Antitrust law, notably the Sherman Act, relies on precedent due to its concise four-page framework. Courts often interpret cases based on established judicial precedents rather than explicit statutes. In order to have a functioning market that provides equal competition to all, we need to make sure our laws change with this evolving landscape. This means unwinding these bad precedents through new legislation, and empowering the FTC and DOJ.

Updating statutes has not fallen from the mind of legislators. Senator Amy Klobachar (D - MN) has been the most vocal and front-facing Congressional member, as she has written a book on the matter, and chairs the Senate subcommittee on antitrust policy. In 2022, Senator Klobachar, in conjunction with a bipartisan Senate and House group, attempted to pass a few bills aimed at curbing some of the power of Big Tech. The American Innovation and Choice Act (AICA), the Open App Markets Act (OAMA), and State Antitrust Enforcement Venue (SAEV) bills received the most attention.

AICA and OAMA were not related to antitrust policy and only focused on raising industry  guidelines against Big Tech. AICA largely focused on creating designations on the biggest platforms, which would make these platforms fall under higher FTC and DOJ scrutiny. OAMA focused on the Apple and Google play stores by ensuring the two stores do not lock out other app stores from being downloaded. Unlike the other two bills, SAEV focused on changing the antitrust statute by giving states more power in raising antitrust law suits.

Despite seeing bipartisan support, these two bills were killed by Congressional leadership. After each bill was defeated, the bipartisan group tried to get it passed within the 2022 Omnibus bill, but only SAEV was integrated. Since the passage of the Omnibus bill, there have been no attempts to restart efforts at reforms. This frustrating turn of events marks the incredible need for more pressure on leaders. How many people know about these efforts by Congress? Not enough.

The number of mergers and acquisitions (M&As) within the past 3 decades has seen cycles of robust growth and decline, with the best years seeing M&As nearing around 10,000 requests. The most recent cycle, from the end of the 2008 recession to the COVID pandemic, saw an increase in filings and mergers, which is the era most relevant to Big Tech as Instagram and WhatsApp were purchased during this period.

Despite these robust numbers, the number of employees who review M&As at the FTC and DOJ have remained stagnant. The increase in M&As have left these two agencies without the resources to adequately challenge or comprehensively review most mergers. Only the biggest dollar value M&As would be analyzed. The FTC and DOJ have scrambled to reverse some of these transactions, like Meta’s purchases of Instagram and WhatsApp, but as mentioned above, these are likely to fail.

In order to prevent future consolidation, Congress instead needs to appropriate more funding for the FTC and DOJ. Within the 2022 Omnibus bill, some funding was given to both agencies for moderate increases in staffing, but these agencies need to see an increase of staff in the thousands instead of hundreds. Congress needs to function for reforms, even mild ones at that, to pass. This means further cooperation among Republicans and Democrats on this issue, especially at the leadership level. It’s a signal to Big Tech and the public that Congress is interested in passing reform, an assurance many want in the current era of deadlock and partisanship. 


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