New Delhi, (Samajweekly) Amazons business strategies and current market dominance pose anti-competitive concerns that the consumer welfare framework in antitrust fails to recognise, wrote Lina Khan in the Yale Law School Journal. She is now the chairperson of the US Federal Trade Commission.
“By this measure, Amazon has excelled; it has evaded government scrutiny in part through fervently devoting its business strategy and rhetoric to reducing prices for consumers. Amazon’s closest encounter with antitrust authorities was when the Justice Department sued other companies for teaming up against Amazon,” the article said.
“It is as if Bezos charted the company’s growth by first drawing a map of antitrust laws, and then devising routes to smoothly bypass them. With its missionary zeal for consumers, Amazon has marched toward monopoly by singing the tune of contemporary antitrust.”
Amazon is the titan of 21st century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space.
Khan says that allthough Amazon has clocked staggering growth, it generates meagre profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the centre of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it.
“Elements of the firm’s structure and conduct pose anticompetitive concerns, yet it has escaped antitrust scrutiny. This note argues that the current framework in antitrust, specifically its pegging competition to ‘consumer welfare’ defined as short-term price effects, is unequipped to capture the architecture of market power in the modern economy,” Khan said in the article.
“We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive.
“My argument is part of a larger recent debate about whether the current paradigm in antitrust has failed. Though relegated to technocrats for decades, antitrust and competition policy have once again become topics of public concern,” Khan added in the article.
Last year, the Wall Street Journal reported that “(a) growing number of industries in the US are dominated by a shrinking number of companies”.
In March 2016, the Economist declared that the “profits are too high. America needs a dose of competition” .
Policy elites, too, have weighed in, issuing policy papers and hosting conferences documenting the decline of competition across the US economy and assessing the resulting harms, including a drop in start-up growth and widening economic inequality.
Antitrust even made it into the 2016 presidential campaign: Democrats included competition policy in their party platform for the first time since 1988, and in October of the same year, presidential candidate Hillary Clinton released a detailed antitrust platform, highlighting not only a need for more vigorous enforcement but for an enforcement philosophy that takes into account market structure.
“As Amazon continues both to deepen its existing control over key infrastructure and to reach into new lines of business, its dominance demands the same scrutiny,” Khan said.
These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors, it adds.
This Note maps out facets of Amazon’s dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon’s structure and conduct, and underscores deficiencies in current doctrine.
The note considers two potential regimes for addressing Amazon’s power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties.
