"Dominant by Definition": Amazon and the Return of Antitrust Law
American antitrust law, which has gone largely unenforced over the last four decades, is in the midst of a resurgence. When it comes to antitrust litigation and legislation, all eyes are on Amazon. From Amazon Original TV shows to Whole Foods groceries delivered the next day with Amazon Prime, the company has embedded itself into every aspect of modern life. While the impacts of this proliferation into daily life may be concerning to some, Amazon’s anti-competitive market behaviour has legislators uneasy in particular. Still, the monolith continues to refute the recent slew of antitrust investigations into their monopolistic behaviour.
American antitrust law originated in the early 1900s to dismantle Rockefeller’s Standard Oil monopoly and has since ebbed and flowed in popularity throughout the past century. Three acts constitute the majority of modern antitrust law: the 1890 Sherman Act, the 1914 Federal Trade Commission Act, and the 1914 Clayton Act. Together, they outlaw monopolisation, "unfair methods of competition", and interlocking directorates (one entity making business decisions for competing companies). The 1940s through to the late 1970s saw the "Golden Era of Antitrust", as economists championed its ability to preserve free-market activities that monopolistic behaviour otherwise inhibits. In his renowned 1944 defence of classical liberalism, Road to Serfdom, economist Friedrich A. Hayek championed free-market economics and praised the role that a legal framework prohibiting anti-competitive behaviour plays in enabling better economic success.
However, other economists perceived antitrust law as an unwelcome intrusion into the market and the rise of the Chicago School led to the decline in antitrust enforcement, as seen in past years. As tech companies grow bolder in their monopolistic conduct, a new tide of antitrust cases is rolling in.
In a strongly-worded blog post on 6 October 2020, Amazon declared that “large companies are not dominant by definition”. However, Amazon’s predatory pricing schemes, control over their competition’s infrastructure, and large market share meet the definition of anti-competitive behaviour. Corporations should not be demonised for their size and success but they must be held accountable when their actions infringe upon the free market. The House Judiciary Committee conducted an Investigation of Competition in Digital Markets, reporting that:
"interviews with sellers, as well as documents that Subcommittee staff reviewed, make clear that Amazon has monopoly power over most third-party sellers and many of its suppliers".
Amazon directly competes with third-party sellers on its platform. They have the ability to identify best-selling products from competitors and replicate them under the Amazon brand at a cheaper price point since they control the infrastructure. Thus, their products benefit from reduced processing costs. This ability to manipulate competition on their own platform means that Amazon has displaced an open market with a privately controlled market. This affords their brands preferential treatment with decision-makers acting as de facto interlocking directorates (violating the Clayton Act) through their control over competing firms’ infrastructure and marketplace.
Another Amazon practice that has come under legal scrutiny is predatory pricing: the illegal act of undercutting other businesses on price and then raising prices once the competition is eliminated. Amazon’s massive revenue stream allows it to operate at a relative loss for the sake of long-run profits. This affords Amazon the ability to undercut nearly every smaller business that cannot compete at a loss. A prime example of predatory pricing is in the late 2000s when Amazon tried to buy e-commerce business Diapers.com. When Diapers.com didn't sell, Amazon dropped their prices, selling diapers at a loss until Quidsi (the parent company) gave in and sold. This is beyond competition leading to lower prices; predatory pricing is a deliberate use of a company’s size and resources to manipulate the competition.
The Democratic-led House Antitrust Subcommittee found Amazon's market share to be as high as 74 per cent across product categories but behind the curtain, Amazon Web Services (AWS) holds the key to the government’s antitrust investigation. AWS bills itself as "the world’s most comprehensive and broadly adopted cloud platform’ and its large market share in the highly concentrated area of cloud computing is exactly what has sparked concern among legislators.
While ultimately ill-fated, social media platform Parler’s antitrust lawsuit against AWS raised important points about the detrimental impacts on free speech that a monopoly over the internet causes. Parler asserts that AWS wields its market share to act as a gatekeeper to the internet. With AWS as well as Amazon.com, it is nearly impossible for any third-party firm to be successful without being listed with Amazon. If Amazon is the main authority on who has access to cloud computing or can sell items online, they possess an immense amount of power over the market.
While Amazon continues to deflect antitrust probes, insisting they are being targeted for their size and success, there is a record of anti-competitive behaviour on their part. Though antitrust law has gone under-enforced for decades, Amazon’s predominance in nearly every industry makes their anti-competitive behaviour more dangerous and a magnet for further antitrust investigations.