February 22, 2024

Vision Cim

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Amazon has mostly avoided antitrust scrutiny, but that may change in 2022

Amazon.com Inc. has largely escaped the gaze of lawmakers in the antitrust battle, but that is changing rapidly and could lead to some challenges in 2022.

Congress and the Federal Trade Commission have Amazon in their collective crosshairs entering 2022. While new bills target Amazon’s online-sales practices, a longtime antagonist sits atop the FTC as it decides how to best keep the e-commerce leader in check.

A bill from U.S. Sens. Amy Klobuchar, D-Minn., and and Chuck Grassley, R-Iowa, seemingly takes direct aim at Amazon
and Apple Inc.
The American Innovation and Choice Online Act would ban dominant online platforms from favoring their own products or services, a practice known as self-preferencing.

The legislation, which could greatly affect searches provided to users by Amazon and Alphabet Inc.’s Google

would bar dominant platforms from discriminating among business users in a way that materially harms competition. It would put an end to such common practices as tilting search results in favor of the dominant firm; requiring a business to buy a dominant platform’s goods or services in exchange for preferred placement; and unfairly preventing another business’s product from inter-operating with the dominant platform.

“As dominant digital platforms — some of the biggest companies our world has ever seen — increasingly give preference to their own products and services, we must put policies in place to ensure small businesses and entrepreneurs still have the opportunity to succeed in the digital marketplace,” Klobuchar said in a statement.

More on the antitrust challenges facing Big Tech in 2022

The House Judiciary Committee passed a similar bill earlier this year, but it lacks the teeth of the Senate version, and House floor consideration has been delayed since then amid intense industry lobbying.

Rep. Ken Buck, R-Colo., ranking member of the House Judiciary antitrust, contends Big Tech “knows such bills will create competition in the marketplace.”

“The cavalry is on the way,” Buck recently told Axios. “You’re going to have a choice of platforms to deal with in the future, and you’re going to be so much stronger as a result.”

recent investigation by The Markup found Amazon often gives its own brands and exclusive products a leg up in search results over better-rated competitors — and that Amazon is inconsistent in disclosing to shoppers that those products are Amazon-brand products or exclusives.

Amazon, which did not follow requests for comment from MarketWatch, has warned third-party sellers that the legislation could jeopardize its ability to host third-party sellers on its platform completely, and prohibit services consumers enjoy, such as Amazon’s Prime shipping.

Antitrust attorney Paul Swanson highly doubts the bipartisan self-preferencing bills will “go anywhere” in a “locked-up” Congress in 2022, though. He said we are more likely to see Jonathan Kanter, who leads the antitrust division of the Justice Department, issuing consent decrees to impose restrictions on self-preferencing in lieu of legislation.

The FTC, Khan and Amazon

Even if Amazon avoids new legislation focused on its e-commerce platform as well as Justice Department scrutiny, it can expect a long and trying patch with the FTC and its chair, a longtime nemesis who is perhaps the company’s biggest concern.

FTC Chair Lina Khan came to prominence as the author of a 93-page paper, “Amazon’s Antitrust Paradox,” that appeared in the January 2017 issue of the Yale Law Journal.

In her paper, Khan argued Amazon avoided antitrust scrutiny by offering ultra-low-cost products to consumers while willfully operating with billions of dollars in losses for years. The end game, she wrote, was to crush competition in multiple markets to collect sensitive data, gain share and establish infrastructure dominance, as illustrated by the company’s current $1.76 trillion market value and estimated record $470.5 billion in 2021 revenue. In a 2020 letter to shareholders, founder Jeff Bezos said the company’s Marketplace unit accounted for nearly 60% of Amazon’s retail sales, which come from about 2 million sellers. 

Khan proposed to remedy the situation by reverting to the old concept of antitrust law by promoting healthy competition, as well as treating Amazon as a public utility and regulating them aggressively. That would include allowing competitors access to Amazon platforms on more favorable terms.

Though the FTC has yet to fully take on Amazon, a few moves indicate potential paths. Earlier this year, the FTC reportedly recommended filing a lawsuit against Amazon over data-security breaches in the company’s home security unit, Ring, but Khan dropped the matter following settlement negotiations with Amazon. The agency is also reviewing Amazon’s planned $8.45 billion purchase of MGM Studios.

Meanwhile, the FTC is fielding lawsuits on Amazon’s business practices. The Strategic Organizing Center, a coalition of labor unions, charged in a complaint filed to the FTC this month that Amazon does not sufficiently distinguish between its search results and paid ads, potentially “deceiving millions of consumers.”

The suit alleges more than a quarter of Amazon search results were third-party ads, but the company does not clearly identify which ones are sponsored results, which could be deceiving to consumers.