Antitrust Lawyer Blog Commentary on Current Developments

Articles Tagged with amazon

On June 20, 2018, the Federal Trade Commission (“FTC”) announced that it will hold a series of public hearings on whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection enforcement law, enforcement priorities, and policy.  The multi-day, multi-part hearings will take place this fall and winter.

It is expected that a lot of time will be devoted to the dominant digital two sided platforms (Google, Facebook, and Amazon) as well as the associated network effects.  The FTC is interested in learning more about how their conduct hinders competition and innovation or how their services actually benefit consumers and enhance competition and innovation.

The hearings and public comment process will provide opportunities for FTC staff and leadership to listen to interested persons and outside experts representing a broad and diverse range of viewpoints.  Additionally, the hearings will stimulate thoughtful internal and external evaluation of the FTC’s near- and long-term law enforcement and policy agenda.  The hearings may identify areas for enforcement and policy guidance, including improvements to the agency’s investigation and law enforcement processes, as well as areas that warrant additional study.

On April 19, 2018, Makan Delrahim, Assistant Attorney General of DOJ’s Antitrust Division delivered the keynote address at the at the University of Chicago’s Antitrust and Competition Conference. The focus of his remarks was “evidence-based enforcement.” He said that “an evidence-based approach requires enforcement built on credible evidence that a practice harms competition and the American consumer, or in the case of merger enforcement, that it creates an unacceptable risk of doing so.”

Delrahim noted that outside of flat out price fixing and naked restraints of trade, which are clearly illegal, “antitrust demands evidence of harm or likely harm to competition, often weighed against efficiencies or procompetitive justifications.”  He added that “taking an evidence-based approach to antitrust law should not be mistaken for an unwillingness to bring enforcement actions.” He said that if there is clear evidence of harm, the antitrust enforcers should vigorously prosecute the antitrust laws. He noted that antitrust enforcers that failed to take action when they had credible evidence and accepted behavioral “band-aid” fixes to anticompetitive mergers should accept some blame.  Delrahim noted that “the Microsoft case proved that an evidence-based antitrust enforcement approach can be flexible in its application to new types of assets and markets—in that case, the computer code and software markets.”

His message was that the U.S. and international antitrust agencies should not simply go to war with digital platform companies rather a more effective approach would be grounded in evidence.  He added that “in certain platform markets involving network effects, there may be barriers to entry or a tendency toward a single firm emerging as the sole winner” and in those situations, “antitrust enforcers may need to take a close look to see whether competition is suffering and consumers are losing out on new innovations as a result of misdeeds by a monopoly incumbent.”

On August 23, 2017, the Federal Trade Commission cleared Amazon.com Inc.’s acquisition of Whole Foods Market Inc. without a second request investigation. As mega mergers go, this antitrust review was fast and furious.

When the deal was announced, consumer groups and politicians questioned whether the combination was anticompetitive. Even President Trump, during the campaign, had been quoted as saying “Amazon had a huge antitrust problem”.

Many others were outspoken that the deal should at the very least undergo a thorough investigation because as they saw it, Amazon was adding groceries to its mix in an effort to cement its position as the go to platform where most online commerce takes place. The argument goes that Amazon is a monopolist in online retailing (46% of online retail sales) and it was acquiring Whole Foods, an organic and premium food grocery brick & mortar retailer providing Amazon with additional infrastructure that would allow Amazon to sell and deliver groceries in more cities. Indeed, AmazonFresh is available only in a handful of cities, and doesn’t have the same range of offerings as Whole Foods. Whole Foods delivers through Instacart, but not in a number of of cities. Amazon Prime offers free delivery and Instacart’s delivery fees can add up. Therefore, the deal raised both vertical (online platform along with brick & mortar stores) and horizontal (both firms competed in the retail distribution of food) issues, but combined the merged firm was still a very small retail grocer and the addition of Whole Foods tiny share of the grocery business was trivial.

Andre P. Barlow
Few missions are as important to the U.S. Department of Justice’s Antitrust Division as preventing anti-competitive mergers or permitting them with adequate conditions to prevent competitive harm. After all, a merger is forever — fixing it after the fact is too messy.

The DOJ is currently investigating Anheuser-Busch InBev SA/NV’s (“ABI”) acquisition of SABMiller PLC, the largest beer merger in history, as well as its proposed divestiture of SABMiller’s interest in the MillerCoors LLC Joint Venture to Molson Coors Brewing Company. These proposed transactions lock in place the two largest beer competitors in the United States while fundamentally changing the dynamics in the beer industry for smaller brewers, distributors, wholesalers and retailers. While ABI maintains that the proposed transactions do not change the competitive landscape, the DOJ knows better.

Indeed, the DOJ’s recent approach in approving Charter Communications Inc.’s acquisition of Time Warner Cable Inc. (“TWC”) and its related acquisition of Bright House Networks LLC to create New Charter, the merged firm, is instructive. Despite no geographic overlap in any local market, the DOJ required comprehensive behavioral conditions to prevent New Charter from engaging in future anti-competitive conduct against its smaller rivals. The DOJ should take the same tough and sophisticated approach to protecting consumers from the much larger ABI/SABMiller merger and the new ownership by Molson Coors, which will create two beer giants that will dwarf its rivals.