Economics: The War On Amazon

(Drivebycuriosity) - The Biden administration declared war on Amazon. Lina Khan, chair of the mighty Federal Trade Commission (FTC), filed a huge law suit against them on the claim of monopolist behavior (over 172 pages). The attack is the crown of her anti-Amazon crusade, which started in 2017. Then the Khan, just as a law student, published a paper called "Amazon`s Antitrust Paradox" ( yalelawjournal). 

The Khan complained that Amazon´s prices are "too low" (!), which would drive competitors out of business and would hinder potential competitors to emerge. The Khan ignored history, economics and the continuously growing number of Amazon competitors ( reason   yalelawjournal  driveby). In 2021 President Biden rewarded the activist and called her Chair of the FTC, apparently as a weapon against an unloved big corporation.

The FTC bases her law suit on a long list of accusations (ftc.gov ). Chair Khan alleges that Amazon has a monopoly on the online superstore market, repeating her monopoly claim from 2017. According to the FTC Amazon had in 2021 77% of the market, Walmart had 13% and Target 2%". 

Apparently the Khan repeats her mistake from 2017. She overlooks again that markets are very dynamical and are changing fast. In the second quarter 2023 Amazon`s online shops advanced just 5% Y-o-Y , while Walmart`s e-commerce segment expanded 24% and e-commerce platform Shopify´s revenues jumped 31% ( cnbc  ir.aboutamazon shopify). How can Amazon be a monopolist and stifle competition when competitors are growing much faster?

 

 ( source)

The Khan is also blind to the fact that Amazon is competing against foreign giants like Alibaba, Rakuten & Mercado Libre and versus innovative online platforms like TikTok, Google & Meta, who all are aggressively entering the highly competitive market ( apnews). Monopoly?

As in her anti-Amazon paper from 2017 Chair Khan overlooks that Amazon`s success is inspiring competition - not stifling.

 

                   Falling Online Prices

While the Khan in 2017 complained that Amazon´s prices are too low ("predatory") she now laments that Amazon raises prices ( marginalrevolution)! Whatever Amazon does, it is wrong in the eyes of the Khan. 

Since going online Amazon has been been obsessed with efficiency, cost cutting and delivering goods cheap, fast & reliably. They have been constructing a network of huge fulfillment centers which are very efficient and save a lot of costs. The competition with Amazon inspires Walmart, Target and many other retailers to be efficient and curb their prices as well. Today also Shopify, Wayfair and many other e-commerce companies are competing with Amazon which forces them all to sell at relatively low prices.  

As a result online prices are already falling, helping to curb the general inflation. Adobe reports that online prices extended their deflationary trend (adobe ): "Online prices in August 2023 fell 3.2% year-over-year (YoY), hitting a 40-month low—and marking a full year (12 consecutive months) of YoY price decreases". 

 

 ( source)

 

                        Based On Ideology

Khan´s Amazon law suit is not based on facts but on ideology ( drivebycuriosity). Khan`s FTC represents a Marxist ideology, explained former FTC-Commissioner & Khan colleague Christine S. Wilson (ftc.gov ). According to Wilson the FTC tries to replace the market process of supply and demand by a continuously regulated environment. Wilson calls the FTC´s antitrust enforcement "a politicized exercise that serves as a tool of oppression". 

Khan`s Amazon obsession is apparently driven from the Marxist belief that the competitive process inevitably leads to the emergence of “an ever-decreasing number of ever more powerful capitalist overlords - over the corpses and semi-corpses of small and middling capitalists" (Leon Trotsky  marxists.org). 

According to Marxist Trotsky “Large enterprises enjoy technical, financial, organizational, economic and, last but not least, political advantages over small enterprises. The greater amount of capital, being able to exploit a greater number of workers, inevitably emerges victorious out of a contest. Such is the unalterable basis of the concentration and centralization process of capital”.

 (ftc.gov )

The FTC law suit reminds me of Aynd Rand`s comment (aynrand ): "Under the Antitrust laws, a man becomes a criminal from the moment he goes into business, no matter what he does. For instance, if he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly or for a successful “intent to monopolize”; if he charges prices lower than those of his competitors, he can be prosecuted for “unfair competition” or “restraint of trade”; and if he charges the same prices as his competitors, he can be prosecuted for “collusion” or “conspiracy.” There is only one difference in the legal treatment accorded to a criminal or to a businessman: the criminal’s rights are protected much more securely and objectively than the businessman’s."
 

Conclusion: Amazon Prime membership offers benefits to consumers that other retailers are unable to provide, such as free, fast shipping options and the ability to return products at a number of convenient locations ( netchoice).  

Biden - and his protege Khan - hate Amazon because it is big and successful - and more popular than the President. I can buy an incredible array of goods through Amazon at prices that weren’t imaginable a few years back, delivered to my door within two days or less. The Khan wants to stop this.