Economics: Why The FTC Amazon Law Suit Was Nine Years In The Making

 (Drivebycuriosity) - The FTC law suit against Amazon makes a lot headlines. But not many may know that this law suit was 9 years in the making! 

Back in the year 2014 today`s FTC chair Lina Khan wrote a piece for CNN as policy analyst at the left-of-center New America Foundation about Amazon`s conflict with French book publisher Hachett (driveby ). Amazon dared to reduce book prices and tried to sell e-books cheaper than printed books (no costs for paper, printing, storing & transporting). The Khan sided with the book publishers, who insisted on their rights as monopolists to set book prices, and complained about Amazon`s "brute exercise of power" and suggested to "drastically curb Amazon’s power" ( cnn).  

In 2017 the Khan, then a law school student, wrote a famous paper: "Amazon`s Antitrust Paradox" ( yalelawjournal). She predicted that Amazon will become a monopolist and  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). 

 

 

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Since then the Khan continued her attacks on Amazon. She claimed publicly, that the corporation is "guilty of antitrust violations and should be broken up." ( wsj.com). In 2018, still a law student, the Khan presented her Amazon critique before the Stigler Center, a left-leaning organization ( StiglerCenter). Khan´s negative Amazon obsession impressed apparently President Biden who called her Chair of the powerful FTC in 2021.  

Being in command of the agency the Khan has swiftly consolidated her power and and employs the FTC as weapon in her crusade against Amazon (inc.com twitter bloomberg). The new Chair put more staffing towards the investigation of Amazon and started harassing her arch enemy by issuing several subpoenas to founder Jeff Bezos, CEO Andy Jasso & other employees about a diversity of Amazon businesses ( theverge). The FTC began also inquiring Amazon’s acquisitions of MGM, iRobot & the health care provider One Medical, even though these companies are in different markets than Amazon and none of them is a monopoly ( protocol).

The FTC law suit is the crown of Khan´s crusade and repeats her claim that Amazon is a monopoly. 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?

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 flawed 2017 Amazon paper Chair Khan overlooks that Amazon`s success is inspiring competition - not stifling.

Apparently Khan´s law suit is not based on facts, rather driven be ideology. The FTC Chair belongs to a movement called Neo-Brandeisians (after Supreme Court Justice Louis Brandeis, 1916-1939) who are working on a fundamental change of America´s economic structure and try to expand the role of the government in the U.S. economy significantly ( pbwt.com dailyjournal promarket reason).

 

 

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Khan`s reformed FTC represents a Marxist ideology, explained former FTC-Commissioner & Khan colleague Christine S. Wilson (ftc.gov ). According to Wilson the Neo-Brandeisians, who are now in control of the FTC, try 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 by 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). 

The FTC wastes the money of the tax payers for a ridiculous law suit, feeding an army of lawyers. The Khan tries to harm a company which is popular for low prices - especially at low income groups (which reminds of the crusade against Walmart) - and she attempts to destroy a service used by millions. The FTC hates Amazon because it is big & successful - and more popular than the Biden Government ( stratechery).