Economics: Antitrust - Punishing Efficiency

(Drivebycuriosity) - It seems that the Biden Administration wants to punish efficiency. The Federal Trade Commission (FTC), America´s mighty antitrust agency, filed a massive law suit against Amazon (172 pages ). The authority claims that Amazon is a monopoly and stifles emerging competition. 

Today`s FTC chair Lina Khan became famous in the year 2017 when she, then a law student, published a paper where she complained that Amazon is too efficient which leads to low prices. She claimed that Amazon´s prices are too low and will drive competitors out of business and hinder potential competitors to emerge ( yalelawjournal). The Khan ignored history, economics and the continuously growing number of Amazon competitors ( reason   yalelawjournal  driveby).

Amazon survived the recessions of 2001/02 & 2008 and became so huge because the corporation is very efficient. Since going online Amazon has been been obsessed with efficiency, cost cutting and delivering goods cheap, fast & reliably. Bezos & Co. have been constructing a network of huge fulfillment centers which operate very efficient and save a lot of costs. Amazon`s huge size also helps to keep costs low (efficiencies  of scale). The result are low prices and fast & reliable deliveries. Many orders are delivered in 2 days or less. Amazon became a platform for many small businesses and enables them to address a huge market.

The competition with Amazon forces 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, who are competing with Amazon, sell at relatively low prices. This way Amazon´s efficiency benefits even consumers who shop elsewhere.

The lawsuit shows that Khan´s FTC dislikes efficiency, low prices and the consumers. The agency wants to protect competitors, even those which are not as efficient Amazon and are therefore more expensive. 

FTC chair Khan - and FTC commissioners Karin Slaughter and Alvaro Bedoya - are part of the Neo-Brandeisians,  a think school who claims that efficiency is unfair.  The Khan declared in an interview: “The word efficiency doesn’t appear anywhere in the antitrust statutes....  It’s not that any business practice that increases welfare or increases efficiency is fine" (promarket. ). 

FTC commissioner Alvaro Bedoya wants to punish stores for providing the lowest possible prices to consumers (CarlSzabo ). Bedoya also claims that efficiency is unfair because efficient companies hurt inefficient competitors (ftc.gov ). Former Biden adviser Tim Wu, another Brandeisian and supporter of the Khan, claims, that efficiencies (caused by large size or created by mergers) are bad. He also sees factors like "productivity, declining costs, and cheapening of commodities" as bad for the society ( reason).  

If the FTC lawsuit against Amazon succeeds it will not only reduce competition (by harming the market leader), it also will lead to waste, corruption and nepotism. If corporations get punished for being efficient and for keeping costs low, it will slow economic growth, raise price level and reduce living standards of low income households who depend on purchasing cheap goods. But the lavishly paid political class in Washington might not care.