Consider This from NPR - Could The Big Antitrust Lawsuit End Amazon As We Know It?

Episode Date: September 27, 2023

The U.S. government and 17 states sued Amazon on Tuesday in a landmark case that could take down the tech giant.The Federal Trade Commission and a bipartisan group of state attorneys general say that Amazon is a monopolist that chokes competitors and raises costs for both sellers and shoppers.Lina Khan, the head of the Federal Trade Commission, has spent years arguing that a few big companies have too much control over corporate America. The new lawsuit against Amazon is the biggest test of these arguments yet. NPR's Ari Shapiro talks to FTC Chair Lina Khan, the driving force behind the case.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This message comes from Indiana University. Indiana University is committed to moving the world forward, working to tackle some of society's biggest challenges. Nine campuses, one purpose. Creating tomorrow, today. More at iu.edu. This week, the Federal Trade Commission effectively declared war on one of the biggest companies in the world. The FTC expected to file that years-long investigation into Amazon's online marketplace. This highly anticipated lawsuit claims the retail giant has an illegal monopoly. Just because Amazon is great and in many ways wonderful and convenient doesn't mean Amazon can break the law.... from Connecticut, New Hampshire, Rhode Island, New York, and...

Along with 17 states, the FTC accused Amazon of using its monopoly to choke competitors and harm consumers. We'll note that Amazon is among NPR's financial supporters and pays to distribute some of our content, but we cover it like any other company. Amazon's conduct causes online shoppers to face artificially high prices, even when they're shopping somewhere other than Amazon. FTC Chair Lena Kahn has been a driving force behind this case, and she's had Amazon in her sights for years. As a Yale law student back in 2017, Kahn wrote a paper arguing that antitrust laws had failed to keep Amazon in her sights for years. As a Yale law student back in 2017, Kahn wrote a paper arguing that antitrust laws had failed to keep Amazon in check. That academic paper went viral. She wrote that it was as if Jeff Bezos had charted the company's growth by drawing a map

of antitrust laws and then devising routes to smoothly bypass them, in her words. Ryan Tracy is a tech policy reporter for The Wall Street Journal. The argument was that antitrust had started to focus kind of myopically, in her view, on low consumer prices, which are obviously a good thing. But her argument was, if you just look at that measure in the short term, you're missing something bigger going on, and that is the health of the market as a whole and problems that creep up when companies come to dominate a market over a period of years. Khan became chair of the FTC in 2021, and at age 34, she is the youngest chairperson in the FTC's history. From the beginning of her tenure,

Kahn has said she would work to break up corporate monopolies and use strategic lawsuits to check the power of big tech. Consider this. After taking on big business generally, and big tech specifically, the FTC is now leading a charge that could reshape Amazon as we know it. And the public as a whole has been deprived of the benefits of open and fair and free competition. And so that's what this case is really about. And those are the harms that we're looking to fix. From NPR, I'm Ari Shapiro. It's Wednesday, September 27th. This message comes from Indiana University. Indiana University is committed to moving the world forward, working to tackle some of society's biggest challenges. IU makes bold investments in the future of bioscience and cybersecurity,

cultivates visionary work in the arts and humanities, and prepares students to become global citizens by teaching more languages than any other university in the country. Indiana University. Nine campuses, one purpose. Creating tomorrow, today. More at iu.edu. This message comes from NBC News. Did you know you can listen to Meet the Press as a podcast?

Join moderator Kristen Welker for breaking political news, in-depth analysis, and interviews with leaders and newsmakers. Search for Meet the Press and follow now. It's Consider This from NPR. The head of the Federal Trade Commission has spent years arguing that a few big companies have too much control over corporate America. The new lawsuit against Amazon is the biggest test yet of these arguments. I spoke with FTC Chair Lena Kahn about the specific claims in this case and the larger implications for business. Amazon has built its brand on a reputation for offering lower prices than its competitors. And in this lawsuit, you

argued that they have only maintained low prices by manipulating the market in ways that ultimately result in shoppers paying higher prices than they would if they were fair competition. So can you begin by giving us one specific example of how you allege Amazon has done that and hurt shoppers? So there are a variety of ways that Amazon is now hurting its customers, both the sellers that rely on Amazon to reach shoppers as well as shoppers themselves. One is that Amazon has been hiking the fees that sellers have to pay. So sellers now have to pay a 50% cut to Amazon. It's a 50% Amazon tax. Sellers have to pass that along to consumers and sellers themselves or small businesses. We've also seen how Amazon

has rolled out a pay-to-play ad scheme, which means that ads are what you see when you search on Amazon and you often get less relevant results and are steered to higher products. And in a healthy, well-functioning, competitive market, if a company chooses to hike prices and worsen service for its customers, that creates an opening for rivals to come in. But our lawsuit alleges that Amazon has actually engaged in a set of illegal tactics to prevent that from happening and to unlawfully maintain its monopoly. Like, just to get specific, I just bought a pet product from a website that was not Amazon. What do you allege Amazon does to make sure the website I bought the pet product from

doesn't have a lower price? So Amazon has a policy, an anti-discounting policy, that basically punishes sellers who sell on other retail platforms at a lower price. They have a whole set of coercive and punitive outcomes for sellers who do that. You can basically disappear from Amazon's storefront if you put a lower price somewhere else. And for sellers, given the significant shopper traffic on Amazon, if Amazon makes you disappear from that storefront, that can be quite fatal for your business. So this is really small businesses survival that's on the line. And so when Amazon says, hey, I'm going to punish you if you have lower prices elsewhere. Businesses take that very seriously. And oftentimes, as a result, businesses have to set their artificially high Amazon price

as a price floor across the internet. So not only are you paying more on Amazon, but our lawsuit alleges that people are actually paying more across the internet because of Amazon's illegal tactics. We invited Amazon to provide somebody to speak with us. They declined. But the company's general counsel posted a response to the lawsuit on the website. And that response says, in part, if the FTC gets its way, the result would be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small

businesses, the opposite of what antitrust law is designed to do. That's a quote. How do you respond to that? Look, I recommend everybody to read the lawsuit. The introduction itself is quite short and readable. It's 10 pages. So I recommend people read our lawsuit and the tactics that we note. These anti-discounting schemes, this coercive tie that requires sellers to use Amazon's fulfillment service if they want to be able to access a decent amount of shoppers. These are all tactics that we allege are designed and have the effect of depriving any other actual or potential rival to Amazon from being able to get the scale needed to meaningfully compete. But in terms of the statement saying, if you win the lawsuit, there are going to be fewer products and higher prices, lower deliveries, et cetera. I mean, do you think that's factually true or false? Totally false. Our lawsuit is alleging that as a result of Amazon's illegal practices,

people are paying higher prices. Consumers are paying more. Sellers are paying more. I mean, sellers are having to give over one of every $2 to Amazon. These are many of them small businesses with low margins. And so we absolutely believe that if we're successful, there will be honest and fair competition in the marketplace and the public will benefit. The public will benefit through lower prices, higher quality, greater selection, more innovation. And both shoppers and sellers will have more opportunity, right? I mean, if you go and read some of the seller comments, you really see how many of them live in fear of Amazon's conduct. And really, that's what our anti-monopoly laws were designed to prevent. Many people were surprised to see that this suit does not

specifically ask for a breakup of the company. You argued in a famous 2017 academic paper that the only way to restrain companies like Amazon is to break them up. Now, I know that your first step is that you need to prove in court that they broke the law. But if I were to ask you for the 10,000 foot view, do you think there is any way to get Amazon to fix all of the problems that you lay out here without breaking up the company? It's a good question. And as you noted, this complaint is focused on establishing liability. We do, in our prayer for relief, note that all options should be on the table, including structural relief. So that's certainly part of what's potentially contemplated here. Ultimately, any relief needs to stop the illegal

tactics, prevent a recurrence, and fully restore competition. And one thing we note in the complaint is that in digital markets, the harms really aggregate, and you can have cumulative harms in ways that are greater than the sum of the individual parts. And so when you have an unlawful set of tactics over years and years and years, and as a result of those tactics, the gap and gulf between Amazon and everybody else is extremely vast. To actually fully restore competition might require significant relief. And so that's what the complaint is teed up for us to be able to argue to the judge. There are several polls and surveys showing that Amazon is one of the most popular and trusted brands, even one of the most well-regarded institutions in the U.S.

Just in our last minute, are there risks to bringing a massive lawsuit against a company that many people seem to love? Look, we follow the facts and the law where they take us. We believe that if you have open, fair, competitive markets, those are really what are best positioned to make sure the public is winning from competition. This is really about ensuring that the next set of Amazons are able to come into the market and fairly compete rather than be unfairly and unlawfully locked out of the market. So this is really about more competition, more types of Amazons, the next generation of Amazons being able to get a foothold in the market and compete

and make life better for consumers, for sellers, for shoppers. And that's really what this lawsuit is designed to do. That was FTC Chair, Lina Khan. If you want to hear more stories like the ones on Consider This, check out All Things Considered, our afternoon news show. It's a mix of deep dives like this one, along with more stories you'll want to hear. To stream it live every afternoon, seven days a week. It's Consider This from NPR. I'm Ari Shapiro.