Morning Wire - FTC Sues Amazon | Saturday Extra

Episode Date: September 30, 2023

The Federal Trade Commission has filed an historic antitrust lawsuit against e-commerce giant Amazon. Amazon is accused of harming the sellers and consumers who use their platform. But does the lawsuit have merit? Get the facts first on Morning Wire. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Amazon is facing what could be an historic antitrust lawsuit from the Federal Trade Commission along with several state attorneys general. The e-commerce giant is being accused of harming small businesses and holding a monopoly. In today's episode, we hear from an expert on consumer protections legislation and we break down the case. I'm Georgia Howe with Daily Wire editor-in-chief John Bickley. It's Saturday, September 30th, and this is an extra edition of Morning Wire. joining us to discuss is Deputy Director of Consumer Choice Center, Yail Osseski. Yail, thanks so much for coming on. Thank you so much for having me.

All right. So first off, can you lay out this lawsuit for us? Who's bringing the suit and what are they claiming? So what we have here is the Federal Trade Commission. They're the nation's top competition authority. And they're joining with 17 different state attorneys general. And they brought out a lawsuit against Amazon, claiming that they're a monopoly power and laying at various charges that relate to Amazon's marketplace, to their sellers programs, to the prime program itself,

and they're essentially using this case to make the broader distinction that Amazon is too big and must be broken up by government officials. And how significant is this suit? Has Amazon ever faced anything like this before? So from the FTC, this is definitely the largest case that they brought. We have a similar case against Google about its search monopoly. that was brought by the Justice Department itself. This is from the FTC. FTC has launched previous suits against Meta for one of its acquisitions and against Microsoft to try to stop one of their mergers with Activision around computer gaming. So this is definitely the largest

case that FTC has taken on. It was able to sign up the state attorneys general as well, so that is basically adding a lot of fire to this. There are a lot of different points, though, that I think people are specifically legal experts are already starting to break apart. Because when we're talking about antitrust law, which is the basis of this case, we have to think about consumers. But a lot of this actually hinges on the sellers themselves. And the FTC makes a lot of arguments about what perfect competition is. That's still very difficult to define in the law. Okay. Can you break down some of the specifics of the claims? For example, how does the FTC say this affects maybe individual sellers or consumers?

So Amazon has a two-day delivery, a prime program that likely many of your listeners are familiar with. And in order to offer that to customers, Amazon has its own sellers program where people opt into this and they're able to have prime delivery. And it means that they need to use the Amazon logistics in order to do so. Now, the FTC and the various state attorneys generals view this as strong arming, view this as trying to weed out competitors. and at the same time, Amazon has this price guarantee. They want to ensure that they have the cheapest price available for a product. So if any seller is going to other marketplaces with a higher price, Amazon will penalize them. Now, that is sort of what Amazon has done as its business model to be able to offer lower prices.

But for the government, they view this as anti-competitive behavior. And I think that's where a lot of people might disagree. Another one is, you know, they talk about deceptive practices that, again, relate to shipping in logistics. And, you know, they have this idea of a tax. That's something that's noted in the complaint. And they say that the fee that is charged to the sellers in order to use the logistics is much too high. Again, that's something that's set by the market. The government views that as anti-competitive, but we're just going to have to see how the judge will rule at the end of the day. And what are you hearing from your legal colleagues? Do people think this suit actually

has legs and could succeed? It's very difficult because, you know, really going back to standard oil, you know, perhaps the tobacco monopolies. We haven't really had a case of this scale and surely not one that deals with an e-commerce industry because, you know, you only have 14% of all retail that's online. Their Amazon has about a 37% advantage among all the other retailers. So it's not the traditional monopoly that we've known in the past, whether it be in oil or tobacco or something else. So a lot of legal experts are really thinking it's going to take a novel theory to really push this through. It really hasn't been done before. And usually the metric for antitrust the past 30 to 40 years has been on consumer prices. And as pretty much anyone can attest,

if you use Amazon, prices are record lows. And they surely were during the pandemic when everyone was shopping online. So that metric, very difficult to bring into this case. However, we'll see what the arguments are of the FTC and the other government lawyers. Overall, this really seems like consumers, you know, this is not the first thing that's at the top of their list. And I'm pretty sure you could say the same for voters as well. How do Amazon sellers feel about this? Are there any associations of sellers that are part of the suit or took any part in bringing it forward? So this is purely a suit that's brought about by the government, the federal government through its independent agency, FTC, and then also the state attorneys general. You have had groups of

sellers online who complained about the rates that Amazon is charging. But again, the vast majority of the sellers are still using the platform because it's the best place to go. It's where you can get your products to the market the quickest. And Amazon now has this very sophisticated logistics and delivery service all through the prime membership that can get stuff out the door and into people's living rooms pretty quickly. So there might be some groups out there. But again, the market is very open. There is no monopoly on selling or putting things online. there are other stores like Etsy and eBay that are also doing a great job, especially post-pandemic. And if sellers don't like what they're doing on Amazon, they're free to go elsewhere.

That's what makes a lot of the monopoly argument a very weak point. Interesting. So what's Amazon's response to this, Ben? Amazon has responded. We saw they put up a press release on their website. They've been a bit active in media. They sort of debunk it point by point. A lot of it has to do just with their consumer centrism. Jeff Bezos talks a lot about this and they quote him. They mention that they do everything they do to lower prices for consumers. And that has been a large approach of Amazon really since it was started and is a pretty stellar point because if we look at all the surveys, Amazon is very much in the top 10 of most

favorite American companies. So I think that focus on the consumer centrism, having consumers be at the center of it, the customer being the most important. They were able to kind of use that in their debunking. again, this is just a response. We don't have the official legal document just yet. We'll see what happens in the court. The FTC doesn't have the strongest winning record as of late.

So we'll just have to see what happens in the court. Right. Well, we're going to be tracking this case. Yael, thanks so much for coming on and explaining this to us. Thank you so much for having me. That was Yail Osowski, Deputy Director of the Consumer Choice Center. And this has been an extra edition of Morning Wire.