The FTC’s Groundless Pursuit of the Business Boogeymen

By SBE Council at 23 June, 2023, 9:15 pm

“Duped,” “Dark Patterns” and Delirium: Khan’s FTC Targets Popular Amazon Prime Service

by Raymond J. Keating –

It must be exhausting chasing down the business boogeymen at every turn. But never let it be said that Lina Khan, chair of the Federal Trade Commission (FTC), isn’t shying away from the challenge.

If there’s a small business in the U.S. that has served consumers well, and accordingly grown and gained considerable market share, while having to continue to compete against current, emerging, future, domestic and international competitors, well, the Khan FTC will be there to put a stop to or crimp such nefarious activity.

Hmmm, it’s almost like these anti-business activists, Khan and others in the administration and in Congress, who happen to now wield the power of government, aren’t all that fond of free enterprise. Go figure.

The Khan FTC’s latest target is Amazon’s Prime service. The FTC complaint opens: “For years, Defendant Amazon.com, Inc. (‘Amazon’) has knowingly duped millions of consumers into unknowingly enrolling in its Amazon Prime service… Specifically, Amazon used manipulative, coercive, or deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically-renewing Prime subscriptions.”

Golly, “dark patterns”? That’s a politically-charged term applied by anti-business activists to business operations or designs with which they disagree.

As The Wall Street Journal reported, “The FTC, a federal agency tasked with enforcing antitrust laws and consumer protection laws, seeks monetary civil penalties without providing a dollar amount. An Amazon spokesman dismissed the FTC’s allegations as ‘false on the facts and the law.’ … Amazon said the FTC filed the lawsuit without allowing the company to explain to the agency’s three commissioners why it shouldn’t be sued, bypassing a step that is typically part of the process for companies facing an enforcement action.”

Khan has spent her career – prior to and while at the FTC – working to ramp up government use of vague antitrust laws to advance a hyper-regulatory agenda against U.S. businesses.

By the way, it’s worth highlighting what was reported by the Journal about the consumer benefits of Amazon Prime:

“JPMorgan analysts estimated in June 2022 that a Prime subscription would cost $1,100 a year if its included benefits were sold separately. JPMorgan estimated at the time that Prime would have 270 million members around the world by the end of 2022. About 72% of all U.S. households, or 96 million, have a paid Prime membership, according to recent estimates from market research firm Insider Intelligence.”

Small Businesses Significantly Benefit from Amazon and Amazon Prime

Keep in mind that entrepreneurs and small businesses also are among those who derive enormous benefits from Amazon and Amazon Prime, both as consumers of products, and as providers of goods and services. SBE Council President and CEO Karen Kerrigan recently noted:

“Amazon’s annual U.S. Small Business Empowerment Report reveals that U.S.-based independent sellers using the platform are big contributors to the American economy. More than 60% of sales in Amazon’s stores come from small to mid-size businesses. These SMBs sell on average 7,800 products every minute, a total of 4.1 billion products in 2022. Of those product sales, more than 260 million were exported globally. Moreover, independent sellers have created about 1.5 million American jobs as a result of Amazon-supported businesses. The breadth of the impact – as underscored by the Amazon report data – is quite impressive. Indeed, as noted by SBE Council’s recent “Small Business Checkup Survey” (May 2023), tech platforms are critical to generating small business sales and their overall success – 30% of small business owners surveyed in our poll identified Amazon ‘as most important’ to their company’s branding and revenue generation. Other highly-ranked ‘most important’ platforms (of the top five) include Facebook, YouTube, Instagram and LinkedIn.”

Of course, as mentioned, there’s also the other side of the coin. That is, entrepreneurs and small businesses use Amazon to purchase goods and services, and often achieving significant gains as Amazon Prime members, including free and timely shipping. This shouldn’t be discounted in this discussion.

I can offer a personal example, which is rather typical.

As a book author and indie publisher, I use Amazon’s services to print and distribute my books (with Amazon Prime members, again, getting free and timely shipping of those books), and as an Amazon Prime member, I benefit, again via time and money saved, as well as in terms of the number of choices provided by other small businesses distributing their products via Amazon. My savings come in an assortment of areas, such as packing and shipping supplies for mailing my signed books, office supplies and equipment, gifts for my Patreon members, and so on. Indeed, my business benefits as both a creator/supplier and as a consumer on Amazon.

Kerrigan added:

“The benefits small businesses accrue from the tools and massive audiences provided by platforms is a reason why they feel threatened by proposed government regulations and legislation directed at these platforms. For example, of the startups SBE Council surveyed over the past year, 61% expressed concern about actions being pushed by the Biden Administration and some in Congress that propose to alter the business practices and models of larger tech platforms. Specifically, they worry that unwarranted government intrusion will make it more expensive to acquire and retain customers, impose new costs on services that many currently use for free, and cause disruption in communication channels they use to engage with customers and potential customers (among other harms, including going out of business!)”

The FTC, the Biden administration, and some in Congress are on a dangerous path when they attack large businesses based largely on their so-called “bigness.” And make no mistake, that’s what is happening. (For example, see my SBE Council analysis titled The FTC’s Bizarre Attempt to Rationalize Regulatory Overreach, November 18, 2022.)

Khan’s FTC is Undermining U.S. Business and Competitiveness

Antitrust hyper-regulation and interference rooted in political preferences, rather than how markets and the economy actually work, undermine entrepreneurship, businesses, investment, innovation, and competitiveness.

The Khan FTC seems to think that big government needs to protect consumers and small businesses from big business. In reality, though, it’s not large firms, that by the way remain disciplined by competitive forces and consumer sovereignty, that are threats. Instead, the real threats are unchecked government regulators and dictates on American businesses and workers.

Thankfully, there are some in Congress pushing back against this unwarranted and costly power grab by the FTC. For example, on June 21, Republican leaders on the House Appropriations Committee rejected the FTC’s mindboggling request for a nearly 40 percent increase in funding. The FTC sought $590 million, but the committee included funding of $376.5 – that is, $213 million less than the FTC’s request and a $53 million reduction versus last year.

Of course, in the end, boogeymen are fictional. The New Oxford American Dictionary defines the boogeyman as “an imaginary evil spirit or being, used to frighten children.” Sounds about right in the world of government and policy as well. Unfortunately, the pursuit of boogeymen doesn’t make for sound policymaking. In fact, it can turn out to be quite costly.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.