FTC Case vs. Amazon: How to Destroy a Vibrant Small Business Ecosystem

By SBE Council at 26 September, 2023, 12:54 pm

NEWS

FOR IMMEDIATE RELEASE

September 26, 2023

Washington, D.C. – In response to today’s announcement that the Federal Trade Commission (FTC) is suing Amazon on antitrust grounds, the Small Business & Entrepreneurship Council (SBE Council) issued a response to Chair Lina Khan’s fervent chase in fulfilling her longstanding and uninformed bias against the company, and by extension the U.S. free enterprise system. According to SBE Council, the lawsuit, if successful, could upend a productive and vibrant platform that is loved and trusted by American consumers and utilized by approximately 500,000 U.S. small businesses to reach customers and drive critical sales and revenues.

“Chair Khan is using her control of the FTC to press forward with a myopic philosophy that has no basis in economic reality. Her disconnected theories put America’s digital leadership and vibrant startup ecosystem in serious danger. Today’s action against Amazon is the latest in Chair Khan’s crusade that once again gets it all wrong when it comes to how markets work, what is actually happening in the marketplace, especially the dynamics of the modern marketplace, which is driven by technology and digital tools to meet customers where they are. People are launching businesses in record numbers and across a broad range of sectors, including retail, because they have access to digital tools and platforms like Amazon to reach customers. Consumers are fully driving the marketplace and that is the way it should be, not regulators like Chair Kahn who continue to push illusory theories that a lack factual, legal or sound economic foundation,” said SBE Council president & CEO Karen Kerrigan.

Kerrigan noted that Chair Kahn has been unsuccessful in her four previous legal cases, primarily because the FTC’s claims were devoid of factual evidence and disconnected from market realities. Moreover, these cases could not prove consumer harm, something that the FTC is supposed to be focused on.

“While small businesses and companies like Amazon are forced to focus on serving consumers well given the competitive and ever-changing dynamics of the modern marketplace, the FTC has thrown ‘consumer harm’ out the window and is obsessed with pushing baseless theories. Unfortunately, small business sellers – and their customers – would be harmed if the FTC has its way,” added Kerrigan.

In a recent Small Business Check Up Survey Q3 published by SBE Council, small business owners who utilize the Amazon platform expressed alarm about pending FTC action. Nearly 80% of small businesses that sell on Amazon expect negative consequences from potential FTC interference, including sales disruption, employee layoffs, loss of their customer base, potential business closure, and increased sales and marketing costs.

“The current pain points of small business owners relate to inflationary pressures, high interest rates, lack of capital and credit, labor shortfalls, high gas prices, and decreasing sales and profitability. Undermining the Amazon model could heap more pain on small business sellers who derive sales from the platform. For most small sellers, Amazon represents only one channel that they use to drive sales. Contrary to the FTC’s claim that small business sellers are being held captive, and ‘rely on Amazon to stay in business’ the data and what small business owners tell us makes clear that Amazon is but one way that entrepreneurs reach customers. So, again the FTC’s theories and claims do not hold up to the facts. Small business owners use the platform because they want to be there. But make no mistake, every sale matters to a small business and cutting off this channel via government interference would be harmful for many small businesses,” observed Kerrigan.

As highlighted in the Small Business Check Up Survey Q3, Amazon accounts for 23% of total sales for these small business sellers. Small business respondents who reported that they sell on Amazon also utilize an array of tools and methods to generate sales, including:

●  Their small business websites: 69%

●  Social media platforms: 64%

●  Other tech platforms like Shopify, Etsy and eBay: 41%

●  Their brick-and-mortar storefront: 35%

●  Retail or wholesale partners: 33%

●  Buy online, pick-up-in-store (BOPIS): 23%

●  And larger company platforms like Walmart: 16%

SBE Council chief economist Ray Keating pointed out, “The U.S. economic landscape arguably has never been more dynamic and entrepreneur-friendly than it is today. And that overwhelmingly is thanks to advancements in technology that have empowered entrepreneurs like never before to create and/or improve goods and services, and to reach customers across the country and around the world. Unfortunately, the FTC, under the leadership of Lina Khan, has been blinded to these dramatic and exciting developments by an ideology disconnected from economic and business realities.”

Keating added, “While our economy is deeply intertwined, with large and small businesses competing, cooperating and serving each other, it’s hard to think of a tech leader that more clearly works with small businesses than Amazon. For example, more than 60 percent of sales in the Amazon store come from independent sellers, who are overwhelmingly small businesses, and that’s up from 40 percent a decade ago. Therefore, Amazon has every incentive to serve its small business customers well, and that’s clear from recent announcements by the company to offer expanded small business services in areas like supply chain management and shipping.”

Keating concluded, “The notion that Amazon is some kind of monopoly, or has the ability to wield ‘monopoly power,’ and therefore warrants hyper-regulation courtesy of the FTC, is simply absurd. Amazon claims 10.4 percent of the total U.S. retail market. That’s certainly not a monopoly – remember, a monopoly means a single seller of a product for which there are few good substitutes, and the industry has high barriers to entry – given the current market, never mind what lies ahead from current, emerging and future competitors. In the end, the most significant obstacle to entrepreneurs, small businesses and their employees arise from big government overreach by elected officials and their appointees who ignore sound economics. Government regulators trying to break-up a company like Amazon would be bad news for consumers, for entrepreneurs and small businesses, and for our economy.”

CONTACT:

KAREN KERRIGAN, kkerrigan@sbecouncil.org

RAYMOND KEATING: rkeating@sbecouncil.org

SBE Council is a nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For nearly 30 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth.

Visit www.sbecouncil.org for additional information. Twitter: @SBECouncil

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