The FTC’s Absurd Market Definition in Amazon Case

By SBE Council at 28 September, 2023, 9:30 am

by Raymond J. Keating –

Activist antitrust regulators have resorted to creating distortive, extremely narrow, unrelated-to-economic-reality market definitions to claim that a business is a monopoly. That is, exclude as much of the actual market as possible to artificially jack up the targeted company’s market share, and then move to hyper-regulate that company as a so-called monopoly.

This deceptive, politically-driven activity has perhaps been taken to a new level with the case brought against Amazon.com by the Federal Trade Commission (FTC) and 17 state attorneys general. It is stated in the case: “A single company, Amazon, has seized control over much of the online retail economy. Amazon is a monopolist.”

Really? Have any of these regulators and state attorneys general gone shopping lately?

The FTC and 17 state attorneys general define one of the two relevant markets in this case as “online superstores.” That’s a market?

Pages and pages are then offered in trying to limit the broad, competitive and dynamic market that retailers, suppliers, creators and consumers actually operate within, including Amazon, to justify something called the “online superstore” market. However, those pages amount to little more than explaining, in effect, how certain businesses, including Amazon, work and compete in retail to find ways to serve both consumers and sellers better, and thereby gain market share. That doesn’t create a new market, separate from other retailers. It’s actually kind of the point of free enterprise.

Again, to argue that there is a separate “online superstore” market is to either ignore or misunderstand the market process.

Indeed, whenever antitrust regulators grossly overreach and play games in attempts to dictate how markets and businesses function, it pays to go back to Economics 101 on monopolies. That is, a monopoly means that a market is served by only one seller, and there must be no close substitutes for the product and high barriers to enter the market.

That’s it. Anything other than that isn’t a monopoly.

Now, that might be inconvenient to those seeking to wield regulation and control, but that nonetheless is reality.

For good measure, it’s clear by the actions of large tech companies like Amazon, as well as Facebook and Google, for example, that these firms understand the dynamism of the marketplace, and that they are not only competing against current businesses, but against emerging and future competitors as well.

In the end, it’s hard to imagine a more competitive industry than retail. Consumers have myriad and expanding choices in the retail universe – both online and in terms of brick-and-mortar – as do sellers of goods and services. And the sector promises to get even more competitive, as retail represents a top industry where entrepreneurs are filing business applications the most (in record numbers, I might add) to launch new businesses.

From a small business perspective, the Amazon store is a great place to sell products, as are other profitable avenues, including one’s own website. As highlighted by SBE Council recent SMALL BUSINESS CHECK UP SURVEY, 23% of Amazon-seller sales are derived from the Amazon website. The remainder come from a wide array of channels, with the small business’s own website topping the list (69%), followed by social media platforms (64%), other tech platforms like Shopify, Etsy and eBay (41%), their brick-and-mortar storefronts (35%), retail or wholesale partners (33%), buy-online-pick-up-instore (BOPIS – 23%), and larger retail platforms like Walmart (16%).

So, again, I ask the question: Have any of these regulators and state attorneys general gone shopping lately?

If this case brought by the FTC and assorted state attorney’s general were to succeed, it would only serve to damage small businesses by undermining a company, i.e. Amazon.com, that is serving small businesses and consumers well.

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.