In classic Lina Khan fashion, the chair of the Federal Trade Commission (FTC) has found a way to sue Amazon over its harm toward consumers while defining the consumers as third-party sellers on Amazon’s marketplace. Third-party sellers are, after all, also Amazon’s competitors, making the case yet another example of the FTC going after firms for competing with rivals, though this time with admitted more creative framing.
Amazon hosts millions of retail sellers on its online marketplace, which features Amazon’s products alongside third-party ones. Since 2007, independent retailers have gone from only 26 percent of total marketplace sales to over 60. Amazon offers opportunities to access its customer base, fulfillment services, and direct-to-consumer shipping, and millions of sellers utilize the marketplace. These independent sellers enjoy access to Amazon’s platform despite competing in some product areas.
The FTC’s lawsuit aims to address a list of perceived anticompetitive behaviors by Amazon. They include sellers allegedly being pressured to use Fulfillment by Amazon (FBA) and Amazon only featuring products in their “buy box” if the prices aren’t lower on other sites. A common thread between each allegation is that the consumer being harmed is not Amazon customers but other retail sellers who compete with Amazon on Amazon’s marketplace.
Evaluating the market definition further solidifies the focus on who this suit protects. If the FTC intends to determine how Amazon’s practices affect retail consumer prices, they may have looked at the total retail market. After all, as consumers, we often shop around for items both in-store and online. Amazon sales only account for a little over 10 percent of the total U.S. retail market, far from the FTC’s monopoly accusation. Focusing on only online retail would allow for a better case to be made as Amazon holds a 40 percent market share, though still not a monopoly.
The FTC also introduces a second market definition framed around sellers who use “online marketplace services.” In this market, the consumers are other businesses that sell goods retail consumers buy. By defining one market, the FTC can recast competitors as consumers.
Harm to sellers is an interesting way for the FTC to narrowly define the relevant market while protecting competitors, something they have been criticized for in the past as an example of their abandonment of consumer-focused antitrust policy.
Perhaps it is unsurprising that the FTC would take this approach, as the courts have repeatedly rejected their attempts to expand beyond the consumer focus of previous antitrust enforcers. By defining the consumer as the competitor, the FTC may hope to build an argument more amenable to the courts.
Unfortunately for the FTC, the supposedly harmful practices Amazon is engaging in are anything but. Amazon’s fulfillment services are not required by the company. Third-party fulfillment processing is allowed if they can match FBA’s standards. The catch is that few other fulfillment services can do this, especially at a better price than FBA offers. According to Amazon, fees for using FBA are 70 percent less than similar two-day fulfillment alternatives like FedEx and UPS.
Even if there were harm to sellers, there is no guarantee that these would be passed down to the retail consumer, which is usually the focus when evaluating “consumer harm.” There are plenty of scenarios that could result in consumer welfare improvements at the cost of some retail competitors. We see this most prominently in the FTC’s complaint about Amazon’s “buy box” rules.
As stated before, to be featured in Amazon’s buy box, which showcases excellent deals, sellers can’t have lower prices for the same item on a different website. Sellers may be at a disadvantage if it forces them to offer their best deal on Amazon instead of their website (a website which the FTC doesn’t consider an alternative). Through this arrangement, Amazon’s consumers can access the best deal seamlessly.
Within this proposed market definition, the FTC recasts the portion of Amazon’s competitors as consumers. Now, the FTC can claim it is defending consumer interest while continuing its prior agenda of reorienting antitrust policy towards protecting competitors.