Today, on the anniversary of the creation of the Federal Trade Commission (FTC) in 1914, the FTC and 17 state attorneys general sued Amazon for using “a set of interlocking anticompetitive and unfair strategies to maintain its monopoly power.” The FTC and the suing states say “Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.”
The states suing are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin. The lawsuit was filed in U.S. District Court for the Western District of Washington.
While estimates of Amazon’s control of the online commerce market vary, they center around about 40%, and Amazon charges third-party merchants for using the company’s services to store and ship items. Last quarter, Amazon reported more than $32 billion in revenues from these services. The suit claims that Amazon illegally overcharges third-party sellers and inflates prices.
This lawsuit is about more than Amazon: it marks a return to traditional forms of government antitrust action that were abandoned in the 1980s. Traditionally, officials interpreted antitrust laws to mean the government should prevent large entities from swallowing up markets and consolidating their power in order to raise prices and undercut workers’ rights. They wanted to protect economic competition, believing that such competition would promote innovation, protect workers, and keep consumer prices down.
In the 1980s, government officials replaced that understanding with an idea advanced by former solicitor general of the United States Robert Bork—the man whom the Senate later rejected for a seat on the Supreme Court because of his extremism—who claimed that traditional antimonopoly enforcement was economically inefficient because it restricted the ways businesses could operate. Instead, he said, consolidation of industries was fine so long as it promoted economic efficiencies that, at least in the short term, cut costs for consumers. While antitrust legislation remained on the books, the understanding of what it meant changed dramatically.
Reagan and his people advanced Bork’s position, abandoning the idea that capitalism fundamentally depends on competition. Industries consolidated, and by the time Biden took office, his people estimated the lack of competition was costing a median U.S. household as much as $5,000 a year.
On July 9, 2021, Biden called the turn toward Bork’s ideas “the wrong path” and vowed to restore competition in an increasingly consolidated marketplace. In an executive order, he established a White House Competition Council to direct a whole-of-government approach to promoting competition in the economy.
“[C]ompetition keeps the economy moving and keeps it growing,” Biden said. “Fair competition is why capitalism has been the world’s greatest force for prosperity and growth…. But what we’ve seen over the past few decades is less competition and more concentration that holds our economy back.”
In that speech, Biden deliberately positioned himself in our country’s long history of opposing economic consolidation. Calling out both Roosevelt presidents—Republican Theodore Roosevelt, who oversaw part of the Progressive Era, and Democrat Franklin Delano Roosevelt, who oversaw the New Deal—Biden celebrated their attempt to rein in the power of big business, first by focusing on the abuses of those businesses, and then by championing competition.
While still a student at Yale Law School, FTC chair Lina Khan published an essay examining the anticompetitive nature of modern businesses like Amazon, arguing that focusing on consumer prices alone does not address the problems of consolidation and monopoly. With today’s action, the FTC is restoring the traditional vision of antitrust action.
(excerpt from “Letters from an American”)