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Government Files an Antitrust Suit against Amazon

Republicans often complain about the big tech companies. Now the Biden administration is actually doing something about one of them: Amazon. The government has sued to break up the company. If the government wins, it could have far reaching implication for consumers, small businesses, and even large businesses. It is a critical moment for Lina Khan, the FTC's hard-charging chair, who has often called for the breakup of Amazon.

It will be a difficult case to win both in court and in the court of public opinion. The government won't be able to prove that Amazon has used its monopoly power to charge prices higher than they would have been without a monopoly. The reason is simple: Amazon is often the cheapest supplier, not the most expensive. It strives for more market share above all else, killing off the competition. If Amazon's profits suffer as a result, so be it. Jeff Bezos & Co. are playing the long game and accept that.

The main argument will probably be the stifling effect Amazon has on the thousands of small businesses that sell their wares on Amazon. It has a stranglehold on them. If they don't agree to Amazon's terms and conditions, nobody will ever find them and they will lose out to competitors who agree to those conditions. Thus the argument in court will probably be this is how Amazon misuses its market power.

In the court of public opinion, it will be a tougher sell. There are over 100 million Amazon Prime members, most of whom like the low prices, free shipping and free movies. Amazon also does a good job at customer service most of the time. Convincing them that Amazon is evil may not be easy. On the other hand, the argument is that Amazon is so powerful that even a company as big and rich as Walmart can't compete against them and if Amazon were broken up, there would be more companies to choose from.

Politically, this could help the Democrats, though. Many people are unhappy with the big tech companies for various reasons. Having the government finally taking on one of them could resonate with them. It is a bit awkward for the Republicans to say "Big tech companies are good for you" when they have been railing against them for years. On the other hand, Amazon can afford the best lawyers in the business and will argue that although they are almost the only game in the e-commerce business, for virtually every kind of product, they have offerings from many vendors, so they encourage, not stifle, competition.

One of us (V) recently wanted to send fuzzy socks to a far-away friend who is not well. He went to Amazon and typed "fuzzy socks" in the search box. About 500 products popped up. He could imagine Amazon's lawyers saying: "Some guy wanted to send fuzzy socks to a friend. We have 500 kinds, from scores of companies, in every price range. Please explain how we are stifling competition." Of course, that misses the point that the guy had to go to Amazon because it is sort of the only game in town. The competition that is missing is between e-commerce sites, not between sock manufacturers. The case is expected to go on for years. (V)

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