The Federal Trade Commission and the American Booksellers Association think Amazon leverages market power to monopolize profits and hurt consumers — but for opposite reasons.
The FTC filed a long-anticipated lawsuit last September against Amazon, alleging the technology titan stifles competition to keep prices high. In April, the American Booksellers Association filed a motion to join that suit, but with a twist: It thinks prices are too low. This mishmash of accusations should make everyone nervous.
As Americans for Tax Reform’s Tom Herbert details in National Review, this glaring contradiction highlights everything wrong with the FTC’s recent antitrust push. The FTC invents its market definitions and then uses them to badger disfavored companies in court that politicians then use as talking points.
Such an arbitrary approach to antitrust law will likely harm consumers by prioritizing the pet projects of regulators and politicians over consumer welfare, leading to decisions that are made regardless of the effect on prices and innovation.
In contrast, over the last few decades the consumer welfare standard has been the lynchpin of antitrust enforcement prioritizing the likely end result on consumers. In competition policy, identifying the relevant markets is key to determining antitrust violations. Very little can be done in competition enforcement without appropriate definitions to judge cases. Here’s how the FTC butchers these market definitions to feed this narrative.
American consumers mix and match purchases from online and in-person retailers and wholesalers. Amazon products can be picked up online, but similar products can often also be bought in competing stores like Target, Meijer, Kroger, Bass Pro, Costco, many sporting goods stores, Home Depot, and more. In fact, consumers often comparison shop between online and offline stores to find the best and most convenient option.
But by creating a novel “online superstore” classification — which ropes in only online purchases — some of Amazon’s largest competitors are defined outside of their competing market. Instead, Amazon’s market concentration is measured by how its market share stacks up against the online versions only of Walmart, Target, and longtime online store e-Bay.
In other words, the FTC does not wrestle with how consumers actually shop. Besides, low book prices have actually been great for consumers.
Contrary to conventional wisdom, the United States is experiencing a “book boom,” where consumers are spending more money, not less, on recreational reading. Although down from its peak, bookstores are experiencing a “years-long revival” with the American Booksellers Association doubling its membership of small bookstores since 2016 and even planning on adding nearly 200 more independent stores to its membership in the next two years.
As many expected, the rise of Amazon did lead many large bookstores like Barnes & Noble and Borders to close at the turn of the century. But what may not have been anticipated is that independent bookstores would reinvent themselves by prioritizing the 3 C’s of community, curation and convening. They have not only survived — but thrived — by providing value in ways that Amazon’s online presence cannot compete, thereby encouraging market specialization and consumer choice.
The American Booksellers Association’s latest attempt to join the Amazon lawsuit is little more than window dressing for protectionism. It has resurfaced the many issues with the FTC’s current approach to antitrust enforcement and has once again exposed the hypocrisy of the “big is bad” boogeyman.
American consumers have reaped enormous benefits from Amazon. Although less well known, they have also benefited from the market evolution of independent bookstores that Amazon helped spark. It’s time for the American Booksellers Association to get out of the way of progress and allow their customers to shop in the ways they prefer.
