FTC Chair Lina Khan testifies during the House Energy and Commerce Subcommittee’s budget hearing on Innovation, Data, and Commerce on April 18, 2023.
Tom Williams | Cq-roll Call Inc. | Getty Images
The day after filing a major antitrust lawsuit AmazonFederal Trade Commission Chair Lina Khan defended the agency’s decision to pursue the company, explaining how the company was able to leverage an effective 50% tax on sellers by using its monopoly power. .
Khan said in an interview Wednesday on CNBC’s “Squawk Box” that the case is “fundamentally about protecting free and fair competition,” and that the FTC will punish big companies for their success. He denied any suggestion that he was interested.
The case marks a major milestone for Mr. Khan’s FTC, given that Mr. Khan’s own fame rose to prominence with his 2017 memo to the Yale Law Journal, “Amazon’s Antitrust Paradox.” It was expected. The article details Khan’s views on how the prevailing approach to antitrust enforcement at the time failed to take into account the vast scale and network effects that existed in digital markets.
Khan on Wednesday pointed to scaling up as a way for Amazon to leverage its power and weaken competition.
“Given economies of scale and network externalities alone, the only way to really benefit from the acceleration and momentum that digital markets bring is whether you are a shopper or a seller,” Khan told CNBC’s Andrew Ross Sorkin. We need to create critical mass.” “And Amazon’s tactics, once it achieved that scale, have been to focus on tactics that deprive rivals of the ability to acquire similarly significant customer numbers.”
Mr Khan added that any remedy would need to take into account the total harm caused by its scale in order to “fully restore competition”. The FTC has not yet detailed the relief it will seek, as it focuses on establishing liability, which is usually the first step in monopoly cases.
Khan also explained the FTC’s decision to define the market dominated by Amazon as an online superstore.
“The superstore concept is really well established in the brick-and-mortar world,” Kahn said. “We have experienced a series of successful antitrust cases in defining our market as a superstore market.”
Khan added that the complaint applies that idea to the online world, with capabilities that only online superstores can offer through the “depth and breadth” of their products.
The FTC’s complaint states that online superstores differ from online and brick-and-mortar competitors by offering unparalleled variety and selection, accessible on demand and 24 hours a day.
But Amazon has long argued that it competes with a wide range of retailers both online and offline. The company downplayed the size of the market, saying it represents 4% of all U.S. retail sales.
However, the US e-commerce market is dominated by Amazon. Research firm Insider Intelligence estimated last year that the company accounts for nearly 40% of Americans’ online spending.
The complaint also alleges that Amazon has a monopoly on the market for selling services to online retailers. The company believes that due to “network effects” between Amazon’s online superstore and marketplace services, the more sellers it signs up, the more targeted and relevant data it can provide, and the more He said that the company’s advantage can be further solidified in that many sellers will start selling. As a marketplace, Amazon can attract more shoppers.