Sensing a changing antitrust landscape, Amazon fires a warning shot.
TIM DE CHANT - 6/30/2021
Enlarge / Lina M. Khan testifies during a Senate Commerce, Science, and Transportation Committee nomination hearing on Capitol Hill on April 21, 2021, in Washington, DC.
Amazon filed a 25-page petition today with the Federal Trade Commission asking that Chairwoman Lina Khan recuse herself from antitrust investigations into the company.
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Khan, a frequent critic of Amazon and other Big Tech firms, was appointed FTC chair less than two weeks ago. Though there has been plenty of speculation about her first moves, her short tenure to date means she hasn’t had much opportunity to file lawsuits or announce investigations. Amazon’s petition shows that its legal team hasn’t sat idle since her nomination as commissioner and subsequent appointment as chair.
“Although Amazon profoundly disagrees with Chair Khan’s conclusions about the company,” Amazon wrote in the petition, “it does not dispute her right to have spoken provocatively and at great length about it in her prior roles. But given her long track record of detailed pronouncements about Amazon and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind.”
Khan made a name for herself four years ago when she published a paper in a law journal. Titled “Amazon’s Antitrust Paradox,” the paper made the case that current antitrust laws have fallen short as tech platforms have risen to dominance. She argued that prices are a poor yardstick with which to measure anticompetitive behavior and market power, especially among platform companies like Amazon. The peculiar economics of platforms means that companies are happy to forgo profits in the name of growth, which leads to predatory pricing, she said. And because the very nature of platforms allows companies to control access to various products and services, it creates incentives for companies to favor their own products over rivals.
Since graduating from law school, Khan worked for the Open Markets Institute, which advocates for stronger antitrust laws and enforcement, and for the House Judiciary Committee, where she worked with Rep. David Cicilline (D-R.I.) to open a congressional inquiry into tech companies’ behavior.Advertisement
That Amazon has come out guns blazing suggests that the company thinks some of its behavior will likely reach the FTC’s inbox, if it hasn’t already. The FTC’s agenda isn’t necessarily set by the chair, Harvard Professor Shane Greenstein told Ars when Khan’s appointment was announced. Rather, it’s shaped by consumer complaints, merger proposals, and so on. The FTC would need a complaint to act on if it were to take action against Amazon.
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“Although Amazon profoundly disagrees with Chair Khan’s conclusions about the company,” Amazon wrote in the petition, “it does not dispute her right to have spoken provocatively and at great length about it in her prior roles. But given her long track record of detailed pronouncements about Amazon and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind.”
Khan made a name for herself four years ago when she published a paper in a law journal. Titled “Amazon’s Antitrust Paradox,” the paper made the case that current antitrust laws have fallen short as tech platforms have risen to dominance. She argued that prices are a poor yardstick with which to measure anticompetitive behavior and market power, especially among platform companies like Amazon. The peculiar economics of platforms means that companies are happy to forgo profits in the name of growth, which leads to predatory pricing, she said. And because the very nature of platforms allows companies to control access to various products and services, it creates incentives for companies to favor their own products over rivals.
Since graduating from law school, Khan worked for the Open Markets Institute, which advocates for stronger antitrust laws and enforcement, and for the House Judiciary Committee, where she worked with Rep. David Cicilline (D-R.I.) to open a congressional inquiry into tech companies’ behavior.Advertisement
That Amazon has come out guns blazing suggests that the company thinks some of its behavior will likely reach the FTC’s inbox, if it hasn’t already. The FTC’s agenda isn’t necessarily set by the chair, Harvard Professor Shane Greenstein told Ars when Khan’s appointment was announced. Rather, it’s shaped by consumer complaints, merger proposals, and so on. The FTC would need a complaint to act on if it were to take action against Amazon.
FURTHER READING
Of course, Khan likely has plenty of complaints to choose from on that front. Earlier this year, an independent bookstore in suburban Chicago filed a class-action lawsuit against Amazon, alleging that the company had colluded with five major book publishers to fix prices and stifle competition among sellers. Last month, the District of Columbia sued Amazon, saying that its most-favored-nation clauses prevented companies from selling their products for less on others sites. The high fees Amazon imposes on third-party sellers “impose an artificially high price floor” that affects prices on other sites.
And then there’s Amazon’s proposed acquisition of MGM Studios, which Sen. Elizabeth Warren (D-Mass.) asked the FTC to investigate. “This $8.45 billion deal would ostensibly help Amazon attract consumers to its subscription streaming services. But because this service is tied to a wide range of additional Amazon products and services that affect broad sectors of our economy, this transaction requires meticulous antitrust scrutiny,” Warren wrote to the FTC in an argument that plugs neatly into Khan’s “Antitrust Paradox” thesis.
Khan said during her confirmation hearing that in cases where recusal questions arise, she would consult with FTC ethics officials. How they’ll advise her is unclear, but they are surely aware that political appointees seldom come into government as blank slates, wholly lacking in opinions related to the thing they’re going to oversee.
Amazon isn’t the first company to attempt to push an FTC commissioner off of an investigation. For decades, companies have argued that commissioners have conflicts that require recusal, ranging from potentially biased statements to previous employment at law firms that represented the company or a competitor—and even employment at the company requesting the recusal. The tactic can work, though not every time.
TIM DE CHANTis a journalist and editor who covers tech policy for Ars Technica. He is a lecturer in MIT’s Graduate Program in Science Writing and has written for The Wire China, the Chicago Tribune, NOVA Next, and Wired magazine, among others. De Chant was awarded a Knight Science Journalism Fellowship at MIT in 2018, and he received his doctorate in environmental science, policy, and management from the University of California, Berkeley, and his bachelor’s degree in environmental studies, English, and biology from St. Olaf College.
And then there’s Amazon’s proposed acquisition of MGM Studios, which Sen. Elizabeth Warren (D-Mass.) asked the FTC to investigate. “This $8.45 billion deal would ostensibly help Amazon attract consumers to its subscription streaming services. But because this service is tied to a wide range of additional Amazon products and services that affect broad sectors of our economy, this transaction requires meticulous antitrust scrutiny,” Warren wrote to the FTC in an argument that plugs neatly into Khan’s “Antitrust Paradox” thesis.
Khan said during her confirmation hearing that in cases where recusal questions arise, she would consult with FTC ethics officials. How they’ll advise her is unclear, but they are surely aware that political appointees seldom come into government as blank slates, wholly lacking in opinions related to the thing they’re going to oversee.
Amazon isn’t the first company to attempt to push an FTC commissioner off of an investigation. For decades, companies have argued that commissioners have conflicts that require recusal, ranging from potentially biased statements to previous employment at law firms that represented the company or a competitor—and even employment at the company requesting the recusal. The tactic can work, though not every time.
TIM DE CHANTis a journalist and editor who covers tech policy for Ars Technica. He is a lecturer in MIT’s Graduate Program in Science Writing and has written for The Wire China, the Chicago Tribune, NOVA Next, and Wired magazine, among others. De Chant was awarded a Knight Science Journalism Fellowship at MIT in 2018, and he received his doctorate in environmental science, policy, and management from the University of California, Berkeley, and his bachelor’s degree in environmental studies, English, and biology from St. Olaf College.
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