This week, the Biden Administration’s Federal Trade Commission (FTC) filed a lawsuit against Amazon. If it succeeds, the suit will rip apart one of America’s leading businesses – harming consumers, small and medium-sized businesses, and the retail sector.
- The FTC’s lawsuit will stifle opportunities for small and medium-sized businesses.
More than a half million American small- and medium-sized businesses sell in Amazon’s store, and these businesses have created 1.5 million American jobs. This lawsuit, if it succeeds, will break the services and tools Amazon has built to ensure their success.
These businesses would also face rising logistics costs. Fulfillment by Amazon (FBA) fees are an average of 30% less expensive than standard shipping methods offered by other major third-party logistics providers. The FBA service allows sellers to focus their time and resources on providing high-quality products. There is no equitable option for these businesses to affordably pack and ship their products.
Small business owners don’t want this lawsuit. They believe antitrust government policies, like this suit, will hurt sales, not help them. President Biden and the FTC hope to harm Amazon with this lawsuit, but over 60% of sales on Amazon are by third-party, small-to-medium-sized businesses. So who will really be harmed if this suit succeeds?
- If successful, the FTC’s lawsuit will raise prices for consumers.
Retail spending is a critical part of the U.S. economy. Nearly 70% of the American economy is based on consumer spending, and retail sector spending accounts for 6% of U.S. GDP. Both consumer spending and the labor market are slowing, meaning we can’t afford drastic government decisions that will only raise prices further.
A Computer & Communications Industry Association (CCIA) study in 2022 concluded that if lawmakers impose regulations that solely target online prices, they would affect prices in physical stores as well. Online and physical stores compete with each other’s prices in order to attract and retain customers. When one channel’s price changes, the other channel usually changes to match it quickly. In attacking Amazon Prime, the FTC’s lawsuit will undeniably raise prices across the retail market.
Pew Research Center polling shows that voters believe increasing prices and partisanship are the biggest problems in the U.S. This lawsuit only exacerbates both of these problems.
- The FTC’s lawsuit undermines the core American principles of competition and innovation.
As NetChoice’s report on the current state of retail notes, the narrative around retail over the past several years by some lawmakers has been that “retail is a largely stagnant industry that is being swallowed whole by large online retailers that are smashing small businesses.”
But for every dollar consumers spend, 75 cents actually go to retailers outside of the five largest ones. This means that even the largest retailers are constantly having to innovate in order to compete for customers. Without arbitrary antitrust regulations restricting growth, the U.S. digital economy is already very competitive, and two-thirds of Americans trust the free market to address competition issues in the tech industry.
What the lawsuit would actually do if it succeeds is limit opportunities for the hundreds of thousands of small and medium-sized retailers who sell on the platform; to the benefit of the “rivals” the FTC cites routinely in the case. The rivals include Walmart, the largest retailer in the country. If customers were to lose access to the Amazon store and the hundreds of thousands of independent sellers who sell on it, they would turn to these rivals – large retailers who, notably, prevented small retailers from gaining market share during their rise to success in the 90s.
The FTC calls Amazon a “monopoly” 10 times in its press release about the lawsuit, but it never states what Amazon is a monopoly of. Monopolies occur when one firm becomes the only seller of a certain product, without any close substitutes – and then uses that position of power to raise prices on consumers who are without other options. The reality is that more than 60% of its products are being sold by independent businesses (who are making money through their businesses), and those independent businesses compete to offer affordable prices to customers every day. Likewise, if customers don’t find what they are looking for at an attractive price, there is no shortage of shopping apps, retail websites and physical stores they can visit to find what they are looking for.
- The FTC’s lawsuit blatantly disregards what Americans say they want.
Last year, NetChoice polling found that a whopping 89% of Americans want Congress to look for ways to address inflation rather than break up large tech companies. Since then, interest rates have skyrocketed, and prices for food, housing, energy and transportation have left millions of Americans struggling. In fact, since President Biden took office, prices have increased cumulatively by 17.4 percent, while hourly wages have increased only 13 percent. Why, when Americans need low prices the most, is the FTC pursuing a lawsuit that will punish a retailer for offering prices that are too low?
Poll after poll has shown that Americans don’t want their government spending time or money on its vendetta against Amazon, but President Biden, Lina Khan, and their supporters in Congress have continuously disregarded Americans’ opinions. NetChoice polling shows that 84% of Americans and 92% of Republicans think the FTC’s lawsuit against Amazon is a waste of resources.
Americans love Amazon. Amazon has consistently ranked as one of the country’s top most trusted and well-liked brands, and Americans like Amazon for its value, its range of selections, its fast delivery times, and its innovation. This lawsuit proves that President Biden and his administration do not care about what Americans think or want.
In its statement following the lawsuit, Amazon called the FTC’s filing “wrong on the facts and the law.” It’s also wrong on what Americans want and what the economy needs, which is affordable, high-quality goods and services for customers. The retail sector needs the government to focus on economic stability, not on witch hunts.