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Antitrust 12/13/2021

Senate Finance Hearing on Amazon – Pinocchios

Zach Lilly
Zach Lilly Policy Manager

At a recent US Senate Finance Committee, many assertions and allegations were thrown at Amazon and it’s important to have the facts to ground the assertions. In this blog, we’re going to compare the claims of elected officials with the facts.

Sen Warren

Pinocchio 1:

“Under President Biden’s leadership the American economy is rebounding. Unemployment rate has dropped from a Pandemic height of 14.8% in April 2020, to 4.6% today. 5.6 million jobs have been added since President Biden’s inauguration – more than were added in the first 10 months of any administration since we’ve been keeping records.” 

What They Mean: Because of Biden and the Democratic Party’s leadership, the American economy has improved at a historic rate. While we don’t want blame for inflation and supply chain issues, we do want credit for the jobs that private businesses are creating.

Why That’s Wrong: This is pretty classic political doublespeak. While Senator Warren wants her party leadership to be given credit for job growth, she will spend the rest of the hearing attacking the very employers who are driving that job growth. 

The Facts: From 2020 to September 2021, Amazon has added approximately 670,000. That would account for 12% of all the jobs created during the Biden administration. 

Pinocchio 2:

 “These factors (supply chain issues) contribute to the price increase for many consumer goods. But they are not the only reason that prices have gone up. Sure, giant companies will raise prices when they have to. But they will also raise prices when they can get away with it.” – Sen. Warren

What They Mean: Voters are going to blame us for the price increases they are facing due to inflation and supply chain issues under our watch. We better come up with a scapegoat. 

Why They Are Wrong: Companies don’t casually raise their prices, especially when the retail industry is more competitive than ever. Any shift in burden to the consumer could lead to that consumer leaving a platform or marketplace. If prices are rising economy wide, then it is a response to major factors beyond individual companies’ control.

Amazon Fact: Famously, Amazon has been held by fans and critics to have helped stave off inflation over the past decade – due to Amazon’s efforts to keep prices low for their customers. 

Pinocchio 3:

“…Our antitrust agencies had already received more merger filings than any other year in the previous decade. In fact, they are on track, in 2021, to receive a 70% increase above average filings in recent years.” – Sen. Warren

What They Mean: We don’t understand how merger filings work. Big is bad, and there is no other reason businesses might merge besides anti competitive efforts. 

Why They Are Wrong: Many companies are built with the hope that they will be acquired by larger companies. Mergers are, among others, a tool for innovation and growth. In the case of an inappropriate or illegal merger request, the FTC is empowered to prevent that merger. What Warren is really complaining about is that the FTC does not currently enjoy the ability to reject mergers wholesale – detached from an objective standard like the Consumer Welfare Standard. Additionally, if Warren were correct and mergers are inherently predatory, wouldn’t that suggest the Biden recovery is actually historically weak, given how many mergers have been requested?

Pinocchio 4:

“During the 4.5 years that you have worked at Amazon, Amazon has grown bigger and bigger, its profits have skyrocketed. So let me ask: in your personal experience, have Amazon’s logistical operations improved or have things gotten worse?” – Sen. Warren

“It used to be about the quality that we are giving our customers, that was the number one thing. But now Amazon really doesn’t care very much…it’s all about speed and quantity.” – Brown

What They Mean: Senator Warren means to tie what she sees as concentration in the market to the supply chain problems currently facing the United States. Brown’s anecdotes are sufficient evidence. 

Why They Are Wrong: Brown’s anecdotes are not sufficient evidence. I cannot speak to the veracity of her claims specifically. Generally, however, the issues she has faced could be explained in a myriad of ways, not least of which is poor management at her fulfillment center. Even if her specific critique was correct, the CWS would be sufficient to address those concerns. So Warren’s attempts to frame this challenge as beyond the scope of current antitrust law is false and makes clear her desire for more expansive legislation that gives deference to executive branch enforcers.  

Barry Lynn

Pinocchio 1:

“Then in July President Joe Biden resoundingly restored anti monopoly law to its necessary and original role as one of the main tools we use to protect our democracy and individual liberties. And in doing so, the President also bluntly renounced the “Chicago School” philosophy of Robert Bork and other “Neoliberal” radicals, with its focus solely on restricting the use of anti monopoly law solely increasing efficiency theoretically to promote the “welfare” of the “consumer.” – Barry Lynn

What They Mean: The Biden administration is making a unified attempt to eliminate the Consumer Welfare Standard – a product of conservative jurisprudence which has flourished under mainstream Republican and Democratic administrations. As radicals, we hold in contempt any standard or principle held by moderates or conservatives.  

Why They Are Wrong: The CWS is so revolutionary because it simultaneously restricts that power of the government without being unduly prescriptive. When Lynn suggests that the CWS “solely” focuses on consumer welfare, what she fails to mention is that the FTC is empowered to make an argument for many different aspects of how welfare can be defined. So she is either ignorant, or she is advocating for the federal government to have unfettered powers in the realm of antitrust. 

Amazon Fact:  We can point to many factors – price, employment, convenience, access to small business – where Amazon leads to improved consumer welfare. Of course, the government could maintain that a different element of welfare is harmed, and bring enforcement action. What Lynn and Warren want is to obliterate that standard so that the government can easily ignore any potential benefit and focus on any perceived harm. 

Pinocchio 2:

“Google and Facebook today – these are the communications corporations of the 21st century. These are the AT&Ts and the Western Unions of the 21st century.” – Barry Lynn (in response to Sen. Whitehouse on how concentration in market leads to proliferation of climate change denialism)

What They Mean: What Sen. Whitehouse means in asking his question and what Lynn means in answering it is that, through their understanding of the market, Americans receive information through hyper-concentrated sources and that it is of concern to the government that the messages being relayed through those sources are inappropriate.

Why They Are Wrong: Americans have endless choices when it comes to access to information. While many may go to Google or Facebook, oftentimes the news they are interacting with is itself from a third-party site that has simply been posted on Facebook or linked to on Google. So this market concentration that Whitehouse and Lynn decry is concocted – rather uncreatively. Ultimately, it is not the purview of the federal or state governments as to the appropriateness of the content consumed by free Americans. Far from being defenders of Americans’ liberty, this line of questioning reveals a deep disdain for the 1st Amendment. 

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