To The Moon

The US Government is currently actively pursuing legal action against not just one, but two major players in the Big Tech industry.

Following its lawsuit against Alphabet, the FTC, in collaboration with 17 states, has initiated legal proceedings against Amazon, citing anti-trust concerns.

Here are some of the allegations leveled against Amazon:

• Undercutting the prices of other sellers with its own products.

• Penalizing sellers who offer lower prices by relegating their listings lower in search results.

• Compelling sellers to utilize its warehousing and delivery services.

• Deceiving numerous consumers into unintentionally subscribing to Amazon Prime.

Amazon's share price saw a 4% decline after the lawsuit became publicly known.

It's worth noting that the U.S. Government has not had a strong track record in recent antitrust lawsuits. A notable example occurred three years ago when the FTC, along with 48 states and districts, sued Facebook and sought to force the company to divest Instagram and WhatsApp. Unfortunately, the U.S. Government lost that case last year, and an appeal to revive it was also rejected.

The most successful antitrust case against a Big Tech company took place in the 1990s with Microsoft. Even in that instance, Microsoft wasn't broken up; instead, it entered into a consent decree lasting over a decade, primarily preventing the company from entering into exclusive operating system agreements with computer manufacturers.

Given this history, it appears that the chances of the U.S. Government prevailing in its case against Amazon are also quite slim.

Regarding Amazon's practice of offering its own products at lower prices compared to competitors, this is a familiar occurrence in supermarkets as well, where store-brand products are frequently priced lower and displayed alongside other competing brands. If this were considered anticompetitive, supermarkets could potentially face similar legal action, but this is not the case.

Similarly, in the context of Prime membership, the market is saturated with various subscription plans. Consumers have multiple options, and it is within their power to cancel a subscription if they choose to do so. Ultimately, it comes down to personal responsibility on the part of the consumer.

Amazon's legal counsel have presented their perspective on the provision of Amazon fulfillment services. They have asserted that the fees associated with these services are, on average, 30% more cost-effective than the standard shipping solutions offered by other prominent logistics providers. Additionally, they claim that these fees are approximately 70% more affordable than similar two-day shipping alternatives.

There are alternatives available, but sellers opt for Amazon's fulfillment services primarily because of their cost-effectiveness. If other logistics companies wish to capture a greater share of the market, they have the opportunity to compete by either lowering their prices or enhancing their service quality.

Considering these arguments, it appears that the case against Amazon appears weak. Coupled with the low success rate of antitrust lawsuits, it is unlikely that this case will have a significant impact on Amazon.