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Bloomberg reports that the Federal Trade Commission (FTC) “has begun interviewing small businesses that sell products on Amazon.com Inc. to determine whether the e-commerce giant is using its market power to hurt competition.” The story says that people interviewed to this point “were asked what percentage of revenue their businesses derive from Amazon versus other online marketplaces like Walmart Inc. and EBay Inc., suggesting regulators are skeptical about Amazon’s claims that shoppers and suppliers have real alternatives to the Seattle-based company.”

The story says that “the interviews indicate the agency is in the early stages of a sweeping probe to learn how Amazon works, spot practices that break the law and identify markets dominated by the company … A key early task for the FTC is defining Amazon’s competitive universe. The company has long argued that it should be considered a retailer that competes against rivals online and offline, a designation that Amazon says gives it a meager 4% share of the U.S. retail market. If Amazon’s market is narrowly defined as online shopping, its share rises to almost 40% - giving it significant leverage. Narrowing the market by product category, such as electronic books, gives Amazon even more dominance.”

The Bloomberg piece notes that “the probe is part of a broader examination of the control companies like Amazon, Google and Facebook have over the U.S. economy. The FTC is also investigating Facebook while the Justice Department is probing Google. Separately, 50 state attorneys general have announced an antitrust probe of Google. The House Judiciary Committee is also probing big technology companies.”
KC's View:
It will be interesting to see how definitions are forged and, as a result, how companies are affected.

It is a pretty good bet that at least some of these investigations will find areas in which Amazon’s behavior can be determined as being anti-competitive … in the same way that a lot of big, successful companies probably squelch competition through their policies and behaviors. How many brands found that they were doing an enormous percentage of their volume through Walmart, only to be squeezed on margins and eventually replaced by a private label over which Walmart had greater control? More than a few.

There will be companies that were squeezed by Amazon that also would never have done nearly as much business if Amazon didn’t exist. They will have to decide whether the gain was worth the pain. And Amazon probably, as a result, will have to make adjustments to some of its procedures.

Hard to know if the federal government will push for some sort of breakup. A lot of that may depend on how the 2020 elections turn out.

What worries me about these probes - which, by the way, I think are necessary - is that they will be conducted with all the attention to nuance for which lawmakers and regulators are known.

Let’s be clear. Vendors have choices. There’s a piece in Modern Retail about how Harry’s - the disruption-minded men’s grooming products company recently acquired by Schick - has made a decision not to sell on Amazon. To this point, company executive say, it has been able to maintain acceptable levels of growth via its own website, which allows it to own the customer experience - and also, they argue, avoid the counterfeits issue. (They also avoid having to compete directly on the same platform with an Amazon knock-off.)

In other words, they’ve owned their business model. They’ve invested in their business model. And it seems to have worked, since Schick is shelling out a reported $1.37 billion for Harry’s.

I know that not every vendor has the ability to take this approach. But I have to wonder how many simply don’t have the inclination to do so because Amazon can be a major driver of sales and profits. Until, of course, it’s not.