Amazon doesn’t have a monopoly in everything

Photo Credit: Getty

As the Federal Trade Commission (FTC) and the Department of Justice (DOJ) recently released their draft merger guidelines, Amazon has found itself in the crosshairs of Washington once again.

These new merger guidelines attack vertical mergers in the name of upholding “competition.” In practice, they will most likely make the process of acquisitions and mergers more strenuous, costly, and time-consuming for companies, while also hurting consumer welfare.

This is not the first time politicians and bureaucrats have been misguided about Amazon. And it will not be the last, with the FTC expected to file an antitrust suit against the company in the coming weeks.

Cries against Amazon as a monopoly have been lobbed from both sides of the aisle long before these new guidelines. In a tweet from 2021, Sen. Josh Hawley (R-MO) reacted to Amazon buying MGM Studios for $8.45 billion and said, “This sale should not go through. @amazon is already a monopoly platform that owns e-commerce, shipping, groceries & the cloud. They shouldn’t be permitted to buy anything else. Period.”

Yet MGM Studios only controlled 7.05 percent of the market share of leading film studios in the U.S. when it was acquired in 2021. It is quite a stretch for Hawley to claim that Amazon holds a monopoly over the film production industry when it is competing against much larger players like Disney, Sony, and Warner Brothers.

Another vocal critic of Amazon has been Sen. Elizabeth Warren (D-MA). During her presidential campaign in 2019, she released a statement on how she would break up Amazon and its purchase of Whole Foods.

It is alarming that Hawley and Warren, who combined hold degrees from Yale, Stanford, and George Washington University, would misrepresent simple economic concepts. The two senators continue to claim that Amazon has a multi-sector monopoly when Whole Foods only makes up just over 1 percent of the grocery market.

Credit: John Phillips

Historically FTC commissioners have supported vertical mergers, which is why the recent actions by the agency are so troublesome. After Chair Lina Khan withdrew the 2020 Vertical Merger guidelines, Commissioners Noah Phillips and Christine Wilson, in a dissenting statement, noted “vertical mergers are different animals from mergers of competitors, changing incentives in ways that are, on the whole, more likely to improve efficiency, bolster competition, and benefit consumers.”

Despite this, politicians and bureaucrats usually side with those like Khan and ignore the positive effects that companies like Amazon have brought about through vertical integration.

One example of innovation has been the launch of Amazon’s new subscription program RxPass, which allows customers to pay $5 a month and get unlimited access to over 50 generic medications that cover more than 80 conditions. Amazon’s entrance into the pharmaceutical and healthcare market has been heavily criticized. However, it has played a significant role in driving down the cost of generic drugs. This new service only came to fruition because Amazon was able to acquire different pharmaceutical and healthcare companies to vertically integrate more efficiently.

Politicians and bureaucrats from both parties resort too often to using the term monopoly whenever there is a company they do not like. It does not take a PhD in economics to understand that Amazon, in some circumstances with 1 percent control of a sector, is not a monopolistic boogeyman preying on its consumers. Although these cries of “monopoly!” may not hold economic merit, they create distrust and lead to support for more inefficient regulation and scrutiny by the government.

The FTC is clearly making a mistake by placing vertical mergers under increased scrutiny, ultimately preventing consumers from reaping the benefits of new products and services generated by companies like Amazon and others.