The FTC is inquiring about Amazon’s practices for a future antitrust investigation (AMZN)

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The US Federal Trade Commission (FTC) and Department of Justice (DoJ) have split up responsibility for oversight of top tech companies, with the FTC taking Amazon and the DoJ handling Google, according to The Washington Post.

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This move could indicate that there’s potential for future antitrust investigations into the companies, and the FTC is already reaching out to e-commerce industry players to learn more about Amazon’s business practices, Recode reports.

Here’s what it means: The FTC is looking into three distinct parts of Amazon’s business, likely to gauge if its practices merit a formal antitrust investigation.

The FTC is interested in Fulfillment by Amazon’s (FBA’s) pricing structure for sellers, possibly to see if it’s influencing merchants to prioritize selling on Amazon. Merchants using FBA can store products at Amazon’s fulfillment centers and have the service handle product shipping and delivery after orders are placed, either on Amazon’s marketplace or elsewhere. Currently, Amazon reportedly charges vendors $4.76 to pick, pack, ship, and offer customer service for items weighing 1-2lbs sold through FBA on Amazon, but the same services cost 75% more for orders through other marketplaces or the merchant’s own site.
The agency is gathering intel on if Amazon uses third-party sellers’ data to help it compete with those same vendors on the Amazon marketplace. Amazon offers a number of private-label products on its platform in addition to items from third-party sellers, raising questions about if it’s fair for Amazon to control the marketplace it’s also competing on. One key issue is if it uses other merchants’ data on its marketplace — Amazon doesn’t use individual merchant’s data to compete with them, but it’s possible it uses aggregated data to do so — as this could give it an unfair competitive advantage.
It’s also considering whether Prime gives Amazon an unfair advantage in pricing. If Amazon uses Prime and its $119 annual fee as a loss-leader, which it may do because Prime gives consumers access to faster shipping and lower prices that can inspire loyalty and greater spend, this likely puts competitors at a disadvantage since Amazon can more easily offer lower prices. And Prime’s breadth of offerings makes it attractive to a wide variety of consumers.

The bigger picture: If the FTC launches a formal antitrust investigation into Amazon and these business practices, it could seriously weaken Amazon’s stranglehold on US e-commerce.

Amazon is estimated to have controlled 40% of US e-commerce sales in 2018, and that position is partially built on its interlocking services and capabilities. By offering so many different services, Amazon is able to attract Prime subscribers and drive sales, impact where third-party merchants sell, and compete on a marketplace it controls, as its various offerings give it advantages throughout its business.

If an antitrust investigation were to weaken or break up some of these capabilities, Amazon wouldn’t be as dominant, though it would likely still be able to lead the industry given its established position and huge product selection.

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