The Street

What could US President Trump actually do to Amazon and Jeff Bezos?

While Trump has suggested Amazon is a monopoly, an antitrust case would likely spark criticism of payback for The Washington Post’s reporting

PUBLISHED : Thursday, 27 July, 2017, 2:40pm
UPDATED : Thursday, 27 July, 2017, 2:41pm

By Leon Lazaroff

In 1998, the U.S. government sued Microsoft Corporation alleging that the software maker had become a monopoly, bundling its Internet Explorer web browser with an operating system that had become the industry standard on Intel-powered computers.

Nearly 20 years later, President Trump has all but said the same about another Seattle-area based company, Amazon Inc. In a series of tweets, Trump has called Amazon a monopoly, suggesting with typical subtlety that the online retailer be investigated for anti-competitive practices at odds with the Sherman Antitrust Act.

Yet unlike the government’s case against Microsoft, Trump’s recent attacks against Amazon are shrouded in the politics of red states versus blue states, and the reality that its founder, Jeff Bezos, owns The Washington Post. And for more than a year, the Post has won accolades and awards reporting on the Trump campaign’s ties to Russia, his firing of former FBI Director James Comey and spending by his own philanthropy, stories that won the newspaper a Pulitzer Price.

In widely-followed tweets on Monday, Trump charged that the Post is being used by Bezos to protect the company from higher taxes, or even an antitrust investigation by the DOJ. While the matter of taxes was dealt with here, the issue of whether Amazon has become a monopoly over certain markets is much harder to establish. One thing is clear, Trump sees Amazon and The Post as a single entity, tied together by Bezos.

As he has done for months, the Republican president labelled the newspaper’s work “fake news” despite wide acceptance of its veracity and supporting reports from numerous other news outlets.

Leaving aside the political context of Trump’s accusations, suing Amazon for antitrust violations would require meeting a difficult and daunting set criteria, said Diana L. Moss, president of the American Antitrust Institute, a non-profit organisation that promotes competition on behalf of consumers and businesses. The bar for proof in antitrust cases is much higher than in Europe, which succeeded in suing Alphabet’s Google, something the DOJ has yet to attempt.

“It’s a heavy lift,” Moss said in a phone interview from Washington. “You have to prove that it’s a monopoly, and that the monopolist has used its market power to extend or maintain that monopoly to the detriment of competition. There would have to be strong proof from market participants that Amazon engaged in exclusionary practices, and the government would have to be pretty concerned about its conduct in many of the markets that it participates in.”

Antitrust law requires evidence that a company has engaged in anti-competitive, exclusionary or predatory pricing that may have led to higher costs for consumers, or a loss of sales at competing companies, said Amy Ray, a partner at Cadwalader, Wickersham & Taft, who specialises in antitrust matters. Such was the case in a series of largely unsuccessful lawsuits waged against Amazon by book publishers.

A case against Amazon is made more difficult because it isn’t simply an online retailer selling products that it manufactures, like a Target Corp or Sears Holdings Corp , she said. Instead, Amazon is an online platform where thousands of companies sell their products, leveraging the website’s global popularity to grow their own revenue.

“There have been allegations of Amazon being a loss leader, especially with respect to books,” Ray said. “But Amazon is basically a conduit for getting those other businesses, who are retailers themselves, products out to their consumers. Amazon is showing the consumer, here’s the best price to find what you’re searching for.”

Amazon and The Washington Post weren’t immediately available for comment.

For the DOJ to mount an investigation against Amazon, Attorney General Jeff Sessions would have to decide that the agency has the interest and expertise to pursue the case. Yet the department, like other federal agencies, has struggled to fill top government posts amid scandals and firings, making it less likely that it would invest large amounts of resources on a case that could take multiple years to build.

Exacerbating matters, Sessions has been weakened in recent days after repeatedly being chastised by Trump for having recused himself from the government’s investigation into whether Trump colluded with Russia to sabotage the campaign of Democratic nominee Hillary Clinton. The current attorney general for antitrust, Andrew Finch, holds the position in an acting capacity.

Yet if Trump really wants the DOJ to consider suing Amazon for antitrust violations, his own tweets could damage the government’s case given that such lawsuits are supposed to be free of politics. Under President Obama, the Federal Trade Commission investigated whether Google had violated antitrust statutes despite close relations between the company and the Democratic party.

Were Trump’s Justice Department to wage an antitrust case against Amazon, the president’s critics as well as the company itself would likely charge that such a probe was payback for The Post’s reporting.

“It would add a layer of murk and distortion to what is supposed to be an independent process by the antitrust agencies,” Moss said. “Political motivations for enforcement of the anti-trust laws really have no business in our system. Interference by the White House or any politically-motivated stakeholder deprives consumers, innovators, and the business community of due process.”

Microsoft, of course, was subject to years of due process. According to one account, the company spent 21 years fighting antitrust battles with the U.S. government. Microsoft was nearly broken-up in 2000 until a court settlement two years later led to a consent decree that restricted some of Microsoft’s practices.

As for Amazon, politics wouldn’t necessarily disqualify the DOJ from mounting a case, Ray says. If an investigation can be shown to be warranted, and the Department is willing to allocate the personnel for the task, Amazon could be sued by the federal government, regardless of the difficulty in winning such a legal battle.

“I wouldn’t take his tweets to be directly relevant to whether independent antitrust enforcers would decide to bring a case,” Ray said. “Its just that under U.S. law, it’s just very difficult to bring successful unilateral conduct, exclusionary, predatory conduct cases to court, and win them.”

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