clippings

In These Times: Is Amazon Violating U.S. Antitrust Laws? This Law Student Thinks He Has Evidence.

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Amazon’s reports of low–or zero–profits have long raised suspicions that it’s selling below cost to build a global monopoly.

Amazon famously barely turned a profit in its first twenty years, and even today nearly all of its operating income comes from cloud-computing service Amazon Web Services. To hear CEO Jeff Bezos tell it, Amazon focuses relentlessly on customer needs, serving as a kind of charity run for the benefit of its users.

Many critics have offered a more sinister theory: Amazon has spent the past couple decades building up market share by underpricing competitors, and someday, when there are no alternatives left, it will become fabulously profitable. Amazon is laying in wait, in other words, to become a monopoly.

The technical term for this is predatory pricing, and it’s actually illegal under U.S. antitrust laws. You can’t drop prices with the intent to monopolize. But predatory pricing is extremely difficult to prove in court. Plaintiffs bringing suit would have to demonstrate that Amazon set prices below the cost of production, which is difficult without access to the internal books. In addition, plaintiffs would have to establish that Amazon’s practices had a high likelihood of successfully creating a lucrative monopoly.

The high bar is thanks to Robert Bork, the godfather of modern antitrust theory, who declared predatory pricing schemes irrational in his influential book The Antitrust Paradox. The Supreme Court adopted Bork’s theory in a 1986 case, claiming that it would be “implausible” for Japanese electronics makers to conspire to hold prices low for television sets exported to the U.S. This would “require the conspirators to sustain substantial losses in order to recover uncertain gains,” the Court ruled. Since then, predatory pricing cases have been few and far between.

But Shaoul Sussman, a law student at Fordham University, thinks he’s come up with a roadmap to prove that Amazon profitably engages in predatory pricing, overcoming Bork’s skepticism. In a paper for the Journal of Antitrust Enforcement published in February that has generated discussion in academic circles, Sussman points to evidence that Amazon has already flipped the switch, moving from dominating the market by undercutting rivals to reaping the profits from that dominance. And Amazon’s doing it, Sussman claims, without raising prices for customers. This strategy is even more attractive because corporate accounting rules make the conduct virtually undetectable.

If Sussman is right, Amazon’s suppliers could use his theories to sue the company and gather evidence in discovery that could reveal illegal maneuvering. The paper could also spur the Federal Trade Commission to make a simple rule change that would lay bare Amazon’s practices. And, it could blow up a scheme that Uber, Lime, and numerous other startups have been accused of undertaking.

Read the full article here. 

See the rest of Matt Stoller's work

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In America today, wealth and political power are more concentrated than at any point in our country’s history.

The Open Markets Institute, formerly the Open Markets program at New America, was founded to protect liberty and democracy from these extreme -- and growing -- concentrations of private power.

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