The Antitrust Circus of FTC v. Amazon
When bureaucrats and politicians (including 17 state attorney generals) attack a successful, entrepreneurial company, is it surprising that it looks like a circus? On the suit of the Federal Trade Commission against Amazon, I read in Thursday’s Wall Street Journal (“Lina Khan Once Went Big Against Amazon. As FTC Chair, She Changed Tack,” September 29, 2023):
Advertising is part of the FTC’s argument for why it says Amazon has provided worsening service to consumers. The company’s shopping results pages are now “cluttered with advertisements,” making it harder to find the products they want, the FTC’s lawsuit said.
That would make some sense if Amazon were trying to maximize its revenues at the cost of losing the consumers of its services, a behavior more suggestive of the approach of governments than of private companies competing in the market. Imagine a citizen shopping on the federal government’s sprawling websites, especially if he is shopping for liberty. He will find these sites cluttered with propaganda, especially at the political level, which makes it very difficult to find what he wants.
Speaking of the FTC’s chair, Lina Khan, the Wall Street Journal notes:
In her 2017 academic paper, Khan argued that Amazon sweet-talked customers by using predatory pricing, or slashed prices so low that it lost money but rivals couldn’t compete. Her paper acknowledged that predatory pricing was almost obsolete as a legal theory, the Supreme Court having set the bar so high that enforcers stopped trying to prove it.
Now the FTC accuses Amazon of hurting consumers with higher prices, mainly through punishing its marketplace sellers if they offer lower discounts anywhere else. …
“It’s really hard to square the circle of the earlier theory of harm that Lina Khan enunciated with the current complaint,” said John Mayo, an economist who leads Georgetown University’s Center for Business and Public Policy. “The earlier complaint was that prices were going to be too low and therefore anticompetitive. And now the theory is they are too high and they are anticompetitive.”
This illustrates the arbitrariness of bureaucratic and political processes. If you can’t sue them because their prices are too low, sue them because they are too high. And of course, the government knows what would be a price neither too low nor too high.
The foundation of the argument against antitrust is that competition and potential competition provide a built-in constraint against concentration. Competition only requires that the market be free from government-granted privileges and legal restrictions to entry. In a free market, greed controls greed. In an overgrown state, power does not control power as much as it fuels it. One can find a short exposé of the arguments against antitrust (including the idea of predatory pricing) in David Friedman’s Law’s Order: What Economics Has to Do with Law and Why It Matters (2000), chapter 16 on antitrust. For the broader economic-philosophical argument, we get a concise summary from James Buchanan (James M. Buchanan and Richard A. Musgrave, Public Finance and Public Choice: Two Contrasting Visions of the State [MIT Press, 1999]), which reminds us what freedom of contract and free enterprise look like:
If I observe someone with apples and somebody else with oranges, I don’t want to try to say a particular allocation of oranges and apples in a final position is better than in the other allocation. If I observe them trading without defrauding each other, whatever emerges, emerges, and that is the way I define what is efficient.