Amazon’s antitrust case, analyzed

Hi folks, it’s Brad. Amazon and US regulators will meet this week, the final step before a long-shot bid to break up the tech giant. But fir [View in browser]( [Bloomberg]( Hi folks, it’s Brad. Amazon and US regulators will meet this week, the final step before a long-shot bid to break up the tech giant. But first… Three things you need to know today: • Sam Bankman-Fried was [taken into custody]( • Amazon is [cracking down on working from home]( • Apple’s chip trade-secrets theft [lawsuit moves ahead]( What’s a market anyway? Later this week, representatives of Amazon.com Inc. [will meet separately]( with the three commissioners of the Federal Trade Commission. These meetings, sometimes called “[last rites](,” provide an opportunity for a company whose conduct is under investigation to argue that its behavior is harmless and to propose ways to avoid a full-blown antitrust lawsuit in federal court. In this case, a last-minute détente is unlikely. Amazon and the FTC have been on a collision course since at least June 2021, when the Biden administration [appointed then 32-year-old Lina Khan]( as chair of the commission. Khan made her name as author of [Amazon’s Anti-Trust Paradox](, a highly regarded paper in the Yale Law Journal, and as senior adviser to a House subcommittee on antitrust that condemned the market tactics of, among other big tech companies, Amazon. To put this inevitable lawsuit in blunt sports terms: When a team [trades for Aaron Rodgers](, you can expect they’re going to pass the ball. Khan’s FTC will likely posit that while Amazon may offer good deals to consumers, it has illegally tightened its grip on the small sellers that rely on the site, charging onerous fees for rapid shipping and advertising, knocking off their products with private labels and using anti-competitive tactics to harm the e-commerce market. At least so far, Amazon investors seem unruffled by the case, sending its stock up 65% this year. “In contrast to Commissioner Khan’s views, we don’t believe it’s credible to explain Amazon’s many successes through anti-competitive behavior,” wrote Colin Sebastian, a senior research analyst at Baird, in a recent note. The FTC [faced a pair of high-profile defeats]( in court recently with judges who looked unfavorably on new interpretations of established antitrust law, and the agency could have an uphill battle in its case against Amazon, too. The FTC will argue that by insisting it have the lowest prices online, and demoting the visibility of sellers who list higher prices on Amazon than on other  websites, Amazon is effectively restricting competition and inflating prices across the internet. Another way of saying this is that Amazon should promote higher prices on its site, which flies against the last 50 years of antitrust doctrine. Courts have been reticent to tell companies they have to charge more. Another FTC argument will be that Amazon commands enough market share to be dubbed a monopoly and that it illegally abuses that position. Here you can expect a furious disagreement about what Amazon’s actual market is. The company will say (dubiously) that it commands a tiny sliver of global and US retail, online and off. But even by traditional measures of e-commerce, Amazon’s market share has plateaued at around 37%, particularly as it’s struggled with trends like shopping on social networks, online auto sales and brands that sell direct to consumer — a corner of the internet where Shopify Inc. dominates. The FTC will try to define the market more narrowly as online marketplaces — platforms that allow a variety of sellers to conduct business online. In this respect, Amazon has a commanding share above 70%. But that doesn’t account for another trend that’s emerged only over the last few months: the rapid rise of Temu and Shein, sites with roots in China that allow manufacturers and sellers from around the world to hawk their wares to US shoppers. One place Amazon may be vulnerable is its practice of giving greater visibility to products sold by merchants who use its logistics service, Fulfillment By Amazon. The company will argue it does so simply because customers like fast shipping. But the FTC won’t have trouble finding merchants who can ship products just as quickly on their own without Amazon’s help and examples where Amazon fails to meet the delivery expectation it imposes on third-party merchants. So Amazon executives can’t exactly relax right now. Over the course of its investigation, the FTC has deposed around 30 executives, likely including Executive Chairman Jeff Bezos and Chief Executive Officer Andy Jassy, and collected reams of internal emails and other evidence. Even though I suspect Amazon is too disciplined a company to commit in writing the kind of transparently bullying tactics that embarrassed Microsoft during its antitrust case in the late ‘90s, the disclosures can still harm its public reputation. There’s also the possibility that a judge takes Khan’s quest more seriously than either Amazon or its investors expect. “If we had something called the daily racing form for antitrust, it would say the odds of the FTC’s success in all of these ambitious goals is somewhat remote,” said William Kovacic, a former FTC commissioner and now a professor at George Washington Law School. “But the company can’t just brush this off. Long-shots sometimes win.” —[Brad Stone](mailto:bstone12@bloomberg.net) The big story Thousands of Magic: The Gathering cards worth $260,000 are still missing, and the suspects remain on the loose. Bloomberg’s Game On newsletter [took a close look at the heist](. One to watch [Watch the Bloomberg Technology TV interview]( with Cruise CEO Kyle Vogt about the changes in San Francisco roads. Get fully charged Excitement over all things superconductor has sent shares of companies deemed related to the technology on a [rollercoaster ride](. Mark Zuckerberg says he’s “not holding my breath” for a cage match with Elon Musk. “[I’ve been ready]( to fight since the day Elon challenged me,” he wrote. Alphabet has a new problem: how to [spend its $118 billion cash pile](. Huawei’s sales grew for a [third straight quarter](. The copper miner Freeport was [hit by a cyberattack](. The impact on production has so far been limited. 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