How big is too big? Amazon sparks antitrust concerns

SEATTLE — Amazon.com, America’s fifthlargest company by market value, is still growing like an adolescent and planting flags in new markets. That is prompting some policymakers and legal experts to ask: How big is too big?

It’s a key issue for an economy being rapidly reshaped by e-commerce, a sector where Amazon and the merchants operating on its platform account for up to a third of all U.S. sales, according to some estimates.

It’s also critical for Seattle, a city that has hitched its wagon to the e-commerce titan, and that once saw another local champion, Microsoft, mired in a lengthy antitrust battle. That fight, over Microsoft keeping a rival internet browser off PCs running Windows, almost led to the split-up of the software giant.

E-commerce is not Amazon’s only game. It also dominates cloud computing, and it may soon have a significant brick-and-mortar presence, with its pending acquisition of Whole Foods Market. The unexpected $13.7 billion deal announced in June spurred an outcry among critics of the company and some members of Congress who asked the Federal Trade Commission to take a close look at the deal.

Last month, Marc Perrone, president of the United Food and Commercial Workers International Union, which represents grocery workers, wrote to the FTC that Amazon’s proposed takeover of the organic food purveyor “is a competitive threat to our economy that will hurt workers and communities.”

Legal experts say it’s really hard to build an antitrust case against the Whole Foods deal, which would give Amazon just a small percentage of the U.S. grocery market.

Amazon’s budding dominance in other markets, too, is likely to remain unchallenged in the long term, unless the philosophy underlying antitrust regulations changes. In fact, U.S. regulators have sided with Amazon against its rivals’ anti-competitive moves — such as when they charged Apple and top New York publishers with conspiring to raise prices for e-books, a market Amazon dominates.

Under the current U.S. antitrust view, how consumers are treated is the prime factor, not the company’s dominance in a market. To take antitrust action against Amazon, regulators would have to prove that the company somehow harms shoppers — for example, by conspiring to make the products they buy artificially more expensive. Another way Amazon could run into trouble is by undermining rivals with strategies such as sustained predatory pricing or forcing suppliers to lock out competitors.

But rather than using tactics like that, some experts say, Amazon has built its empire just by giving customers what they want — products at low prices with lots of choices — which is not against the rules, no matter how big it grows.

“Antitrust law doesn’t make it illegal to get market power,” provided it was done properly, said A. Douglas Melamed, a professor of antitrust law at Stanford University and a former U.S. Department of Justice antitrust official. Amazon’s humongous size is “politically important,” but not an antitrust issue. “Not if they got there by being more innovative and more creative than the next guy,” he said.

At the same time, the huge role occupied by Amazon — and other big tech firms such as Google and Facebook — is fostering a rethinking among policy wonks about how government can oversee the power of these large tech companies.

“A lot of people are waking up to the fact that Amazon has positioned itself as a central piece of infrastructure for the 21st century economy,” said Lina Khan, a fellow at the New America Foundation, a Washington, D.C., think tank. She is also author of “Amazon’s Antitrust Paradox,” which has attracted widespread attention since it was published in January by the Yale Law Journal.

“We need to rethink how to go about preserving competition,” she said in an interview.

Amazon downplays the antitrust issue. During a recent call with reporters, Amazon Chief Financial Officer Brian Olsav sky said that “the businesses we are in are all very large market segments with lots of very serious competition.”

Nevertheless, the company last year hired a veteran D.C. antitrust adviser, Seth Bloom.