Yale Law Journal – Le paradoxe antitrust d’Amazon -Commander sur Amazon -49 % Réduction





abstrait. Amazon est le titan de vingt et unième
siècle de commerce. En plus d’être un détaillant, c’est maintenant un outil de marketing.
plate-forme, un réseau de livraison et de logistique, un service de paiement, un prêteur de crédit,
une maison de ventes, un grand éditeur de livres, un producteur de télévision et de films, un
créateur de mode, fabricant de matériel informatique et grand hébergeur de serveurs cloud
espace. Bien que Amazon ait connu une croissance stupéfiante, il génère peu
bénéfices, en choisissant un prix inférieur au coût et une large expansion à la place. À travers cela
stratégie, la société s'est positionnée au centre du commerce électronique et maintenant
sert d’infrastructure essentielle à de nombreuses autres entreprises qui dépendent de
il. Des éléments de la structure et du comportement de l’entreprise posent des problèmes de concurrence.
préoccupations – pourtant, il a échappé à l'examen antitrust.

Ce
Note soutient que le cadre actuel en matière antitrust, en particulier ses reliant la concurrence au «bien-être du consommateur», défini comme
effets sur les prix à court terme – n'est pas équipé pour capturer l'architecture du marché
pouvoir dans l'économie moderne. Nous ne pouvons pas connaître les dommages potentiels à
concurrence exercée par la domination d’Amazon si nous mesurons la concurrence principalement
par le prix et la production. Plus précisément, la doctrine actuelle sous-estime la
risque de prix d'éviction et comment l'intégration entre des secteurs d'activité distincts
peut s'avérer anticoncurrentiel. Ces préoccupations s’intensifient dans le contexte de
plates-formes en ligne pour deux raisons. Tout d’abord, l’économie des marchés de plateformes crée
incitations pour une entreprise à poursuivre sa croissance sur ses bénéfices, une stratégie qui
les investisseurs ont récompensé. Dans ces conditions, les prix d'éviction deviennent
très rationnel – même si la doctrine existante la traite comme irrationnelle et donc
peu plausible. Deuxièmement, parce que les plates-formes en ligne servent d’intermédiaires essentiels,
l'intégration à travers les secteurs d'activité positionne ces plates-formes pour contrôler la
infrastructure essentielle dont dépendent leurs rivaux. Ce double rôle aussi
permet à une plate-forme d’exploiter les informations collectées sur les entreprises utilisant ses
services pour les affaiblir en tant que concurrents.

Ce
Note décrit les aspects de la domination d’Amazon. Cela nous permet de donner un sens
de sa stratégie commerciale, met en lumière les aspects anticoncurrentiels des
structure et la conduite, et souligne les lacunes de la doctrine actuelle. le
La note se termine en considérant deux régimes potentiels pour répondre au pouvoir d’Amazon:
rétablir les principes traditionnels de la politique antitrust et de la concurrence ou appliquer
obligations et devoirs des transporteurs publics.

auteur. Je suis profondément reconnaissant à David Singh
Grewal pour m'avoir encouragé à poursuivre ce projet et à Barry C. Lynn pour avoir présenté
moi à ces questions en premier lieu. Pour des commentaires réfléchis à divers
étapes de ce projet, je suis également reconnaissant à Christopher R. Leslie, Daniel Markovits, Stacy Mitchell, Frank Pasquale, George Priest,
Maurice Stuckeet Sandeep Vaheesan.
Enfin, merci à Juliana Brint, Urja Mittal et le Yale
Journal juridique
personnel pour commentaires perspicaces et édition minutieuse. Toutes les erreurs
sont les miens.


introduction

"Même
comme Amazon est devenu l'un des plus grands détaillants du pays, il n'a jamais semblé
intéressé à charger suffisamment pour faire un profit. Les clients célébrés et le
la concurrence languissait.

Le nouveau
York Times

“[O]l’un des plus impressionnants de M. Rockefeller
caractéristiques est la patience. "

Ida Tarbell,
Une histoire de la compagnie pétrolière standard

Dans les premières années d’Amazon, une blague courante entre Wall Street
analystes était que le PDG Jeff Bezos construisait un château de cartes. Entrer dans
sixième année en 2000, la société n’avait pas encore réalisé de bénéfice et montait
des millions de dollars en continu pertes, chaque
quart est plus grand que le dernier. Néanmoins, un segment d'actionnaires
croyait qu’en investissant de l’argent dans la publicité et des rabais importants, Amazon était
faire un investissement judicieux qui rapporterait une fois le commerce électronique lancé.
Chaque trimestre, la société ferait état de pertes et le cours de ses actions augmenterait.
Un site de nouvelles a capturé le sentiment partagé en demandant: «Amazon: Ponzi Schème ou Wal-Mart du Web? "

Seize ans plus tard, personne ne doute sérieusement qu'Amazon est
tout sauf le titan du vingt et unième siècle
Commerce. En 2015, ses revenus ont atteint 107 milliards de dollars,
et, à partir de 2013, il a vendu
plus que ses douze prochains concurrents en ligne combinés.
Selon certaines estimations, Amazon
représente désormais 46% des achats en ligne, sa part augmentant plus rapidement que les
secteur dans son ensemble.
En plus d’être un détaillant, il
est une plate-forme marketing, un réseau de livraison et de logistique, un service de paiement,
prêteur, une maison de vente aux enchères, un grand éditeur de livres, un producteur de
télévision et des films, un créateur de mode, un fabricant de matériel, et un leader
fournisseur d’espace serveur en nuage et de puissance de calcul. Bien que Amazon a chronométré
croissance stupéfiante – en affichant des augmentations à deux chiffres du chiffre d’affaires annuel –
rapporte de maigres bénéfices, préférant investir de manière agressive. L'entreprise
des pertes constantes répertoriées pour les sept premières années d’activité, avec
dettes de 2 milliards de dollars.

Alors qu'il sort du rouge plus régulièrement maintenant,
les rendements négatifs sont encore
commun. La société a enregistré des pertes au cours de deux des cinq dernières années, par exemple:
et son revenu net annuel le plus élevé était toujours inférieur à 1% de ses ventes nettes.

Malgré les maigres rendements de la société, les investisseurs ont
avec zèle: les actions d’Amazon se négocient à plus de 900 fois
bénéfice dilué, ce qui en fait le titre le plus cher du marché Standard &
Poor’s 500.
Comme l’a émerveillé un journaliste: «Le entreprise à peine un bénéfice, dépense une fortune
expansion et livraison gratuite et est célèbre pour son opacité
opérations. Encore investisseurs. . . verser
dans le stock. "
Un autre a commenté que
Amazon est «une classe à part en matière d’évaluation».

Les journalistes et les analystes financiers continuent de spéculer sur
quand et comment les investissements importants et les lourdes pertes d’Amazon porteront leurs fruits.
Les clients, universellement
semble aimer la compagnie. Près de la moitié des acheteurs en ligne vont directement à
Amazon d'abord à rechercher des produits,
et en 2016, la réputation
L’Institut a nommé la société «la société la plus réputée en Amérique» pour le troisième
année consécutive.
Dans les années récentes,
les journalistes ont exposé les tactiques commerciales agressives employées par Amazon. Pour
Amazon, par exemple, a nommé une campagne «The Gazelle Project», une stratégie par laquelle
Amazon approcherait les petits éditeurs "comme un guépard serait un malade
gazelle."
Ceci, ainsi que d'autres rapports, a attiré l'attention générale, peut-être parce qu'il a offert
un aperçu des coûts sociaux potentiels de la domination d’Amazon. Le cabinet
conflit très public avec Hachette en 2014, dans lequel Amazon a retiré la liste
livres de l'éditeur sur son site Web au cours de négociations commerciales – de la même manière
a suscité un examen approfondi de la presse et un dialogue approfondi.
Plus généralement, il y a
sensibilisation croissante du public sur le fait qu'Amazon s'est imposé comme un élément essentiel
une partie de l'internet économie,
et un sens rongeur
que sa domination – son échelle et sa largeur – peut présenter des dangers.
Mais quand on presse pourquoi,
les critiques tâtonnent souvent pour expliquer comment une entreprise qui a si clairement livré
énormes avantages pour les consommateurs – sans oublier de révolutionner le commerce électronique
général – pourrait, en fin de compte, menacer nos marchés. Essayer de faire
sens de la contradiction, un journaliste a noté que l'argument de la critique
semble être que «même si les activités d'Amazon ont tendance à réduire prix du livre, qui est considéré comme bon pour les consommateurs, ils
finalement blessé les consommateurs. "

À certains égards, l’histoire de la croissance soutenue et croissante d’Amazon
La domination est aussi l’histoire des changements dans nos lois antitrust. Suite à un changement
dans la pensée et la pratique juridiques des années 1970 et 1980, le droit antitrust
évalue principalement la concurrence en tenant compte des intérêts à court terme des
les consommateurs, pas les producteurs ou la santé du marché dans son ensemble; doctrine antitrust
estime que les prix bas à la consommation sont la preuve d'une concurrence saine. Par ça
mesure, Amazon a excellé; il a échappé à l'examen du gouvernement en partie grâce à
consacre avec ferveur sa stratégie commerciale et son discours à la réduction des prix des
les consommateurs. La plus proche rencontre d’Amazon avec les autorités antitrust a eu lieu lorsque
Le ministère de la Justice a poursuivi d'autres entreprises pour s'être associées à Amazon.
C'est comme si Bezos cartographiait
croissance de la société en dessinant d’abord une carte des lois antitrust, puis
concevoir des itinéraires pour les contourner en douceur. Avec son zèle missionnaire pour
consommateurs, Amazon a marché vers le monopole en chantant l’air du contemporain
antitrust.

Cette note décrit les différentes facettes du pouvoir d’Amazon. En particulier,
elle retrace les sources de la croissance d’Amazon et analyse les effets potentiels de
sa domination. Cela nous permet de comprendre la stratégie commerciale de la société.
et éclaire les aspects anticoncurrentiels de sa structure et de son comportement. Ce
L’analyse révèle que le cadre actuel en matière antitrust, en particulier son
assimiler la concurrence au «bien-être du consommateur», généralement mesuré à
effets à court terme sur les prix et la production
– ne réussit pas à capturer
architecture du pouvoir de marché sur le marché du XXIe siècle. En d'autre
En d’autres termes, les inconvénients potentiels de la domination d’Amazon sur la concurrence ne sont pas évidents.
reconnaissable si nous évaluons la concurrence principalement par le prix et la production. Mise au point
sur ces métriques nous aveugle plutôt aux dangers potentiels.

Mon argument est que jauger la concurrence réelle dans le
marché du XXIe siècle – en particulier dans le cas des services en ligne
plates-formes – nécessite d'analyser la structure et la dynamique sous-jacentes des marchés.
Plutôt que d’attacher la concurrence à un ensemble limité de résultats, cette approche
examinerait le processus concurrentiel lui-même. L'animation de ce cadre est la
idée que le pouvoir d’une entreprise et la nature anticoncurrentielle potentielle de cette
le pouvoir ne peut être entièrement compris sans se pencher sur la structure d'une entreprise
et le rôle structurel qu'il joue sur les marchés. Appliquer cette idée implique, par exemple
exemple, évaluer si la structure d’une entreprise crée certains
conflits d'intérêts anticoncurrentiels; si elle peut croiser le marché du levier
des avantages dans des secteurs d'activité distincts; et si la structure de la
le marché incite et autorise les comportements prédateurs.

C’est la démarche que j’adopte dans cette note. Je commence par
explorer et contester le traitement de la structure du marché par la loi antitrust moderne.
La première partie donne un aperçu de l’évolution de la législation antitrust au détriment des intérêts économiques.
structuralisme en faveur de la théorie des prix et identifie comment ce départ a
mis en œuvre dans deux domaines d'application: les prix d'éviction et les
l'intégration. La partie II remet en question cette focalisation étroite sur le bien-être du consommateur
mesuré par les prix, en affirmant que l’évaluation de la structure est essentielle pour protéger
valeurs antitrust importantes. La note utilise ensuite l’objectif de la structure du marché pour
révéler les aspects anticoncurrentiels de la stratégie et du comportement d’Amazon. Partie III
documente l’histoire d’investissements agressifs et de pertes d’Amazon, ses
stratégie d'entreprise et son intégration dans de nombreux secteurs d'activité. Partie IV
identifie deux instances dans lesquelles Amazon a construit des éléments de son activité
par des pertes soutenues, paralysant ses rivaux, et deux cas dans lesquels
L’activité d’Amazon dans plusieurs secteurs d’activité pose des menaces anticoncurrentielles
de manière à ce que le cadre actuel ne soit pas enregistré. La note évalue ensuite
comment la législation antitrust peut répondre aux défis posés par les plateformes en ligne telles que
Amazone. La partie V examine ce que les marchés financiers suggèrent à propos de l’économie de
Amazon et autres plates-formes Internet. La partie VI propose deux approches pour
Aborder le pouvoir des plateformes dominantes: (1) limiter leur domination
en rétablissant les principes traditionnels de la politique antitrust et de la concurrence et
(2) réglementer leur position dominante en appliquant les obligations du transporteur commun et
fonctions.

I. la révolution scolaire de chicago: l'abandon du processus concurrentiel et de la structure du marché

L’un des changements les plus importants de la législation antitrust et
interprétation au cours du siècle dernier a été l'abandon de l'économie
structuralisme. Dans cette partie, je retrace cette histoire en esquissant comment un système basé sur la structure
vue de la concurrence a été remplacé par la théorie des prix et à explorer comment cela
Ce changement a eu lieu à travers des changements de doctrine et de mise en application.

En gros, le structuralisme économique repose sur l'idée que
des structures de marché concentrées favorisent les comportements anticoncurrentiels.
Ce point de vue est qu'un
marché dominé par un très petit nombre de grandes entreprises risque d’être moins
concurrentiel qu'un marché peuplé de nombreuses petites et moyennes
entreprises. En effet, (1) les structures de marché monopolistiques et oligopolistiques
permettre aux acteurs dominants de se coordonner avec plus de facilité et de subtilité, en facilitant
comportement comme la fixation des prix, la division du marché et la collusion tacite; (2) monopolistique
et les entreprises oligopolistiques peuvent utiliser leur domination existante pour bloquer les nouveaux venus;
et (3) les entreprises monopolistiques et oligopolistiques ont un plus grand pouvoir de négociation
contre les consommateurs, les fournisseurs et les travailleurs, ce qui leur permet d’augmenter leurs prix
et dégrader le service et la qualité tout en maintenant des profits.

Cette compréhension de la concurrence fondée sur la structure du marché était
un fondement de la pensée antitrust et de la politique à travers les années 1960. S'abonner à
De ce point de vue, les tribunaux ont bloqué les fusions qui, à leur avis, conduiraient à une
structures de marché. Dans certains cas, cela signifiait arrêter horizontalement
des accords de fusions combinant deux concurrents directs opérant sur le même marché ou
gamme de produits, ce qui aurait conféré à la nouvelle entité une large part du marché.
Dans d'autres, cela impliquait
rejetant les fusions verticales – les accords se joignant à des entreprises opérant dans différents
niveaux de la même chaîne d’approvisionnement ou de production – qui «excluraient
concurrence."
Au centre, cette approche
impliqué la police non seulement pour la taille mais aussi pour les conflits d’intérêts, comme
autoriser un fabricant de chaussures dominant à s'étendre à la vente au détail de chaussures
créerait une incitation pour le fabricant à désavantager ou à discriminer
contre les détaillants concurrents.

L’approche antitrust de la Chicago School, qui a permis
l’importance et la crédibilité dans les années 1970 et 1980, a rejeté cette idée. structuraliste vue.
Dans les mots de Richard
Posner, l’essentiel de la position de la Chicago School est que «l’optique appropriée pour
Voir les problèmes antitrust est la théorie des prix. "
Fondement à cette vue est une foi
dans l'efficacité des marchés, propulsés par des acteurs maximisant les profits. Le chicago
L’approche scolaire fonde sa vision de l’organisation industrielle sur un simple
prémisse théorique: “[R]ational acteurs économiques
travaillant dans les limites du marché cherchent à maximiser les profits en combinant
les intrants de la manière la plus efficace. Un échec à agir de cette manière sera
punis par les forces concurrentielles du marché ".

Bien qu'économique structuralistes
croire que la structure industrielle prédispose les entreprises à certaines formes de
comportement qui oriente ensuite les résultats du marché, la Chicago School présume que
les résultats du marché, y compris la taille de l'entreprise, la structure de l'industrie et la concentration
niveaux – reflètent l’interaction des forces du marché autonomes et des contraintes techniques
demandes de production.
En d'autres termes, économique structuralistes prendre la structure de l'industrie comme une entrée pour
comprendre la dynamique du marché, tandis que la Chicago School considère que l'industrie
la structure reflète simplement cette dynamique. Pour l'école de Chicago, “[w]chapeau existe
est finalement le meilleur guide sur ce qui devrait exister. "

En pratique, le passage du structuralisme à la théorie des prix avait
deux ramifications majeures pour l'analyse antitrust. Premièrement, cela a conduit à une importante
rétrécissement de la notion de barrière d’entrée. Une barrière d'entrée est un coût qui
doit être supporté par une entreprise cherchant à entrer dans une industrie mais n’est pas transporté par
entreprises déjà dans l'industrie.
Selon la Chicago School, les avantages
que les opérateurs historiques tirent d’économies d’échelle, de fonds propres et
différenciation des produits ne constituent pas des barrières à l'entrée, ces facteurs étant
considérés comme ne reflétant que les «exigences techniques objectives de
production et distribution. "

Avec autant de «barrières à l'entrée». . . à prix réduit, toutes les entreprises
sont soumis à la menace de potentiel
concurrence . . . quel que soit le nombre d'entreprises ou
niveaux de concentration. "

De ce point de vue, le pouvoir de marché est toujours éphémère – et donc l’application des lois antitrust
rarement nécessaire.

La deuxième conséquence de l'abandon du structuralisme
c’est que les prix à la consommation sont devenus la mesure principale pour évaluer la concurrence.
Dans son travail très influent, le
Paradoxe antitrust
, Robert Bork a affirmé que le seul objectif normatif
antitrust devrait consister à maximiser le bien-être du consommateur, ce qui serait préférable
promouvoir l'efficacité économique.
Bien que Bork ait utilisé «le consommateur
«bien-être social» signifie «efficacité allocative»,
tribunaux et autorités antitrust
largement mesuré par les effets sur les prix à la consommation. En 1979, le
La Cour suprême a suivi les travaux de Bork et déclaré que «le Congrès a conçu le
Sherman Act en tant qu ’« ordonnance de protection du consommateur »»
—Une déclaration qui est largement vue
comme erroné.
Pourtant, cette philosophie
se frayer un chemin dans la politique et la doctrine. Les directives de 1982 sur les fusions publiées par
l'administration Reagan — un changement radical par rapport aux directives précédentes,
écrit en 1968 – reflétait ce nouvel objectif. Alors que les directives de 1968 avaient
établi que le "rôle primordial" de la mise en œuvre des fusions était de "préserver et
promouvoir des structures de marché propices à la concurrence »,
les lignes directrices de 1982 ont dit
fusions "ne devraient pas être autorisées à créer ou à renforcer un" pouvoir de marché "",
comme «la capacité d'une ou de plusieurs entreprises à maintenir de façon rentable des prix supérieurs
niveaux compétitifs. "
Aujourd'hui, montrant des dommages antitrust
il faut démontrer qu'il y a atteinte au bien-être du consommateur, généralement sous forme de prix;
augmentations et restrictions de sortie.

Il est vrai que les autorités antitrust n’ignorent pas le non-prix
effets entièrement. Les lignes directrices de 2010 sur les concentrations horizontales, par exemple,
reconnaître qu'un pouvoir de marché accru peut se manifester par des dommages non liés au prix,
compris sous la forme de qualité de produit réduite, de variété de produit réduite, de
service, ou innovation diminuée.
L'administration Obama a notamment
l’opposition à l’une des plus grandes concentrations proposées sous sa surveillance – Comcast /TimeWarner—Soumis d'une préoccupation concernant l'accès aux marchés, non
des prix.
Et par certaines mesures, le
La Federal Trade Commission (FTC) a allégué un risque potentiel pour l’innovation dans
environ un tiers des mesures d’application des règlements de fusion au cours de la dernière décennie.
Pourtant, il est juste de dire
qu'un souci d'innovation ou d'effets non liés aux prix anime ou conduit rarement
enquêtes ou mesures coercitives, notamment en dehors du contexte de la fusion.
Facteurs économiques plus faciles à
mesure – tels que les impacts sur les prix, la production ou l’efficacité productive dans des
marchés définis – sont devenus «d’une importance disproportionnée».

Deux domaines d'application de la loi affectés par cette réorientation
de manière spectaculaire les prix prédateurs et l’intégration verticale. L'école de chicago
affirme que «les prix d'éviction, l'intégration verticale et les accords de vente liée
jamais ou presque jamais réduire le bien-être du consommateur. "
Prix ​​prédateurs et
L’intégration verticale est très utile pour analyser le chemin d’Amazon vers la domination.
et la source de son pouvoir. Ci-dessous, j’offre un bref aperçu de la façon dont la ville de Chicago
L’influence de l’école a façonné la doctrine des prix prédateurs et les points de vue des autorités
d'intégration verticale.

A. Prix prédateurs

Au milieu du vingtième siècle, le Congrès a maintes fois répété
promulgué une législation ciblant les prix d'éviction. Congrès, ainsi que l'état
législatures, considérait les prix prédateurs comme une tactique utilisée par des entreprises très capitalisées.
entreprises à la faillite de leurs rivaux et à la destruction de la concurrence – en d’autres termes, comme
contrôle du concentré. Les lois interdisant les prix d'éviction faisaient partie d'un accord plus vaste
des lois sur les prix qui cherchaient à répartir le pouvoir et les opportunités. Cependant, un
décision controversée de la Cour suprême dans les années 1960 a créé une ouverture pour
critiques pour attaquer le régime. Cette réaction intellectuelle a fait son chemin dans
Doctrine de la Cour suprême au début des années 90 sous la forme de la loi restrictive «test de récupération. "

La première affaire en matière de prix d'éviction en Amérique était la
poursuite antitrust du gouvernement contre Standard Oil, qui a atteint le Suprême
Cour en 1911.
Comme détaillé dans l’exposé d’Ida Tarbell,
Une histoire de la compagnie pétrolière standard, Huile standard régulièrement coupé
prix afin de chasser les concurrents du marché.
De plus, il
subventions croisées: prix du monopole facturés par le pétrole standard
dans les marchés où il fait face
pas de concurrents; sur les marchés où les rivaux ont contrôlé la domination de la société,
drastiquement baissé les prix dans un effort pour les faire sortir. Dans son affaire antitrust
contre l’entreprise, le gouvernement a fait valoir qu’une série de pratiques de la
Le pétrole – y compris les prix prédateurs – a violé l’article 2 de la loi Sherman. le
La Cour suprême a statué pour le gouvernement et ordonné la dissolution de la société.
Les tribunaux ultérieurs ont cité le
décision pour établir que, dans la quête du pouvoir monopoliste, "la réduction des prix
est devenu peut-être l'arme la plus efficace de la grande entreprise. "

Reconnaissant la menace de prix prédateurs exécutés par
Standard Oil, le Congrès a adopté une série de lois interdisant de tels comportements. Dans
Le Congrès de 1914 a promulgué la loi Clayton
pour renforcer la loi Sherman et
une disposition visant à lutter contre la discrimination par les prix et les prix prédateurs.
Le rapport de la maison
déclaré que l’article 2 de la loi Clayton était expressément conçu pour interdire
grandes entreprises de réduire les prix au-dessous du coût de production "avec le
intention de détruire et de rendre non rentables les activités de leurs concurrents »et
dans le but d’acquérir un monopole dans la localité ou la section concernée
le prix discriminant est fait. "

Le Congrès a également agi pour protéger les lois de «commerce équitable» des États qui
davantage protégés contre les prix prédateurs. Législation sur le commerce équitable accordée
aux producteurs le droit de fixer le prix de détail final de leurs produits, en limitant
capacité des magasins à escompte.
Quand la Cour suprême
ciblé ces efforts de «maintien du prix de revente», le Congrès a intensifié pour défendre
leur. Après que la Cour suprême en 1911 eut annulé la forme du prix de revente
maintenance rendue possible par les lois du commerce équitable,
Le Congrès de 1937 s'est taillé
une exception pour les lois sur le commerce équitable des États à travers leTydings
Acte.
Quand la Cour suprême en
1951, les producteurs ne pouvaient imposer des prix minimaux que sur ceux qui
les détaillants ayant signé des contrats acceptant de le faire,
Le Congrès a répondu avec un
loi rendant les prix minimum applicables contre non-signataires
aussi.

Un autre sous-produit du mouvement «commerce équitable» était le
Robinson-Patman Acte de 1936. Cet Acte interdit
discrimination de prix par les détaillants entre producteurs et par les producteurs
détaillants.
Son but était d'empêcher
conglomérats et les grandes entreprises d’utiliser leur pouvoir d’achat pour extraire
des réductions rédhibitoires de la part de petites entités et de garder les grands fabricants et
les détaillants de faire équipe contre leurs rivaux.
Comme les lois interdisant les prédateurs
l'interdiction de la discrimination par les prix a effectivement limité la
puissance de taille. L’article 3 de la loi traitait directement des prix prédateurs en
criminaliser la vente de biens à des prix «déraisonnablement bas» dans le but de
détruire la concurrence ou éliminer un concurrent. "
Alors que la réduction des prix prédateurs
en matière de responsabilité civile et de recours en vertu de la loi Clayton, de laPatman Agissez également avec des sanctions pénales.

Cette série de lois antitrust démontre que le Congrès a vu
les prix prédateurs comme une menace sérieuse pour les marchés concurrentiels. Par le
milieu du XXe siècle, la Cour suprême a reconnu et donné effet à cette
intention du congrès. La Cour a confirmé laPatman
Agissez de nombreuses fois, en considérant que les facteurs pertinents étaient de savoir si un détaillant
destiné à détruire la concurrence par ses pratiques en matière de tarification et par le
conduite a poursuivi cet objectif.

Cependant, tous les exemples de prix inférieurs aux coûts n'étaient pas illégitimes. Liquidation
les biens excédentaires ou périssables, par exemple, étaient considérés comme du gibier.
Seules les «ventes réalisées à un prix inférieur au prix coûtant»
sans objectif commercial légitime et avec une intention spécifique de détruire
concurrence "enfreindrait clairement l'article 3.
Dans d'autres affaires, la Cour
fait la distinction entre les avantages concurrentiels tirés de compétences supérieures et
production, et ceux tirés du pouvoir brut de la taille et du capital.
Ce dernier, la cour
gouverné, étaient illégitimes.

Dans Utah Pie Co. c. Continental Baking Co.,la Cour a encore renforcé
l'illégitimité des prix prédateurs.
Utah Pie et Continental
Les pâtisseries étaient des fabricants concurrents de tartes à dessert glacées. Une localisation
avantage a donné à Utah Pie un accès moins cher au marché de Salt Lake City, qu’elle
utilisé pour des prix inférieurs à ceux vendus par les concurrents. Autres fabricants de tourtes surgelées,
y compris Continental, a commencé à vendre à des prix inférieurs au prix de revient dans la ville de Salt Lake City
marché, tout en maintenant les prix dans les autres régions à un prix égal ou supérieur au coût. Utah Pie
introduit un cas de prix d'éviction contre Continental. La Cour suprême a statué
pour Utah Pie, notant que les stratégies de prix de ses concurrents avaient détourné
affaires de Utah Pie et contraint la société à réduire encore ses prix,
conduisant à une «structure de prix en déclin».
De plus, Continental
avait admis avoir envoyé un espion industriel à l'usine d'Utah Pie pour obtenir des informations
saboter les relations commerciales de l’Utah avec les détaillants, un fait que la Cour
établir «l'intention de blesser».

La décision était controversée. La conduite de Continental avait
relâché l'emprise d'un quasi-monopoleur. Avant la présumée prédation, Utah
Pie avait contrôlé 66,5% du marché de Salt Lake City, mais après
Pratiques de Continental, sa part est tombée à 45,3%.
Pénaliser une conduite qui avait
fait un marché plus compétitif comme
les prédateurs semblaient pervers. Comme le juge Stewart l'a souligné dans la dissidence, «je ne peux pas
dire que la position monopolistique d’Utah Pie était protégée par le gouvernement fédéral.
lois antitrust de la concurrence effective des prix. . . . "

Le cas présentait une opportunité pour les critiques de prédateur
prix lois pour attaquer la doctrine comme égarés. Dans un article étiquetage Utah
Tarte
«La décision antitrust la plus anticoncurrentielle de la décennie», a déclaré Ward
Bowman, économiste à la Yale Law School, a fait valoir que la prémisse de prédateur
les lois sur les prix était faux.
Il a écrit: «Le Robinson-Patman Loi repose sur une présomption que le prix
la discrimination peut ou peut être utilisée comme une technique de monopolisation. Ceci, comme plus
La littérature économique récente confirme, est au mieux une présomption très douteuse. "
Bork, quant à lui, a dit de
la décision, "Il n'y a pas de théorie économique digne de ce nom qui pourrait trouver
une atteinte à la concurrence sur les faits de la cause. Les accusés ont été condamnés
non pas de nuire à la concurrence mais, tout simplement, de concurrencer. "
Il a décrit prédateur
la tarification en général comme "un phénomène qui n'existe probablement pas" et la
Robinson-Patman Agir comme «la progéniture difforme de
un dessin intolérable couplé à une théorie économique totalement erronée. "
D'autres savants,
en particulier ceux de la Chicago School en plein essor, a également pesé dans critiquer
Utah Pie.

Comme le suggèrent les écrits de Bowman et Bork, le Chicago
La critique scolaire de la doctrine des prix prédateurs repose sur l’idée que les coûts inférieurs aux coûts
la tarification est irrationnelle et est donc rarement utilisée.
D'une part, les critiques soutiennent,
il n'y avait aucune garantie que la réduction des prix au-dessous des coûts conduirait une
concurrent ou inciter autrement le rival à cesser de concourir. Deuxièmement, même si
un concurrent devait abandonner, le prédateur aurait besoin de maintenir le monopole
prix assez longtemps pour récupérer les pertes initiales et contrecarrer avec succès l'entrée de concurrents potentiels, qui
être attiré par le prix de monopole. L’incertitude de son succès, associée à
garantie de coûts, a rendu les prix prédateurs peu attrayants – et donc
hautement improbable – stratégie.

Au fur et à mesure que l'influence et la crédibilité de ces savants grandissaient,
leur pensée a façonné l'application du gouvernement. Au cours des années 1970, par exemple,
le nombre de Robinson-Patman Loi cas que la FTC
ont chuté de façon spectaculaire, reflétant la conviction que ces cas étaient de
peu de souci économique.
Sous l'administration Reagan, le
FTC presque entièrement abandonné Robinson-Patman Acte
cas.
La nomination de Bork en tant que solicitor
Général, pendant ce temps, lui a donné une plate-forme principale pour influencer la Cour suprême sur
questions antitrust et lui ont permis «de former et d’influencer de nombreux avocats
qui se disputerait devant la Cour suprême pour la prochaine génération. "

La critique de l'école de Chicago a façonné la Cour suprême
doctrine sur les prix d'éviction. La profondeur et le degré de cette influence sont devenus
apparent dans Matsushita Electric Industrial Co. c. Zenith Radio Corp.
Zenith, un fabricant américain de
électronique grand public, a porté l'affaire Sherman Act au titre de l'article 1 accusant le Japonais
entreprises de conspiration visant à pratiquer des prix prédateurs sur le marché américain
afin de conduire les entreprises américaines à la faillite.
La Cour suprême a accordé
certiorari pour vérifier si le troisième circuit avait appliqué le bon standard
pour annuler l’octroi du jugement sommaire par le tribunal de district à Matsushita – un
enquête qui a conduit la Cour à évaluer le caractère raisonnable de présumer la présumée
prédation.

Citer à Bork Le paradoxe antitrust, la Cour a conclu que prédateur
systèmes de tarification étaient invraisemblables et ne pouvaient donc pas justifier une
hypothèse en faveur de Zenith. "Comme [Bork’s work] montre, le succès de ces
régimes est intrinsèquement incertain: la perte à court terme est définitive, mais la
L’avantage à long terme dépend de la neutralisation réussie de la concurrence », a déclaré la Cour.
a écrit.
"Pour cette raison, il y a
un consensus parmi les commentateurs sur le fait que les systèmes de prix prédateurs sont rarement essayés,
et encore plus rarement réussi. "

Outre l’adoption du cadre coûts-avantages de Bork, le
La Cour a fait écho à son inquiétude selon laquelle la concurrence par les prix pourrait être confondue avec
prédation. Dans Le paradoxe antitrust,Bork a écrit: «Le danger réel pour la loi est moins que
la prédation sera manquée que ce comportement concurrentiel normal sera mal
classé comme prédateur et supprimé. "
Justice Powell, écrivant pour
la majorité des 5-4 Matsushitaa déclaré Bork:[C]dire prix afin d'accroître les affaires est souvent
l'essence même de la concurrence. Ainsi, des conclusions erronées dans des cas tels que celui-ci
l'un est particulièrement coûteux, car ils refroidissent la conduite même de la loi antitrust
les lois sont conçues pour protéger. "

Bien que Matsushita concentré
question étroite – la norme de jugement sommaire applicable aux demandes introduites
L'article 1 de la loi Sherman, qui vise la coordination entre les parties
—Il a eu une grande influence dans
monopolisation, qui relèvent de la section 2. En d’autres termes, le raisonnement
qui a son origine dans un contexte a fini dans la jurisprudence s'appliquant à
circonstances totalement distinctes, même si les violations sous-jacentes diffèrent
énormément.
Cours ultérieures appliquées MatsushitaL’analyse des prix prédateurs
aux cas de monopolisation et de comportement anticoncurrentiel unilatéral,
la jurisprudence de l'article 2 de la loi Sherman.
Les juridictions inférieures saisies MatsushitaPoint central: l’idée
que "les systèmes de prix prédateurs sont rarement essayés et encore plus rarement avec succès".
La phrase est devenue un
talisman contre l’existence de prix prédateurs, invoqués de manière routinière par
tribunaux en faveur des accusés.

Dans Brooke Group Ltd. c. Brown & Williamson Tobacco
Corp
.
La Court Suprême
formalisé cette prémisse en un test doctrinal. L’affaire impliquait la cigarette
fabrication, une industrie dominée par six entreprises.
Liggett, l'un des six,
introduced a line of generic cigarettes, which it sold for about 30% less than
the price of branded cigarettes.
Liggett alleged that when
it became clear that its generics were diverting business from branded
cigarettes, Brown & Williamson, a competing manufacturer, began selling its
own generics at a loss.

Liggett sued, claiming that Brown & Williamson’s tactic was designed to
pressure Liggett to raise prices on its generics, thus enabling Brown &
Williamson to maintain high profits on branded cigarettes. A jury returned a
verdict in favor of Liggett, but the district court judge decided that Brown
& Williamson was entitled to judgment as a matter of law.

Importantly, Liggett’s accusation was that Brown &
Williamson would recoup its losses through raising prices on marque
cigarettes, ne pas the generics
cigarettes it was steeply discounting. Building on the analysis introduced in Matsushita,
the Court held that Liggett had failed to show that Brown & Williamson
would be able to execute the scheme successfully by recouping its losses
à travers supracompetitive pricing. “Evidence of
below-cost pricing is not alone sufficient to permit an inference of probable recoupment
and injury to competition,” Justice Kennedy wrote for the majority.
Instead, the plaintiff
“must demonstrate that there is a likelihood that the predatory scheme alleged
would cause a rise in prices above a competitive level that would be sufficient
to compensate for the amounts expended on the predation, including the time
value of the money invested in it”
—a requirement now known as
the “recoupment test.”

In placing recoupment at the center of predatory pricing
analysis, the Court presumed that direct profit maximization is the singular
goal of predatory pricing.

Furthermore, by establishing that harm occurs seulement when predatory
pricing results in higher prices, the Court collapsed the rich set of concerns
that had animated earlier critics of predation, including an aversion to large
firms that exploit their size and a desire to preserve local control. Au lieu,
the Court adopted the Chicago School’s narrow conception of what constitutes
this harm (higher prices) and Comment
this harm comes about—namely, through the alleged predator raising prices on
the previously discounted good.

Today, succeeding on a predatory pricing claim requires a
plaintiff to meet the Brooke Group récupération
test by showing that the defendant would be able to recoup its losses through
soutenant supracompetitive prices. Since the Court
introduced this recoupment requirement, the number of cases brought and won by
plaintiffs has dropped dramatically.
Despite the Court’s contention—that
“predatory pricing schemes are rarely tried and even more rarely successful”—a
host of research shows that predatory pricing can be “an attractive
anticompetitive strategy” and has been used by dominant firms across sectors to
squash or deter competition.

B. Vertical Integration

Analysis of vertical integration has similarly moved away
from structural concerns. Vertical integration arises when “two or more
successive stages of production and/or distribution of a product are combined
under the same control.”

For most of the last century, enforcers reviewed vertical integration under the
same standards as horizontal mergers, as set out in the Sherman Act, the
Clayton Act, and the Federal Trade Commission Act. Vertical integration was
banned whenever it threatened to “substantially lessen competition”
or constituted a
“restraint of trade”

or an “unfair méthode[[[[]of competition.”
However, the Chicago
School’s view that vertical mergers are generally pro-competitive has led
enforcement in this area to significantly drop.

Serious concern about vertical integration took hold in the
wake of the Great Depression, when both the law and economic theory became
sharply critical of the phenomenon.
Thurman Arnold, the Assistant
Attorney General in the 1930s, targeted vertical ownership achieved through
both mergers and contractual provisions, and by the 1950s courts and antitrust
authorities generally viewed vertical integration as anticompetitive. Partly
because it believed that the Supreme Court had failed to use existing law to
block vertical integration through acquisitions, Congress in 1950 amended section
7 of the Clayton Act to make it applicable to vertical mergers.

Critics of vertical integration primarily focused on two
theories of potential harm: leverage and foreclosure. Leverage reflects the
idea that a firm can use its dominance in one line of business to establish dominance
in another. Because “horizontal power in one market or stage of production
creates ‘leverage’ for the extension of the power to bar entry at another
level,” vertical integration combined with horizontal market power “can impair
competition to a greater extent than could the exercise of horizontal power
alone.”
Foreclosure, meanwhile,
occurs when a firm uses one line of business to disadvantage rivals in another
ligne. A flourmill that also owned a bakery could hike prices or degrade quality
when selling to rival bakers—or refuse to do business with them entirely. Dans
this view, even if an integrated firm did not directly resort to exclusionary
tactics, the arrangement would still increase barriers to entry by requiring
would-be entrants to compete at two levels.

When seeking to block vertical combinations or arrangements,
the government frequently built its case on one of these theories—and, through
the 1960s, courts largely accepted them.
Dans Brown Shoe v. United States, for example, the government sought to
block a merger between a leading manufacturer and a leading retailer of shoes
on the grounds that the tie-up would “foreclos[e]

competition” and “enhanc[e] Brown’s competitive
advantage over other producers, distributors and sellers of shoes.”
The Court acknowledged
that the Clayton Act did not “render unlawful all . . . vertical arrangements,” but held that this
merger would undermine competition by “foreclos[[[[ing]. . . independent manufacturers
from markets otherwise open to them.”
En d'autres termes, le
concern was that—once merged—the combined entity would forbid its retailing arm
from stocking shoes made by competing independent manufacturers. Calling this
form of foreclosure “the primary vice of a vertical merger,”
the Court noted it was
also largely inevitable: “Every extended vertical arrangement by its very
nature, for at least a time, denies to competitors of the supplier the opportunity
to compete for part or all of the trade of the customer-party to the vertical
arrangement.”
In his partial concurrence,
Justice Harlan observed that the deal would enable Brown to “turn an independent
purchaser into a captive market for its shoes,” thereby “diminish[[[[ing]the available market for which shoe manufacturers
compete.”
The Court enjoined the merger.

Another reason courts cited for blocking these arrangements
was that vertical deals eliminated potential rivals—a recognition of how a
merger would reshape industry structure. Upholding the FTC’s challenge of Ford
purchasing an equipment manufacturer, the Court noted that before the
acquisition, Ford had helped check the power of the manufacturers and had a
“soothing influence” over prices.
An outside firm “may
someday go in and set the stage for noticeable deconcentration,”
the Court wrote.

“While it merely stays near the edge, it is a deterrent to current
competitors.”
In other
words, the threat of potential entry by Ford—the fact that, pre-merger, it pourrait have internally expanded into
equipment manufacturing—had played an important disciplining role.
Relatedly,
the Court observed that when a company in a competitive market integrates with
a firm in an oligopolistic one, the merger can have “the result of transmitting
the rigidity of the oligopolistic structure” of one industry to the other,
“thus reducing the chances of future deconcentration
du marché.

The Court required Ford to divest the manufacturer.

In the 1950s—while Congress, enforcement agencies, and the
courts recognized potential threats posed by vertical arrangements—Chicago
School scholars began to cast doubt on the idea that vertical integration has
anticompetitive effects.

By replacing market transactions with administrative decisions within the firm,
they argued, vertical arrangements generated efficiencies that antitrust law
should promote. And if integration failed to yield efficiencies, then the
integrated firm would have no cost advantages over unintegrated rivals,
therefore posing no risk of impeding entry. They further argued that vertical
deals would not affect a firm’s pricing and output policies, the primary
metrics in their analysis. Under this framework, only horizontal mergers affect
competition, as “[h]orizontal mergers increase market
share, but vertical mergers do not.”

Chicago School theory holds that concerns about both leverage
and foreclosure are misguided. Under the “single monopoly profit theorem,” the
amount of profit that a firm can extract from one market is fixed and cannot be
expanded through extending into an adjacent market if the two products are used
in fixed proportions.

Under this premise, not only does monopoly leveraging not pose any competitive
concern, but—since it can only be motivated by efficiencies, not profits—it is
actually procompetitive when it does occur.

The traditional worries about foreclosure, Bork claimed, were
unfounded, as “[p]redation through vertical merger is
extremely unlikely.”

A manufacturer would not favor its retail subsidiary over others unless it was
cheaper to do so—in which case, Bork argued, discriminating would yield
efficiencies that the firm would pass on to consumers. Additionally, any manufacturer
that sought to privilege its own retailer would face “entrants who would arrive
in sky-darkening swarms for the profitable alternatives.”
In other words, Bork’s
take was that vertical integration generally would not create forms of market
power that firms could use to hike prices or constrain output. In the rare case
that vertical integration fait créer
this form of market power, he believed that it would be disciplined by actual
or potential entry by competitors.
In light of this,
antitrust law’s aversion to vertical arrangements was, Bork argued, irrational.
“The law against vertical mergers is merely a law against the creation of
efficiency.”

With the election of President Reagan, this view of vertical
integration became national policy. In 1982 and 1984, the Department of Justice
(DOJ) and the FTC issued new merger guidelines outlining the framework that
officials would use when reviewing horizontal deals.
The 1984 version included guidelines
specific to vertical deals.

Part of a sweeping effort to overhaul antitrust enforcement, the new guidelines
narrowed the circumstances in which the agencies would challenge vertical
mergers.
Bien que
the guidelines acknowledged that vertical mergers could sometimes give rise to
competitive concerns, in practice the change constituted a de facto approval of
vertical deals.
The DOJ and FTC did not challenge even one vertical merger
during President Reagan’s tenure.

Although subsequent administrations have continued reviewing
vertical mergers, the Chicago School’s view that these deals generally do not
pose threats to competition has remained dominant.
Rejection of vertical
tie-ups—standard through the 1960s and 1970s—is extremely rare today;
in instances where
agencies spot potential harm, they tend to impose conduct remedies or require
divestitures rather than block the deal outright.
The Obama Administration
took this approach with two of the largest vertical deals of the last decade:
Comcast/NBC and Ticketmaster/LiveNation. In each
case, consumer advocates opposed the deal
and warned that the tie-up would
concentrate significant power in the hands of a single company,
which it could use to
engage in exclusionary practices, hike prices for consumers, and dock payments
to content producers, such as TV screenwriters and musicians. Nonetheless, the
DOJ attached certain behavioral conditions and required a minor divestiture, ultimately
approving both deals.

The district court held the consent decrees to be in the public interest.

II. Why competitive process and structure matter

The current framework in antitrust fails to register certain
forms of anticompetitive harm and therefore is unequipped to promote real
competition—a shortcoming that is illuminated and amplified in the context of
online platforms and data-driven markets. This failure stems both from
assumptions embedded in the Chicago School framework and from the way this framework
assesses competition.

Notably, the present approach fails even if one believes that
antitrust should promote only consumer interests. Critically, consumer
interests include not only cost but also product quality, variety, and innovation.
Protecting these long-term interests requires a much thicker conception of
“consumer welfare” than what guides the current approach. But more importantly,
the undue focus on consumer welfare is misguided. It betrays legislative
history, which reveals that Congress passed antitrust laws to promote a host of
political economic ends—including our interests as workers, producers,
entrepreneurs, and citizens. It also mistakenly supplants a concern about process
and structure (i.e., whether power is sufficiently distributed to keep markets
competitive) with a calculation regarding outcome (i.e., whether consumers are
materially better off).

Antitrust law and competition policy should promote not
welfare but competitive markets. By refocusing attention back on process and
structure, this approach would be faithful to the legislative history of major
antitrust laws. It would also promote actual competition—unlike the present
framework, which is overseeing concentrations of power that risk precluding
real competition.

A. Price and Output Do Not Cover the Full Range of Threats to Consumer Welfare

As discussed in Part I, modern doctrine assumes that
advancing consumer welfare is the sole purpose of antitrust. But the consumer
welfare approach to antitrust is unduly narrow and betrays congressional
intent, as evident from legislative history and as documented by a vast body of
scholarship. I argue in this Note that the rise of dominant internet platforms
freshly reveals the shortcomings of the consumer welfare framework and that it
should be abandoned.

Strikingly, the current approach fails même si one believes that consumer interests should remain
paramount.Focusing primarily on price and output undermines effective antitrust
enforcement by delaying intervention until market power is being actively
exercised, and largely ignoring whether and how it is being acquired. In other
words, pegging anticompetitive harm to high prices and/or lower output—while disregarding
the market structure and competitive process that give rise to this market
power—restricts intervention to the moment when a company has already acquired
sufficient dominance to distort competition.

This approach is misguided because it is much easier to
promote competition at the point when a market risks becoming less competitive
than it is at the point when a market is no longer competitive. The antitrust
laws reflect this recognition, requiring that enforcers arrest potential
restraints to competition “in their incipiency.”
But the Chicago School’s
hostility to false positives—and insistence that market power and high
concentration both reflect and generate efficiency
—has undermined this
incipiency standard and enfeebled enforcement as a whole. Indeed, enforcers
have largely abandoned section 2 monopolization claims,
which—by virtue of
assessing how a single company amasses and exercises its power—traditionally
involved an inquiry into structure. By instead relying primarily on price and output
effects as metrics of competition, enforcers risk overlooking the structural
weakening of competition until it becomes difficult to address effectively, an
approach that undermines consumer welfare.

Indeed, growing evidence shows that the consumer welfare
frame has led to higher prices and few efficiencies,
failing by its own metrics.

It arguably has further contributed to a decline in new business growth,
resulting in reduced opportunities for entrepreneurs and a stagnant economy.
The long-term interests of
consumers include product quality, variety, and innovation—factors best promoted
through both a robust competitive process and open markets. By contrast,
allowing a highly concentrated market structure to persist endangers these
long-term interests, since firms in uncompetitive markets need not compete to
improve old products or tinker to create news ones. Even if we accept consumer
welfare as the touchstone of antitrust, ensuring a competitive process—by
looking, in part, to how a market is structured—ought to be clé.
Empirical studies revealing that the consumer welfare Cadre
has resulted in higher prices—failing even by its own terms—support
la
need for a different approach.

B. Antitrust Laws Promote Competition To Serve a Variety of Interests

Legislative history reveals that the idea that “Congress
designed the Sherman Act as a ‘consumer welfare prescription’”
is wrong. Congress enacted antitrust
laws to rein in the power of industrial trusts, the large business organizations
that had emerged in the late nineteenth century. Responding to a fear of
concentrated power, antitrust sought to distribute it. In this sense, antitrust
was “guided by principles.”
The law was “pour diversity and access to markets; c'était contre high concentration and abuses of power.”

More relevant than any single goal was this general vision.
Quand Congress passed the Sherman Act in 1890,
Senator John Sherman called it “a bill of rights, a charter of liberty,” and
stressed its importance in political terms.
On the floor of the Senate he declared,

If we will not endure a king as a political power, we
should not endure a king over the production, transportation, and sale of any
of the necessities of life. If we would not submit to an emperor, we should not
submit to an autocrat of trade, with power to prevent competition and to fix
the price of any commodity.”

In other words, what was at stake in
keeping markets open—and keeping them free from industrial monarchs—was
freedom.

Animating this vision was the understanding that
concentration of economic power also consolidates political power, “breed[[[[ing]antidemocratic political pressures.”
This would occur through enabling a
small minority to amass outsized wealth, which they could then use to influence
gouvernement. But it would also occur by permitting “private discretion by a few
in the economic sphere” to “contrôle[[[[]the welfare of
all,” undermining individual and business freedom.
In the lead up to the
passage of the Sherman Act, Senator George Hoar warned that monopolies were “a
menace to republican institutions themselves.”

This vision encompassed a variety of ends. Pour un,
competition policy would prevent large firms from extracting wealth from
producers and consumers in the form of monopoly profits.
Senator Sherman, for
example, described overcharges by monopolists as “extortion which makes the
people poor,”
while Senator Richard Coke
referred to them as “robbery.”

Representative John Heard announced that trusts had “stolen millions from the
people,”
and Congressman Ezra
Taylor noted that the beef trust “robs the farmer on the one hand and the
consumer on the other.”

In the words of Senator James George, “
enormous wealth by extortion which makes the people poor.”

Notably, this focus on wealth transfers was not solely
economic. Leading up to the passage of the Sherman Act, price levels in the
United States were stable or slowly decreasing.
If the exclusive concern
had been higher prices, then Congress could have focused on those industries
where prices were, indeed, high or still rising. The fact that Congress chose
to denounce unjust redistribution suggests that something else was at
play—namely, that the public was “angered less by the reduction in their wealth
than by the way in which the wealth was extracted.”
In other words, though the
harm was being registered through an economic effect—a wealth transfer—the
underlying source of the grievance was also political.

Another distinct goal was to preserve open markets, in order
to ensure that new businesses and entrepreneurs had a fair shot at entry.
Several Congressmen advocated for the Federal Trade Commission Act because it
would help promote small business. Senator James Reed expressly noted that Congress’s
aim in passing the law was to keep markets open to independent firms.
Quand on discute de
Sherman Act, Senator George lamented that if large-scale industry were allowed
to grow unchecked, it would “crush out all small men, all small capitalists, tout small enterprises.”

Through the 1950s, courts and enforcers applied antitrust
laws to promote this variety of aims. While the vigor and tenor of enforcement
varied, there was an overarching understanding that antitrust served to protect
what Justice Louis Brandeis called “industrial liberty.”
Key to this vision was the
recognition that excessive concentrations of private power posed a public
threat, empowering the interests of a few to steer collective outcomes. “Power
that controls the economy should be in the hands of elected representatives of
the people, not in the hands of an industrial oligarchy,” Justice William O.
Douglas wrote.

Decentralizing this power would ensure that “the fortunes of the people will
not be dependent on the whim or caprice, the political prejudice, the emotional
stability of a few self-appointed men.”

As described in Part I, Chicago School scholars upended this
traditional approach, concluding that the only legitimate goal of antitrust is
consumer welfare, best promoted through enhancing economic efficiency. Notably,
some prominent liberals—including John Kenneth Galbraith—ratified this idea,
championing centralization.

In the wake of high inflation in the 1970s, Ralph Nader and other consumer advocates
also came to support an antitrust regime centered on lower prices, according
with the Chicago School’s view.

By orienting antitrust toward material rather than political ends, both the neoclassical
school and its critics effectively embraced concentration over competition.

Focusing antitrust exclusively on consumer welfare is a
mistake.
For one, it betrays legislative
intent, which makes clear that Congress passed antitrust laws to safeguard
against excessive concentrations of economic power. This vision promotes a
variety of aims, including the preservation of open markets, the protection of
producers and consumers from monopoly abuse, and the dispersion of political
and economic control. Secondly, focusing on
consumer welfare disregards the host of other ways that excessive concentration
can harm us—enabling firms to squeeze suppliers and producers, endangering
system stability (for instance, by allowing companies to become too big to
fail),
or undermining media diversity, to name a few. Protecting this range
of interests requires an approach to antitrust that focuses on the neutrality
of the competitive process and the openness of market structures.

C.Promoting Competition Requires Analysis of
Process and Structure

The Chicago School’s embrace of consumer welfare as the sole
goal of antitrust is problematic for at least two reasons. First, as described
in Section II.B, this idea contravenes legislative history, which shows that
Congress passed antitrust laws to safeguard against excessive concentrations of
private power. It recognized, in turn, that this vision would protect a host of
interests, which the sole focus on “consumer welfare” disregards. Second, by
adopting this new goal, the Chicago School shifted the analytical emphasis away
de processus—the conditions necessary
for competition—and toward an résultat—namely,
consumer welfare.

In other words, a concern about structure (is power sufficiently distributed to
keep markets competitive?) was replaced by a calculation (did prices rise?).
This approach is
inadequate to promote real competition, a failure that is amplified in the case
of dominant online platforms.

Antitrust doctrine has evolved to reflect this redefinition.
The recoupment requirement in predatory pricing, for example, reflects the idea
that competition is harmed only if the predator can ultimately charge consumers
supracompetitive prices.
This logic is agnostic
about process and structure; it measures the health of competition primarily
through effects on price and output. The same is true in the case of vertical
integration. The modern view of integration largely assumes away barriers to entry,
an element of structure, presuming that any advantages enjoyed by the
integrated firm trace back to efficiencies.

More generally, modern doctrine assumes that market power is
not inherently harmful and instead may result from and generate efficiencies.
In practice, this presumes that market power is benign sauf si it leads to higher prices or reduced output—again glossing
over questions about the competitive process in favor of narrow calculations.
In other words, this approach
equates harm entirely with whether a firm choisit
to exercise its market power through price-based levers, while disregarding
whether a firm has développé ce
power, distorting the competitive process in some other way.
But allowing firms to
amass market power makes it more difficult to meaningfully check that power
when it is eventually exercised. Companies may exploit their market power in a
host of competition-distorting ways that do not directly lead to short-term price
and output effects.

I propose that a better way to understand competition is by
focusing on competitive process and market structure.
By arguing for a focus on
market structure, I am not advocating a strict return to the structure-conduct-performance
paradigm. Instead, I claim that seeking to assess competition without
acknowledging the role of structure is misguided. This is because the best guardian
of competition is a competitive process, and whether a market is competitive is
inextricably linked to—even if not solely determined by—how that market is
structured. In other words, an analysis of the competitive process and market
structure will offer better insight into the state of competition than do
measures of welfare.

Moreover, this approach would better protect the range of
interests that Congress sought to promote through preserving competitive
markets, as described in Section II.B. Foundational to these interests is the
distribution of ownership and control—inescapably a question of structure.
Promoting a competitive process also minimizes the need for regulatory involvement.
A focus on process assigns government the task of creating background
conditions, rather than intervening to manufacture or interfere with outcomes.

In practice, adopting this approach would involve assessing a
range of factors that give insight into the neutrality of the competitive
process and the openness of the market. These factors include: (1) entry
barriers, (2) conflicts of interest, (3) the emergence of gatekeepers or
bottlenecks, (4) the use of and control over data, and (5) the dynamics of
bargaining power. An approach that took these factors seriously would involve
an assessment of how a market is structured and whether a single firm had
acquired sufficient power to distort competitive outcomes.
Key questions involving
these factors would be: What lines of business is a firm involved in and how do
these lines of business interact? Does the structure of the market create or
reflect dependencies? Has a dominant player emerged as a gatekeeper so as to
risk distorting competition?

Attention to structural concerns and the competitive process
are especially important in the context of online platforms, where price-based
measures of competition are inadequate to capture market dynamics, particularly
given the role and use of data.
As internet platforms mediate a
growing share of both communications and commercial activity, ensuring that our
framework fits how competition actually works in these markets is vital. Au dessous de
I document facets of Amazon’s power, trace the source of its growth, and
analyze the effects of its dominance. Doing so through the lens of structure
and process enables us to make sense of the company’s strategy and illuminates
anticompetitive aspects of its business.

III. Amazon’s Business Strategy

Amazon has established dominance as an online platform thanks
to two elements of its business strategy: a willingness to sustain losses and
invest aggressively at the expense of profits, and integration across multiple
business lines.
These facets of its strategy are
independently significant and closely interlinked—indeed, one way it has been
able to expand into so many areas is through foregoing returns. Ce
strategy—pursuing market share at the expense of short-term returns—defies the
Chicago School’s assumption of rational, profit-seeking market actors. Plus
significantly, Amazon’s choice to pursue heavy losses while also integrating
across sectors suggests that in order to fully understand the company and the
structural power it is amassing, we must view it as an integrated entity.
Seeking to gauge the firm’s market role by isolating a particular line of
business and assessing prices in that segment fails to capture both (1) the
true shape of the company’s dominance and (2) the ways in which it is able to
leverage advantages gained in one sector to boost its business in another.

A. Willingness To Forego Profits To Establish Dominance

Recently, Amazon has started reporting consistent profits,
largely due to the success of Amazon Web Services, its cloud computing
affaires.
Its North America retail
business runs on much thinner margins, and its international retail business
still runs at a loss.

But for the vast majority of its twenty years in business, losses—not profits—were
the norm. Through 2013, Amazon had generated a positive net income in just over
half of its financial reporting quarters. Even in quarters in which it did
enter the black, its margins were razor-thin, despite astounding growth. le
graph below captures the general trend.

Figure 1.

Amazon’s Profits

image006.jpg

Just as striking as Amazon’s lack of interest in generating
profit has been investors’ willingness to back the company.
With the exception of a
few quarters in 2014, Amazon’s shareholders have poured money in despite the
company’s penchant for losses. On a regular basis, Amazon would report losses,
and its share price would soar.

As one analyst told the New York Times,
“Amazon’s stock price doesn’t seem to be correlated to its actual experience in
any way.”

Analysts and reporters have spilled substantial ink seeking
to understand the phenomenon. As one commentator joked in a widely circulated
post, “Amazon, as best I can tell, is a charitable organization being run by
elements of the investment community for the benefit of consumers.”

In some ways, the puzzlement is for naught: Amazon’s
trajectory reflects the business philosophy that Bezos outlined from the start.
In his first letter to shareholders, Bezos wrote:

We believe that a fundamental measure of our success
will be the shareholder value we create over the long terme. This value will be a direct result of our ability to
extend and solidify our current market leadership position . . . .
We first measure ourselves in terms of the metrics most indicative of our
market leadership: customer and revenue growth, the degree to which our
customers continue to purchase from us on a repeat basis, and the strength of
our brand. We have invested and will continue to invest aggressively to expand
and leverage our customer base, brand, and infrastructure as we move to establish
an enduring franchise.

In other words, the premise of Amazon’s business model was to
establish scale. To achieve scale, the company prioritized growth. Under this
approach, aggressive investing would be key, even if that involved slashing
prices or spending billions on expanding capacity, in order to become
consumers’ one-stop-shop. This approach meant that Amazon “may make decisions
and weigh tradeoffs differently than some companies,” Bezos warned.
“At this stage, we choose
to prioritize growth because we believe that scale is central to achieving the
potential of our business model.”

The insistent emphasis on “market leadership” (Bezos relies
on the term six times in the short letter)
signaled that Amazon
intended to dominate. And, by many measures, Amazon has succeeded. Ses
year-on-year revenue growth far outpaces that of other online retailers.
Despite efforts by big-box competitors
like Walmart, Sears, and Macy’s to boost their online operations, no rival has
succeeded in winning back market share.

One of the primary ways Amazon has built a huge edge is
through Amazon Prime, the company’s loyalty program, in which Amazon has
invested aggressively. Initiated in 2005, Amazon Prime began by offering
consumers unlimited two-day shipping for $79.
In the years since, Amazon
has bundled in other deals and perks, like renting e-books and streaming music
and video, as well as one-hour or same-day delivery. The program has arguably
been the retailer’s single biggest driver of growth.
Amazon does not disclose the exact
number of Prime subscribers, but analysts believe the number of users has
reached 63 million—19 million more than in 2015.
Membership doubled between 2011 and
2013; analysts expect it to “easily double again by 2017.”
By 2020, it is estimated
that half of U.S. households may be enrolled.

As with its other ventures, Amazon lost money on Prime to
gain buy-in. In 2011 it was estimated that each Prime subscriber cost Amazon at
least $90 a year—$55 in shipping, $35 in digital video—and that the company
therefore took an $11 loss annually for each customer.
One Amazon expert tallies that
Amazon has been losing $1 billion to $2 billion a year on Prime memberships.
The full cost of Amazon
Prime is steeper yet, given that the company has been investing heavily in
warehouses, delivery facilities, and trucks, as part of its plan to speed up
delivery for Prime customers—expenditures that regularly push it into the red.

Despite these losses—or perhaps because of them—Prime is
considered crucial to Amazon’s growth as an online retailer. Selon
analysts, customers increase their purchases from Amazon by about 150% after
they become Prime members.

Prime members comprise 47% of Amazon’s U.S. shoppers.
Amazon Prime members also
spend more on the company’s website—an average of $1,500 annually, compared to
$625 spent annually by non-Prime members.
Business experts note that
by making shipping free, Prime “successfully strips out paying for . . . the leading consumer burden of
online shopping.”

Moreover, the annual fee drives customers to increase their Amazon purchases in
order to maximize the return on their investment.

As a result, Amazon Prime users are both more likely to buy
on its platform and less likely to shop elsewhere. “[Sixty-three percent] de
Amazon Prime members carry out a paid transaction on the site in the same
visit,” compared to 13% of non-Prime members.
For Walmart and Target,
those figures are 5% and 2% respectively.
One study found that less
than 1% of Amazon Prime members are likely to consider competitor retail sites
in the same shopping session. Non-Prime members, meanwhile, are eight times
more likely than Prime members to shop between both Amazon and Target in the
same session.
In the words of one former
Amazon employee who worked on the Prime team, “It was never about the $79. Il
was really about changing people’s mentality so they wouldn’t shop anywhere
else.”
In that regard, Amazon
Prime seems to have proven successful.

In 2014, Amazon hiked its Prime membership fee to $99. The move prompted some consumer ire,
but 95% of Prime members surveyed said they would either definitely or probably
renew their membership regardless,
suggesting that Amazon has
created significant buy-in and that no competitor is currently offering a comparably
valuable service at a lower price. It may, however, also reveal the general
stickiness of online shopping patterns. Although competition for online
services may seem to be “just one click away,” research drawing on behavioral
tendencies shows that the “switching cost” of changing web services can, in
fact, be quite high.

No doubt, Amazon’s dominance stems in part from its
first-mover advantage as a pioneer of large-scale online commerce. But in
several key ways, Amazon has achieved its position through deeply cutting prices
and investing heavily in growing its operations—both at the expense of profits.
The fact that Amazon has been willing to forego profits for growth undercuts a
central premise of contemporary predatory pricing doctrine, which assumes that
predation is irrational precisely because firms prioritize profits over growth.
In this way, Amazon’s
strategy has enabled it to use predatory pricing tactics without triggering the
scrutiny of predatory pricing laws.

B. Expansion into Multiple Business Lines

Another key element of Amazon’s strategy—and one partly
enabled by its capacity to thrive despite posting losses—has been to expand
aggressively into multiple business lines.
In addition to being a retailer,
Amazon is a marketing platform, a delivery and logistics network, a payment
service, a credit lender, an auction house, a major book publisher, a producer
of television and films, a fashion designer, a hardware manufacturer, and a
leading provider of cloud server space and computing power.
For the most part, Amazon
has expanded into these areas by acquiring existing firms.

Involvement in multiple, related business
lines means
that, in many instances, Amazon’s rivals are also its
les clients. The retailers that compete with it to sell goods may also use its
delivery services, for example, and the media companies that compete with it to
produce or market content may also use its platform or cloud infrastructure. À
a basic level this arrangement creates conflicts of interest, given that Amazon
is positioned to favor its own products over those of its competitors.

Critically, not only has Amazon integrated across select
lines of business, but it has also emerged as central infrastructure for the
internet economy. Reports suggest this was part of Bezos’s vision from the
début. According to early Amazon employees, when the CEO founded the business,
“his underlying goals were not to build an online bookstore or an online
retailer, but rather a ‘utility’ that would become essential to commerce.”
In other words, Bezos’s
target customer was not only end-consumers but also other businesses.

Amazon controls key critical infrastructure for the Internet
economy—in ways that are difficult for new entrants to replicate or compete
against. This gives the company a key advantage over its rivals: Amazon’s
competitors have come to depend on it. Like its willingness to sustain losses,
this feature of Amazon’s power largely confounds contemporary antitrust
analysis, which assumes that rational firms seek to drive their rivals out of
affaires. Amazon’s game is more sophisticated. By making itself indispensable
to e-commerce, Amazon enjoys receiving business from its rivals, even as it
competes with them. Moreover, Amazon gleans information from these competitors
as a service provider that it may use to gain a further advantage over them as
rivals—enabling it to further entrench its dominant position.

IV Establishing Structural Dominance

Amazon now controls 46% of all e-commerce in the United
États.
Not only is it the
fastest-growing major retailer, but it is also growing faster than e-commerce
as a whole.
In 2010, it employed 33,700 workers;
by June 2016, it had 268,900.

It is enjoying rapid success even in sectors that it only recently entered. Pour
example, the company “is expected to triple its share of the U.S. apparel
market over the next five years.”
Its clothing sales
recently rose by $1.1 billion—even as online sales at the six largest U.S.
department stores fell by over $500 million.

These figures alone are daunting, but they do not capture the
full extent of Amazon’s role and power. Amazon’s willingness to sustain losses
and invest aggressively at the expense of profits, coupled with its integration
across sectors, has enabled it to establish a dominant structural role in the
marché.

In the Sections that follow, I describe several examples of
Amazon’s conduct that illustrate how the firm has established structural
dominance.
These examples—its handling
of e-books and its battle with an independent online retailer—focus on predatory
pricing practices. These cases suggest ways in which Amazon may benefit from
predatory pricing even if the company does not raise the price of the goods on
which it lost money. The other examples, Fulfillment-by-Amazon and Amazon
Marketplace, demonstrate how Amazon has become an infrastructure company, both
for physical delivery and e-commerce, and how this vertical integration
implicates market competition. These cases highlight how Amazon can use its
role as an infrastructure provider to benefit its other lines of business.
These examples also demonstrate how high barriers to entry may make it
difficult for potential competitors to enter these spheres, locking in Amazon’s
dominance for the foreseeable future. All four of these accounts raise concerns
about contemporary antitrust’s ability to register
and address the anticompetitive threat posed by Amazon and other dominant
online platforms.

A. Below-Cost Pricing of Bestseller E-Books and the Limits of Modern Recoupment Analysis

Amazon entered the e-book market by pricing bestsellers below
Coût. Although this strategic pricing helped Amazon to establish dominance in
the e-book market, the government perceived Amazon’s cost cutting as benign, focusing
on the profitability of e-books in the aggregate and characterizing the
company’s pricing of bestsellers as “loss leading” rather than predatory
pricing. This failure to recognize Amazon’s conduct as
anticompetitive stems from a misunderstanding of online markets generally and
of Amazon’s strategy specifically.
Additionally, analyzing the issues
raised in this case suggests that Amazon could recoup its losses through means
not captured by current antitrust analysis.

In late 2007, Amazon rolled out the Kindle, its e-reading
device, and launched a new e-book library.
Before introducing the
device, CEO Jeff Bezos had decided to price bestseller e-books at $9.99,
significantly below the
$12 to $30 that a new hardback typically costs.
Critically, the wholesale price at
which Amazon was buying books from publishers had not dropped; it was instead
choosing to price e-books below cost.
Analysts estimate that Amazon sold
the Kindle device below manufacturing cost too.
Bezos’s plan was to
dominate the e-book selling business in the way that Apple had become the go-to
platform for digital music.

The strategy worked: through 2009, Amazon dominated the e-book retail market,
selling around 90% of all e-books.

Publishers, fearing
that Amazon’s $9.99 price point for e-books would permanently drive down the price
that consumers were willing to pay for all books, sought to wrest back some
contrôle. When the opportunity came to partner with Apple to sell e-books
à travers le iBookstore store, five of the “Big Six”
publishers introduced agency pricing, whereby publishers would set the final
retail price and Apple would get a 30% cut.
After securing this deal, MacMillan, one of the “Big Six,” demanded
that Amazon, too, adopt this pricing model.
Though it initially refused and delisted MacMillan’s books, Amazon ultimately relented, explaining to readers that “we will have
to capitulate and accept Macmillan’s terms because Macmillan has a monopoly
over their own titles.”
Other publishers followed suit, halting
Amazon’s ability to price e-books at $9.99.

In 2012, the DOJ sued
the publishers and Apple for colluding to raise e-book prices.
In response to claims that the DOJ was going after the wrong
actor—given that it was Amazon’s predatory tactics that drove the publishers
and Apple to join forces—the DOJ investigated Amazon’s pricing strategies and
found “persuasive evidence lacking” to show that the company had engaged in
predatory practices.

According to the government, “from the time of its launch, Amazon’s e-book
distribution business has been consistently profitable, even when substantially
discounting some newly released and bestselling titles.”

Judge Cote, who
presided over the district court trial, refrained from affirming the
government’s conclusion.
Still, the government’s argument illustrates
the dominant framework that courts and enforcers use to analyze predation—and
how it falls short. Specifically, the government erred by analyzing the
profitability of Amazon’s e-book business in the aggregate and by characterizing
the conduct as “loss leading” rather than potentially predatory pricing.
These missteps suggest a failure to appreciate two critical aspects of
Amazon’s practices: (1) how steep discounting by a firm on a platform-based
product creates a higher risk that the firm will generate monopoly power than
discounting on non-platform goods and (2) the multiple ways Amazon could recoup
losses in ways other than raising the price of the same e-books that it
discounted.

On the first point,
the government argued that Amazon was not engaging in predation because in the agrégat,Amazon’s e-books business was profitable. This perspective
overlooks how heavy losses on particular lines of e-books (bestsellers, for example,
or new releases) may have thwarted competition, even if the e-books business as
a whole was profitable. That the DOJ chose to define the relevant market as
e-books—rather than as specific lines, like bestseller e-books—reflects a
deeper mistake: the failure to recognize how the economics of platform-based
products differ in crucial ways from non-platform goods.
As a result, the DOJ analyzed the e-book market as it would the market
for physical books.

One indication of
this failure to appreciate the difference between physical books and e-books is
that the government and Judge Cote treated Amazon’s below-cost pricing as loss
leading,
rather than as predatory pricing. The difference between loss leading and predatory pricing is not
spelled out in law, but the distinction turns on the nature of the below-cost
pricing, specifically its intensity and the intent motivating it. Judge Cote’s
use of “loss leading” revealed a view that “Amazon’s below-cost pricing was (a)
selective rather than pervasive, and (b) not intended to generate monopoly
power.”
On this view, Amazon’s aim was to trigger
additional sales of other products sold by Amazon, rather than to drive out
competing e-book sellers and acquire the power to increase e-book prices.
In other words, because Amazon’s alleged short-term aim was to sell
more e-readers and e-books—rather than to harm its rivals and raise prices—its
conduct is considered loss leading rather than predatory pricing. What both the
DOJ and the district court missed, however, is the way in which below-cost
pricing in this instance entrenched and reinforced Amazon’s dominance in ways
that loss leading by physical retailers does not.

Unlike with online
shopping, each trip to a brick-and-mortar store is discrete. If, on Monday,
Walmart heavily discounts the price of socks and you are looking to buy socks,
you might visit, buy socks, and—because you are already there—also buy milk. Sur
Thursday, the fact that Walmart had discounted socks on Monday does not
necessarily exert any tug; you may return to Walmart because you now know that
Walmart often has good bargains, but the fact that you purchased socks from
Walmart on Monday is not, in itself, a reason to return.

Internet retail is
différent. Say on Monday, Amazon steeply discounts the e-book version of Harper
Lee’s Go Set a Watchman, and you purchase both a Kindle and the e-book. Sur
Thursday, you would be inclined to revisit Amazon—and not simply because you
know it has good bargains. Several factors extend the tug. For one, Amazon,
like other e-book sellers, has used a scheme known as “digital rights management”
(DRM), which limits the types of devices that can read certain e-book formats.
Compelling readers to purchase a Kindle through cheap e-books locks
them into future e-book purchases from Amazon.
Moreover, buying—or even browsing—e-books on Amazon’s platform hands
the company information about your reading habits and preferences, data the
company uses to tailor recommendations and future deals.
Replicated across a few more purchases, Amazon’s lock-in becomes
strong. It becomes unlikely that a reader will then purchase a Nook and switch
to buying e-books through Barnes & Noble, even if that company is slashing
prices.

Put differently, loss
leading pays higher returns with platform-based e-commerce—and specifically
with digital products like e-books—than it does with brick-and-mortar stores.
The marginal value of the first sale and early sales in general is much higher
for e-books than for print books because there are lock-in effects at play, due
both to technical design and the possibilities for and value of personalization.

By treating
e-commerce and digital goods the same as physical stores and goods, both the
government and Judge Cote missed the anticompetitive implications of Amazon’s
below-cost pricing. Though the immediate effect of Amazon’s pricing of bestseller
e-books may have been to sell more e-books generally, that tactic has also
positioned Amazon to dominate the market in a way that sets it up to raise
future prices. In this context, the traditional distinction between loss
leading and predatory pricing is strained.

Instead of
recognizing that the economics of platforms meant that below-cost pricing on a
platform-hosted good would tend to facilitate long-term dominance, the government
took comfort that the industry was “dynamic and evolving” and concluded that
the “presence and continued investment by technology giants, multinational book
publishers, and national retailers in e-books businesses” rendered an Amazon-dominated
market unlikely.
Yet Amazon’s early lead has, in fact,
translated to long-term dominance. It controls around 65% of the e-book market
aujourd'hui,
while its share of the e-reader market hovers around 74%. Players that appeared up-and-coming even a few years ago are now
retreating from the market. Sony closed its U.S. Reader store and is no longer
introducing new e-readers to the U.S. market.
Barnes & Noble, meanwhile, has slashed funding for the Nook by 74%. The only real e-books competitor left standing is Apple.

Parce que le
government deflected predatory pricing claims by looking at aggregate
profitability, neither the government nor the court reached the question of
recoupment. Given that—under current doctrine—whether below-cost pricing is
predatory or not turns on whether a firm recoups its losses, we should examine
how Amazon could use its dominance to recoup its losses in ways that are more
sophisticated than what courts generally consider or are able to assess.

Most obviously,
Amazon could earn back the losses it generated on bestseller e-books by raising
prices of either particular lines of e-books or e-books as a whole. Ce
intra-product market form of recoupment is what courts look for. However, it remains
unclear whether Amazon has hiked e-book prices because, as the New York Times noted, “[[[[je]t is difficult to comprehensively track the movement of
prices on Amazon,” which means that any evidence of price trends is “anecdotal
and fragmentary.”
As Amazon customers can attest, Amazon’s prices
fluctuate rapidly and with no explanation.

This underscores a
basic challenge of conducting recoupment analysis with Amazon: it may not be
apparent when and by how much Amazon raises prices. Online commerce enables
Amazon to obscure price hikes in at least two ways: rapid, constant price
fluctuations and personalized pricing.

Constant price fluctuations diminish our ability to discern pricing trends. Par
one account, Amazon changes prices more than 2.5 million times each day.
Amazon is also able to tailor prices to individual consumers, known as
first-degree price discrimination. There is no public evidence that Amazon is
currently engaging in personalized pricing,
but online retailers generally are devoting significant resources to
analyzing how to implement it.
A major topic of discussion at the 2014 National Retail Federation
annual convention, for example, was how to introduce discriminatory pricing
without triggering consumer backlash.
One mechanism discussed was highly personalized coupons sent at the
point of sale, which would avoid the need to show consumers different prices
but would still achieve discriminatory pricing.

Si
retailers—including Amazon—implement discriminatory pricing on a wide scale,
each individual would be subject to his or her own personal price trajectory,
eliminating the notion of a single pricing trend. It is not clear how we would
measure price hikes for the purpose of recoupment analysis in that scenario.
There would be no obvious conclusions if some consumers faced higher prices
while others enjoyed lower ones. But given the magnitude and accuracy of data
that Amazon has collected on millions of users, tailored pricing is not simply
a hypothetical power.

Discerning whether and by how much Amazon raises book prices will be more
difficult than the Matsushita ou Brooke Group Courts could have imagined.

C'est vrai que
brick-and-mortar stores also collect data on customer purchasing habits and
send personalized coupons. But the types of consumer behavior that internet
firms can access—how long you hover your mouse on a particular item, how many
days an item sits in your shopping basket before you purchase it, or the
fashion blogs you visit before looking for those same items through a search
engine—is uncharted ground. The degree to which a firm can tailor and
personalize an online shopping experience is different in kind from the methods
available to a brick-and-mortar store—precisely because the type of behavior
that online firms can track is far more detailed and nuanced. And unlike
brick-and-mortar stores—where everyone at least voit a common price (even if they go on to receive
discounts)—internet retail enables firms to entirely personalize consumer experiences,
which eliminates any collective baseline from which to gauge price increases or
decreases.

The decision of whichproduct market in which Amazon may
choose to raise prices is also an open question—and one that current predatory
pricing doctrine ignores. Courts generally assume that a firm will recoup by
increasing prices on the same goods on which it previously lost money. Mais
recoupment across markets is also available as a strategy, especially for firms
as diversified across products and services as Amazon. Reporting suggests the
company did just this in 2013, by hiking prices on scholarly and small-press
books and creating the risk of a “two-tier system where some books are priced
beyond an audience’s reach.”
Although Amazon may be recouping its initial losses in e-books through
markups on physical books, this cross-market recoupment is not a scenario that
enforcers or judges generally consider.
One possible reason for this neglect is that Chicago School
scholarship, which assumes recoupment in single-product markets is unlikely,
also holds recoupment in multi-product scenarios to be implausible.

Although current
predatory pricing doctrine focuses only on recoupment through raising prices
for consumers, Amazon could also recoup its losses by imposing higher fees on
publishers. Large book retailer chains like Barnes & Noble have long used
their market dominance to charge publishers for favorable product placement,
such as displays in a storefront window or on a prominent table.
Amazon’s dominance in the e-book market has enabled it to demand
similar fees for even the most basic of services. For example, when renewing
its contract with Hachette last year, Amazon demanded payments for services
including the pre-order button, personalized recommendations, and an Amazon
employee assigned to the publisher.
In the words of one person close to the negotiations, Amazon “is very
inventive about what we’d call standard service. . . . Ils sont
teasing out all these layers and saying, ‘If you want that service, you’ll have
to pay for it.’”
By introducing fees on services that it
previously offered for free, Amazon has created another source of revenue.
Amazon’s power to demand these fees—and recoup some of the losses it sustained
in below-cost pricing—stems from dominance partly built through that same
below-cost pricing. The fact that Amazon has itself vertically integrated into
book publishing—and hence can promote its own content—may give it additional
leverage to hike fees. Any publisher that refuses could see Amazon favor its
own books over the publisher’s, reflecting a conflict of interest I discuss
further in Section IV.D. It is not uncommon for half of the titles on Amazon’s
Kindle bestseller list to be its own.

While not captured by
current antitrust doctrine, the pressure Amazon puts on publishers merits concern.
For one, consolidation among book sellers—partly spurred by Amazon’s
pricing tactics and demands for better terms from publishers—has also spurred
consolidation among publishers. Consolidation among publishers last reached its
heyday in the 1990s—as publishing houses sought to bulk up in response to the
growing clout of Borders and Barnes & Noble—and by the early 2000s, the
industry had settled into the “Big Six.”
This trend has cost authors and readers alike, leaving writers with
fewer paths to market and readers with a less diverse marketplace. Puisque
Amazon’s rise, the major publishers have merged further—thinning down to five,
with rumors of more consolidation to come.

Second, the
increasing cost of doing business with Amazon is upending the publishers’
business model in ways that further risk sapping diversity. Traditionally,
publishing houses used a cross-subsidization model whereby they would use their
best sellers to subsidize weightier and riskier books requiring greater upfront
investment.
In the face of higher fees imposed by
Amazon, publishers say they are less able to invest in a range of books. Dans un
recent letter to DOJ, a group of authors wrote that Amazon’s actions have
“extract[[[[ed]vital resources from the [book] industrie
in ways that lessen the diversity and quality of books.”
The authors noted that publishers have responded to Amazon’s fees by
both publishing fewer titles and focusing largely on books by celebrities and
bestselling authors.
The authors also noted, “Readers are presented
with fewer books that espouse unusual, quirky, offbeat, or politically risky
ideas, as well as books from new and unproven authors. This impoverishes
America’s marketplace of ideas.”

Amazon’s conduct
would be readily cognizable as a threat under the pre-Chicago
School view
that predatory pricing laws specifically and antitrust generally
promoted a broad set of values. Under the predatory pricing jurisprudence of
the early and mid-twentieth century, harm to the diversity and vibrancy of
ideas in the book market may have been a primary basis for government
intervention. The political risks associated with Amazon’s market dominance
also implicate some of the major concerns that animate antitrust laws. Par exemple,
the risk that Amazon may retaliate against books that it disfavors—either to impose
greater pressure on publishers or for other political reasons—raises concerns
about media freedom. Given that antitrust authorities previously considered
diversity of speech and ideas a factor in their analysis, Amazon’s degree of
control, too, should warrant concern.

Even within the
narrower “consumer welfare” framework, Amazon’s attempts to recoup losses
through fees on publishers should be understood as harmful. A market with less
choice and diversity for readers amounts to a form of consumer injury. That DOJ
ignored this concern in its suit against Apple and the publishers suggests that
its conception of predatory pricing fails to captureoverlooks
the full suite of harms that Amazon’s actions may cause.

Amazon’s below-cost
pricing in the e-book market—which enabled it to capture 65% of that market,
a sizable share by any measure—strains predatory pricing doctrine in
several ways. First, Amazon is positioned to recoup its losses by raising
prices on less popular or obscure e-books, or by raising prices on print books.
In either case, Amazon would be recouping outside the original market where it
sustained losses (bestseller e-books), so courts are unlikely to look for or
consider these scenarios. Additionally, constant fluctuations in prices and the
ability to price discriminate enable Amazon to raise prices with little chance
of detection. Lastly, Amazon could recoup its losses by extracting more from
publishers, who are dependent on its platform to market both e-books and print
livres. This may diminish the quality and breadth of the works that are
published, but since this is most directly un fournisseur-side
rather than buyer-side harm, it is less likely that a modern court would
consider it closely. The current predatory pricing framework fails to capture
the harm posed to the book market by Amazon’s tactics.

B. Acquisition of Quidsi and Flawed Assumptions About Entry and Exit Barriers

In addition to using below-cost pricing to establish a
dominant position in e-books, Amazon has also used this practice to put
pressure on and ultimately acquire a chief rival. This history challenges contemporary
antitrust law’s assumption that predatory pricing cannot be used to establish
dominance. While theory may predict that entry barriers for online retail are
low, this account shows that in practice significant investment is needed to
establish a successful platform that will attract traffic. Finally, Amazon’s conduct
suggests that psychological intimidation can discourage new entry that would
challenge a dominant player’s market power.

En 2008, Quidsi était l'un des
world’s fastest growing e-commerce companies.
It oversaw several subsidiaries: Diapers.com
(focused on baby care), Soap.com (focused on household essentials), and BeautyBar.com
(focused on beauty products). Amazon expressed interest in acquiring Quidsi in 2009, but the company’s founders declined Amazon’s
offre.

Shortly after Quidsi rejeté
Amazon’s overture, Amazon cut its prices for diapers and other baby products by
up to 30%.
By reconfiguring their
prices, Quidsi executives saw that Amazon’s pricing
bots—software “that carefully monitors other companies’ prices and adjusts
Amazon’s to match”—were tracking Diapers.com and would immediately slash
Amazon’s prices in response to Quidsi’s changes.
In September 2010, Amazon rolled out
Amazon Mom, a new service that offered a year’s worth of free two-day Prime
shipping (which usually cost $79 a year).
Customers could also secure an
additional 30% discount on diapers by signing up for monthly deliveries as part
of a service known as “Subscribe and Save.”
Quidsi
executives “calculated that Amazon was on track to lose $100 million over three
months in the diaper category alone.”

Eventually, Amazon’s below-cost pricing started eating into Diapers.com’s growth, and it “slowed under Amazon’s pricing
pressure.”
Investors, meanwhile,
“grew wary of pouring more money” into Quidsi, given
the challenge from Amazon.

Struggling to keep up with Amazon’s pricing war, Quidsi’s owners began talks with Walmart about potentially
selling the business. Amazon intervened and made an aggressive counteroffer.
Although Walmart offered a
higher final bid, “the Quidsi executives stuck with
Amazon, largely out of fear.”

The FTC reviewed the Amazon-Quidsi deal and decided
that it did not trigger anticompetitive concerns.
Through its purchase of Quidsi, Amazon eliminated a leading competitor in the
online sale of baby products. Amazon achieved this by slashing prices and
bleeding money,

losses that its investors have given it a free pass to incur—and that a smaller
and newer venture like Quidsi, by contrast, could not
maintain.

After completing its buy-up of a key rival—and seemingly losing
hundreds of millions of dollars in the process—Amazon went on to raise prices.
In November 2011, a year after buying out Quidsi,
Amazon shut down new memberships in its Amazon Mom program.
Though the company has
since reopened the program, it has continued to scale back the discounts and generous
shopping terms of the original offer. As of February 2012, discounts that had previously
been 30% were reduced to 20%, and the one year of free Prime membership was cut
to three months.

In November 2014, the company hiked prices further: members purchasing more
than four items in a month would no longer receive the general 20% discount,
and the 20% discount on baby wipes—one of the program’s top-selling
products—was cut to 5%.

Summarizing the series of changes, one journalist observed, “The Amazon Mom
program has become much less generous than it was when it was introduced in
2010.”
In online forums where
consumers expressed frustrations with the changes, several users said they
would be taking their business from Amazon and returning to Diapers.com—which,
other users pointed out, was no longer possible.
Through its strategy,
Amazon now holds a strong position in the baby-product market.

Amazon’s conduct runs counter to contemporary predatory
pricing thinking, which contends that predation is no path to buying up a
competitor. Dans The Antitrust Paradox,Bork wrote, “[T]he modern law of
horizontal mergers makes it all but impossible for the predator to bring the
war to an end by purchasing his victim. To accomplish the predator’s purpose,
the merger must create a monopoly” and law “would preclude the attainment of
the monopoly necessary to make predation profitable.”
For sectors with low entry
costs, Bork writes, this strategy is precluded by the constant possibility of
reentry by other players. “A shoe retailer can be driven out rapidly, but
reentry will be equally rapid.”

In fields in which entry costs are high, Bork argued that exit by competitors
is unlikely because management would need to believe that the predation had
rendered the value of their facilities negligible. For instance, “[r]ailroading, which involves specialized facilities, is
difficult to enter, but the potential victim of predation would be difficult to
drive out precisely because railroad facilities are not useful in other industries.”

Does online retailing of baby products resemble shoe
retailing or railroading? Given the absence of formal barriers, entry should be
easy: unlike railroading, selling baby products online requires no heavy investment
or fixed costs. However, the economics of online retailing are not quite like
traditional shoe retailing. Given that attracting traffic and generating sales
as an independent online retailer involves steep search costs, the vast
majority of online commerce is conducted on platforms, central marketplaces
that connect buyers and sellers. Thus, in practice, successful entry by a
potential diaper retailer carries with it the cost of attempting to build a new
online platform, or of creating a brand strong enough to draw traffic from an
existing company’s platform. As several commentators have observed, the
practical barriers to successful and sustained entry as an online platform are
very high, given the huge first-mover advantages stemming from data collection
and network effects.
Moreover, the high exit barriers
that Bork assumes for railroads—namely, that they would have to be convinced
their facilities were worth more as scrap than as a railroad—do not apply to
online platforms. Investment in online platforms lies not in physical infrastructure
that might be repurposed, but in intangibles like brand recognition. Celles-ci
intangibles can be absorbed by a rival platform or retailer with greater ease
than a railroad could take over a competing line.
In other words, online
retailers like Quidsi face the high entry barriers of
a railroad coupled with the relatively low exit costs typical of
brick-and-mortar retailers—a combination that Bork, and the courts, failed to
consider.

Courts also tend to discount that predators can use
psychological intimidation to keep out the competition.
Amazon’s history with Quidsi has sent a clear message to potential
competitors—namely that, unless upstarts have deep pockets that allow them to
bleed money in a head-to-head fight with Amazon, it may not be worth entering
le marché. Even as Amazon has raised the price of the Amazon Mom program, no
newcomers have recently sought to challenge it in this sector, supporting the
idea that intimidation may also serve as a practical barrier.

As the world’s largest online retailer, Amazon serves as a
default starting point for many online shoppers: one study estimates that 44%
of U.S. consumers “aller[[[[]directly to Amazon first to
search for products.”

Moreover, the swaths of data that Amazon has collected on consumers’ browsing
and searching histories can create the same problem that Google’s would-be
competitors encounter: “an insurmountable barrier to entry for new
competition.”
Though at least one
venture opened shop with an eye to challenging Amazon,
its founders recently sold
the firm to Walmart
—a move that suggests that the only
players positioned to challenge Amazon are the existing giants. However, even
this strategy has skeptics.

While established brick-and-mortar retailers like Target have tried to lure
online consumers through discounts and low delivery costs,
Amazon remains the major
online seller of baby products.

Although Amazon established its dominance in this market through aggressive
price cutting and selling steeply at a loss, its actions have not triggered
predatory pricing claims. In part, this is because prevailing theory
assumes—per Bork’s analysis—that market entry is easy enough for new rivals to
emerge any time a dominant firm starts charging monopoly prices.

In this case, Amazon raised prices by cutting back discounts
and (at least temporarily) refusing to expand the program. Even if a firm
viewed the unmet demand as an invitation to enter, several factors would prove
discouraging in ways that the existing doctrine does not consider. In theory,
online retailing itself has low entry costs since anyone can set up shop
online, without significant fixed costs. But in practice, successful entry in
online markets is a challenge, requiring significant upfront investment. Il
requires either building up strong brand recognition to draw users to an
independent site, or using an existing platform, such as Amazon or eBay, which
can present other anticompetitive challenges.
Indeed, most independent
retailers choose to sell through Amazon
—even when the business
relationship risks undermining their business. The fact that no real rival has
emerged, even after Amazon raised prices, undercuts the assumption embedded in
current antitrust doctrine.

C. Amazon Delivery and Leveraging Dominance Across Sectors

As its history with Quidsi shows,
Amazon’s willingness to sustain losses has allowed it to engage in below-cost
pricing in order to establish dominance as an online retailer. Amazon has
translated its dominance as an online retailer into significant bargaining
power in the delivery sector, using it to secure favorable conditions from
third-party delivery companies. This in turn has enabled Amazon to extend its
dominance over other retailers by creating the Fulfillment-by-Amazon service
and establishing its own physical delivery capacity. This illustrates how a
company can leverage its dominant platform to successfully integrate into other
sectors, creating anticompetitive dynamics. Retail competitors are left with
two undesirable choices: either try to compete with Amazon at a disadvantage or
become reliant on a competitor to handle delivery and logistics.

As Amazon expanded its share of e-commerce—and enlarged the
e-commerce sector as a whole—it started comprising a greater share of delivery
companies’ business. For example, in 2015, UPS derived $1 billion worth of
business from Amazon alone.

The fact that it accounted for a growing share of these firms’ businesses gave
Amazon bargaining power to negotiate for lower rates.
By some estimates, Amazon
enjoyed a 70% discount over regular delivery prices.
Delivery companies sought
to make up for the discounts they gave to Amazon by raising the prices they
charged to independent sellers,

a phenomenon recently termed the “waterbed effect.”
As scholars have described,

[T]he presence of a waterbed effect can further
distort competition by giving a powerful buyer now a two-fold advantage,
namely, through more advantageous terms for itself and through higher purchasing
costs for its rivals. What then becomes a virtuous circle for the strong buyer
ends up as a vicious circle for its weaker competitors.

To this two-fold advantage Amazon added a third perk:
harnessing the weakness of its rivals into a business opportunity. En 2006,
Amazon introduced Fulfillment-by-Amazon (FBA), a logistics and delivery service
for independent sellers.

Merchants who sign up for FBA store their products in Amazon’s warehouses, and
Amazon packs, ships, and provides customer service on any orders. Products sold
through FBA are eligible for service through Amazon Prime—namely, free two-day
shipping and/or free regular shipping, depending on the order.
Since many merchants
selling on Amazon are competing with Amazon’s own retail operation and its
Amazon Prime service, using FBA offers sellers the opportunity to compete at
less of a disadvantage.

Notably, it is partly because independent sellers faced
higher rates from UPS and FedEx—a result of Amazon’s dominance—that Amazon
succeeded in directing sellers to its new business venture.
In many instances, orders
routed through FBA were still being shipped and delivered by UPS and FedEx,
since Amazon relied on these firms.
But because Amazon had
secured discounts unavailable to other sellers, it was cheaper for those
sellers to go through Amazon than to use UPS and FedEx directly. Amazon had
used its dominance in the retail sector to create and boost a new venture in
the delivery sector, inserting itself into the business of its competitors.

Amazon has followed up on this initial foray into fulfillment
services by creating a logistics empire. Building out physical capacity lets
Amazon further reduce its delivery times, raising the bar for entry yet higher.
Moreover it is the firm’s capacity for aggressive investing that has enabled it
to rapidly establish an extensive network of physical infrastructure. Puisque
2010, Amazon has spent $13.9 billion building warehouses,
and it spent $11.5 billion
on shipping in 2015 alone.

Amazon has opened more than 180 warehouses,
28 sorting centers, 59 delivery
stations that feed packages to local couriers, and more than 65 Prime Now hubs.
Analysts estimate that the
locations of Amazon’s fulfillment centers bring it within twenty miles of 31%
of the population and within twenty miles of 60% of its core same-day base.
This sprawling network of
fulfillment centers—each placed in or near a major metropolitan area—equips
Amazon to offer one-hour delivery in some locations and same-day in others (a
service it offers free to members of Amazon Prime).
While several rivals
initially entered the delivery market to compete with Prime shipping, some are
now retreating.

As one analyst noted, “Prime has proven exceedingly difficult for rivals to
copy.”

Most recently, Amazon has also expanded into trucking. Last
December, it announced it plans to roll out thousands of branded semi-trucks, a
move that will give it yet more control over delivery, as it seeks to speed up
how quickly it can transport goods to customers.
Amazon now owns four thousand truck
trailers and has also signed contracts for container ships, planes,
and drones. As of October 2016, Amazon
had leased at least forty jets.

Former employees say Amazon’s long-term goal is to circumvent UPS and FedEx altogether,
though the company itself has said it is looking only to supplement its
reliance on these firms,not supplant them.

The way that Amazon has leveraged its dominance as an online
retailer to vertically integrate into delivery is instructive on several
fronts. First, it is a textbook example of how the company can use its dominance
in one sphere to advantage a separate line of business. To be sure, this
dynamic is not intrinsically anticompetitive. What should prompt concern in
Amazon’s case, however, is that Amazon achieved these cross-sector advantages
in part due to its bargaining power. Because Amazon was able to demand heavy
discounts from FedEx and UPS, other sellers faced price hikes from these
companies—which positioned Amazon to capture them as clients for its new
affaires. By overlooking structural factors like bargaining power, modern antitrust
doctrine fails to address this type of threat to competitive markets.

Second, Amazon is positioned to use its dominance across
online retail and delivery in ways that involve tying, are exclusionary, and
create entry barriers.

That is, Amazon’s distortion of the delivery sector in turn creates anticompetitive
challenges in the retail sector. For example, sellers who use FBA have a better
chance of being listed higher in Amazon search results than those who do not,
which means Amazon is tying the outcomes it generates for sellers using its
retail platform to whether they also use its delivery business.
Amazon is also positioned
to use its logistics infrastructure to deliver its own retail goods faster than
those of independent sellers that use its platform and fulfillment service—a
form of discrimination that exemplifies traditional concerns about vertical
integration. And Amazon’s capacity for losses and expansive logistics
capacities mean that it could privilege its own goods while still offering independent
sellers the ability to ship goods more cheaply and quickly than they could by
using UPS and FedEx directly.

Relatedly, Amazon’s expansion into the delivery sector also
raises questions about the Chicago School’s limited conception of entry barriers.
The company’s capacity for losses—the permission it has won from investors to
show negative profits—has been key in enabling Amazon to achieve outsized
growth in delivery and logistics. Matching Amazon’s network would require a
rival to invest heavily and—in order to viably compete—offer free or otherwise
below-cost shipping. In interviews with reporters, venture capitalists say
there is no appetite to fund firms looking to compete with Amazon on physical
delivery.
In this way, Amazon’s
ability to sustain losses creates an entry barrier for any firm that does not
enjoy the same privilege.

Third, Amazon’s use of Prime and FBA exemplifies how the
company has structurally placed itself at the center of e-commerce. Already 44%
of American online shoppers begin their online shopping on Amazon’s platform.
Given the traffic, it is
becoming increasingly clear that in order to succeed in e-commerce, an
independent merchant will need to use Amazon’s infrastructure. Le fait que
Amazon competes with many of the businesses that are coming to depend on it
creates a host of conflicts of interest that the company can exploit to
privilege its own products.

The dominant framework in antitrust today fails to recognize
the risk that Amazon’s dominance poses for discrimination and barriers to new
entry. In part, this is because—as with the framework’s
view of predatory pricing—the primary harm that registers within the “consumer
welfare” frame is higher consumer prices. On the Chicago School’s account,
Amazon’s vertical integration would only be harmful if and when it chooses to
use its dominance in delivery and retail to hike fees to consumers. Amazon has
already raised Prime prices.

But antitrust enforcers should be equally concerned about the fact that Amazon
increasingly controls the infrastructure of online commerce—and the ways in
which it is harnessing this dominance to expand and advantage its new business
ventures. The conflicts of interest that arise from Amazon both competing with
merchants and delivering their wares pose a hazard to competition, particularly
in light of Amazon’s entrenched position as an online platform. Amazon’s conflicts
of interest tarnish the neutrality of the competitive process. The thousands of
retailers and independent businesses that must ride Amazon’s rails to reach
market are increasingly dependent on their biggest competitor.

D. Amazon Marketplace and Exploiting Data

As described above, vertical integration in retail and
physical delivery may enable Amazon to leverage cross-sector advantages in ways
that are potentially anticompetitive but not understood as such under current
antitrust doctrine. Analogous dynamics are at play with Amazon’s dominance in
la fourniture de en ligne Infrastructure,
in particular its Marketplace for third-party sellers. Because information
about Amazon’s practices in this area is limited, this Section necessarily will
be brief. But to capture fully the anticompetitive features of Amazon’s
business strategy, it is vital to analyze how vertical integration across internet
businesses introduces more sophisticated—and potentially more troubling—opportunities
to abuse cross-market advantages and foreclose rivals.

The clearest example of how the company leverages its power
across online businesses is Amazon Marketplace, where third-party retailers
sell their wares. Since Amazon commands a large share of e-commerce traffic,
many smaller merchants find it necessary to use its site to draw buyers.
These sellers list their goods on
Amazon’s platform and the company collects fees ranging from 6% to 50% of their
sales from them.

More than two million third-party sellers used Amazon’s platform as of 2015, an
increase from the roughly one million that used the platform in 2006.
The revenue that Amazon
generates through Marketplace has been a major source of its growth:
third-party sellers’ share of total items sold on Amazon rose from 36% in 2011
to over 50% in 2015.

Third-party sellers using Marketplace recognize that using
the platform puts them in a bind. As one merchant observed, “You can’t really
be a high-volume seller online without being on Amazon, but sellers are very
aware of the fact that Amazon is also their primary competitor.”
Evidence suggests that
their unease is well founded. Amazon seems to use its Marketplace “as a vast
laboratory to spot new products to sell, test sales of potential new goods, and
exert more control over pricing.”
Specifically, reporting
suggests that “Amazon uses sales data from outside merchants to make purchasing
decisions in order to undercut them on price” and give its own items “featured
placement under a given search.”
Take the example of Pillow
Pets, “stuffed-animal pillows modeled after NFL mascots” that a third-party
merchant sold through Amazon’s site.
For several months, the
merchant sold up to one hundred pillows per day.
According to oneaccount, “just ahead of the holiday
season, [the merchant] noticed Amazon had itself beg[u]n offering the same
Pillow Pets for the same price while giving [its own] produits en vedette
placement on the site.”

The merchant’s own sales dropped to twenty per day.
Amazon has gone
head-to-head with independent merchants on price, vigorously matching and even
undercutting them on products that they had originally introduced. By going
directly to the manufacturer, Amazon seeks to cut out the independent sellers.

In other instances, Amazon has responded to popular
third-party products by producing them itself. Last year, a manufacturer that
had been selling an aluminum laptop stand on Marketplace for more than a decade
saw a similar stand appear at half the price. The manufacturer learned that the
brand was AmazonBasics, the private line that Amazon
has been developing since 2009.

As one news site describes it, initially, AmazonBasics
focused on generic goods like batteries and blank DVDs. “Then, for several
years, the house brand ‘slept quietly as it retained data about other sellers’
successes.’”
As it now rolls out more AmazonBasics products, it is clear that the company has
used “insights gleaned from its vast Web store to build a private-label
juggernaut that now includes more than 3,000 products.”
One study found that in
the case of women’s clothing, Amazon “began selling 25 percent of the top items
first sold through marketplace vendors.”

It is true that brick-and-mortar retailers sometimes also
introduce private labels and may use other brands’ sales records to decide what
to produce. The difference with Amazon is the scale and sophistication of the
data it collects. Whereas brick-and-mortar stores are generally only able to
collect information on actual sales, Amazon tracks what shoppers are searching
for but cannot find, as well as which products they repeatedly return to, what
they keep in their shopping basket, and what their mouse hovers over on the
écran.

In using its Marketplace this way, Amazon increases sales
while shedding risk. It is third-party sellers who bear the initial costs and
uncertainties when introducing new products; by merely spotting them, Amazon
gets to sell products only once their success has been tested. le
anticompetitive implications here seem clear: Amazon is exploiting the fact
that some of its customers are also its rivals. The source of this power is: (1)
its dominance as a platform, which effectively necessitates that independent
merchants use its site; (2) its vertical integration—namely, the fact that it
both sells goods as a retailer and hosts sales by others as a marketplace; et
(3) its ability to amass swaths of data, by virtue of being an internet
entreprise. Notably, it is this last factor—its control over data—that heightens
the anticompetitive potential of the first two.

Evidence suggests that Amazon is keenly aware of and
interested in exploiting these opportunities. For example, the company has reportedly
used insights gleaned from its cloud computing service to inform its investment
decisions.
By observing
which start-ups are expanding their usage of Amazon Web Services, Amazon can make
early assessments of the potential success of upcoming firms. Amazon has used
this “unique window into the technology startup world” to invest in several
start-ups that were also customers of its cloud business.

How Amazon has
cross-leveraged its advantages across distinct lines of business suggests that
the law fails to appreciate when vertical integration may prove anticompetitive.
This shortcoming is underscored with online platforms, which both serve as
infrastructure for other companies and collect swaths of data that they can
then use to build up other lines of business. In this way, the current
antitrust regime has yet to reckon with the fact that firms with concentrated
control over data can systematically tilt a market in their favor, dramatically
reshaping the sector.

V. How Platform Economics and Capital Markets May Facilitate Anticompetitive Conduct and Structures

As Part IV mapped out, aspects of Amazon’s conduct and
structure may threaten competition yet fail to trigger scrutiny under the
analytical framework presently used in antitrust. In part this reflects the “consumer
welfare” orientation of current antitrust laws, as critiqued in Part II. Mais ça
also reflects a failure to update antitrust for the internet age. This Part
examines how online platforms defy and complicate assumptions embedded in
current doctrine. Specifically, it considers how the economics and business
dynamics of online platforms create incentives for companies to pursue growth
at the expense of profits, and how online markets and control over data may enable
new forms of anticompetitive activity.

Economists have analyzed extensively how platform markets may
pose unique challenges for antitrust analysis.
Specifically, they stress
that analysis applicable to firms in single-sided markets may break down when
applied to two-sided markets, given the distinct pricing structures and network
externalities.

These studies often focus on the challenge that two-sided platforms face in
attracting both sides—the classic coordination problem of having to attract
buyers without an established line of sellers, and vice versa.
Economists tend to conclude
that—given the particular challenges of two-sided markets
—antitrust should be
forgiving of conduct that might otherwise be characterized as anticompetitive.

Legalanalysis of
online platforms is comparatively undertheorized. le
Justice Department’s case against Microsoft under Section 2 of the Sherman Act,
initiated in the 1990s, remains the government’s most significant case involving
two-sided markets—even as platforms have emerged as central arteries in our
modern economy. Starting in 2011, the FTC pursued an investigation into Google,
partly in response to allegations that the company uses its dominance as a
search engine to cement its advantage and exclude rivals in other lines of
affaires. While the FTC closed the investigation without bringing any charges,
leaks later revealed that FTC staff had concluded that Google abused its power
on three separate counts.

The European Union has brought charges against Google for violating antitrust
laws.

For the purpose of competition policy, one of the most
relevant factors of online platform markets is that they are winner-take-all.
This is due largely to network effects and control over data, both of which mean
that early advantages become self-reinforcing. The result is that technology
platform markets will yield to dominance by a small number of firms. Walmart’s
recent purchase of the one start-up that had sought to challenge Amazon in
online retail—Jet.com—illustrates this reality.

Network effects arise when a user’s utility from a product
increases as others use the product. Since popularity compounds and is
reinforcing, markets with network effects often tip towards oligopoly or monopoly.
Amazon’s user reviews, for example,
serve as a form of network effect: the more users that have purchased and
reviewed items on the platform, the more useful information other users can
glean from the site.

As the Fourth Circuit has noted, “[O]nce dominance is
achieved, threats come largely from outside the dominated market, because the
degree of dominance of such a market tends to become so extreme.”
In this way, network
effects act as a form of entry barrier.

A platform’s control over data, meanwhile, can also entrench
its position.
Access to consumer data
enables platforms to better tailor services and gauge demand. Involvement à travers markets, meanwhile, may permit a
company to use data gleaned from one market to benefit another business line.
Amazon’s use of
Marketplace data to advantage its retail sales, as described in Section IV.D,
is an example of this dynamic. Control over data may also make it easier for dominant
platforms to enter new markets with greater ease. For example, reports now
suggest that Amazon may dramatically expand its footprint in the ad business,
“leveraging its rich supply of shopping data culled from years of operating a
massive e-commerce business.”

In other words, control over data, too, acts as an entry barrier.

Given that online platforms operate in markets where network
effects and control over data solidify early dominance, a company looking to
compete in these markets must seek to capture them. The most effective way is
to chase market share and drive out one’s rivals—even if doing so comes at the
expense of short-term profits, since the best guarantee of long-term profits is
immediate growth. Due to this dynamic, striving to maximize market share at the
expense of one’s rivals makes predation highly rational; indeed, it would be
irrational for a business ne pas à
frontload losses in order to capture the market. Recognizing that enduring
early losses while aggressively expanding can lock up a monopoly,
investors seem willing to back this strategy.

As the Introduction and Part III describe, Amazon has charted
immense growth while investing aggressively—both by expanding provision of
physical and online infrastructure and by pricing goods below cost. Amazon
stock price has soared despite a history of razor-thin—or even
negative—margins. In essence, investors have given Amazon a free pass to grow
without any pressure to show profits. The firm has used this edge to expand
wildly and dominate online commerce.

The idea that investors are willing to fund predatory growth
in winner-take-all markets also holds in the case of Uber.
Although the dynamics of the online retail market are distinct from those of
ride-sharing, Uber growth trajectory is worth analyzing
for general insight into how investors enable platform dominance. In 2015, news
reports revealed that Uber had an operating loss of
$470 million on $415 million in revenue, confirming suspicions that the company
has been bleeding money for the sake of achieving steep growth and acquiring
market share.
In China, the company has lost more
than $1 billion a year.

The strategy of aggressive price competition and brazen leadership coupled with
soaring growth prompted immediate comparisons to Amazon.
Like Amazon, Uber has drawn immense interest from investors. As of July
2015, its valuation hit nearly $51 billion, equaling the record set by Facebook
in 2012.
It recently secured an
additional $3.5 billion in investment, bringing its total funds to $13.5
billion—a figure “far greater than most companies raise even during an initial
public offering,” which Uber has avoided.

One might dismiss this phenomenon as irrational investor
exuberance. But another way to read it is at face value: the reason investors
value Amazon and Uber so highly is because they
believe these platforms will, eventually, generate huge returns. As one venture
capitalist recently remarked, if he had to “put his entire capital in a single
company and hold it for the next 10 years,” he would choose Amazon. “I don’t
see any cleaner monopoly available to buy in the public markets right now.”
In other words, that these
platform companies are undertaking consistent, steep losses and still
generating strong investor backing suggests that the markets expect Amazon and Uber to recoup these losses.

While investors have unambiguously endorsed and funded online
platforms’ quest to bleed money in their race to draw users, antitrust doctrine
fails to acknowledge this strategy. In the past, the Supreme Court’s analysis
has embraced the Efficient Market Hypothesis (EMH), the idea that market prices
reflect all available information.
The Justice Department
also acknowledges that market information—for example, the financial terms of
an acquisition—may “be informative regarding competitive effects.”
Applying EMH in this instance
overwhelmingly suggests that these platforms are positioned to recoup their
pertes. Yet bringing a predatory pricing suit against an online platform would
be almost impossible to win in light of the recoupment requirement. Strikingly,
the market is reflecting a reality that our current laws are unable to detect.

In addition to overlooking why online platform dynamics make
predation especially rational, current doctrine also fails to appreciate how a
platform might recoup losses. For one, investor support allows Amazon to
strategize and operate on a time horizon far longer than what the Brooke Group ou Matsushita Courts confronted. Raising prices in a third year after
enduring losses for two is different from engaging in a decade-long quest to
become the dominant online retailer and provider of internet infrastructure. Cette
longer timeline, meanwhile, makes available more recoupment mechanisms. ne pas
only has Amazon inaugurated an entire generation into online shopping through
its platform, but it has expanded into a suite of additional businesses and
amassed significant troves of data on users. This data enables it both to
extend its tug over customers through highly tailored personal shopping
experiences, and, potentially, to institute forms of price discrimination, as
described in Section IV.A. Both the latitude granted by investors and control
over data equip an incumbent platform to recoup losses in ways less obviously
connected to the initial form of below-cost pricing.

These recoupment mechanisms may also be more sophisticated
than what a judge or even rivals would be able to spot. This last point becomes
even more apparent in the context of Uber, whose dynamic
pricing has conditioned users not to expect a stable or regular price. Tandis que Uber claims that its algorithms set prices to reflect
real-time supply and demand, initial research has found that the company manipulates
the availability of both.

Moreover, it routinely gives away discount coupons to select users, effectively
charging users different prices, even for the same service at the same time.

Although platforms form the backbone of the internet economy,
the way that platform economics implicates existing laws is relatively undertheorized.
Amazon’s conduct suggests
that predatory pricing and integration across related business lines are
emerging as key paths to establishing dominance—aided by the control over data
that dominant platforms enjoy. But because current predatory pricing doctrine
defines recoupment in overly narrow terms, competitors generally have not been
able to make an effective legal case. Similarly, because current doctrine
largely discounts entry barriers, the anticompetitive effects of vertical
integration are difficult to cognize under the existing framework. Roadblocks
to these claims persist even as Amazon’s valuation and share price point to a
strong market expectation of recoupment and profits.

There are signs that enforcers are becoming more attuned to
the special factors that may render current antitrust analysis inadequate to
promote competition in internet platform markets. For example, in 2014 the
United States successfully challenged a merger between two leading providers of
online ratings and reviews platforms. In its complaint, DOJ acknowledged that
data-driven industries can be characterized by network effects, which increase
switching costs and entry barriers.
Recent comments by FTC
Commissioner Terrell McSweeny—noting that data can
act as a barrier to entry and that “competition enforcers can and should assess
the competitive implications of data”—also suggest that top officials are
assessing how to revise their tools and framework for gauging competition in
platform markets.

While this burgeoning recognition is heartening, the unique
features of platform markets require a more thorough evaluation of how
antitrust is applied. Because scale is both vital to platforms’ business model
and helps entrench their dominant position, antitrust should reckon with the
fact that pursuing growth at the expense of returns is—contra to current
doctrine—highly rational. An approach more attuned to the realities of online
platform markets would also recognize the variety of mechanisms that businesses
may use to recoup losses, the longer time horizon on which recoupment might
occur, and the ways that vertical integration and concentrated control over
data may enable new forms of anticompetitive conduct. Revising antitrust to
reflect the dynamics of online platforms is vital, especially as these companies
come to mediate a growing share of communications and commerce.

VI. Two Models for Addressing Platform Power

If it is true that the economics of platform markets may
encourage anticompetitive market structures, there are at least two approaches
we can take. Key is deciding whether we want to govern online platform markets
through competition, or want to accept that they are inherently monopolistic or
oligopolistic and regulate them instead. If we take the former approach, we
should reform antitrust law to prevent this dominance from emerging or to limit
its scope. If we take the latter approach, we should adopt regulations to take
advantage of these economies of scale while neutering the firm’s ability to
exploit its dominance.

A. Governing Online Platform Markets Through Competition

Reforming antitrust to address the anticompetitive nature of
platform markets could involve making the law against predatory pricing more
robust and strictly policing forms of vertical integration that firms can use
for anticompetitive ends. Importantly, each of these doctrinal areas should be
reformulated so that it is sensitive to preserving the competitive process and
limiting conflicts of interest that may incentivize anticompetitive conduct.

1. Predatory Pricing

While predatory pricing technically remains illegal, it is
extremely difficult to win predatory pricing claims because courts now require
proof that the alleged predator would be able to raise prices and recoup its
pertes.
Revising predatory pricing
doctrine to reflect the economics of platform markets, where firms can sink
money for years given unlimited investor backing, would require abandoning the
recoupment requirement in cases of below-cost pricing by dominant platforms.
And given that platforms are uniquely positioned to fund predation, a
competition-based approach might also consider introducing a presumption of
predation for dominant platforms found to be pricing products below cost.

Several reasons militate in favor of a presumption of
predation in such cases. First, firms may raise prices years after the original
predation, or raise prices on unrelated goods, in ways difficult to prove at
trial. Second, firms may raise prices through personalized pricing or price
discrimination, in ways not easily detectable. Third, predation can lead to a
host of market harms même si l'entreprise
does not raise consumer prices. Within a consumer welfare framework, these
harms include degradation of product quality and sapping diversity of choice.
Such harms may arise if
Amazon uses its bargaining power to extract better terms from producers and
suppliers, who, in turn, slash investments to meet its demands. Within a
broader framework—which seeks to protect the full range of interests that
antitrust laws were enacted to safeguard—the potential harms include lower
income and wages for employees, lower rates of new business creation, lower
rates of local ownership, and outsized political and economic control in the
hands of a few.

Introducing a presumption of predation would involve
identifying when a price is below cost, a subject of much debate. The Supreme
Court has not addressed the issue, but most appellate courts have said that
average variable cost is the right metric.
This Note does not
advocate the adoption of one particular measure over others. Admittedly, “below
cost” is an imperfect filter, especially since what constitutes the relevant
cost may vary depending on the industry or cost structure. And the specific
definition of “costs” that courts and enforcers adopt may ultimately be less
significant if the test for predatory pricing also permits a business
justification defense, which would help screen against false positives.
A business justification defense
could cover compensating a buyer for taking the risk of buying a new product, expanding
demand to a level which will allow the entrant to achieve scale economies,
keeping prices at competitive levels while expecting costs to decline, and
matching competition.

Whether a platform is dominant enough to trigger the
presumption could be assessed through its market share: those holding greater
than, say, 40% of the market in any given line of service (e.g., cloud
computing, ride sharing) might be designated “dominant.” Rather than measuring
this market share nationally, enforcers would look to levels of local control;
a ride-sharing platform that held only 35% of the national market but 75% of
the Nashville market would still be considered dominant for the purpose of
price-cutting in Nashville.

2. Vertical Integration

The current approach to antitrust does not sufficiently
account for how vertical integration may give rise to anticompetitive conflicts
of interest, nor does it adequately address the way a dominant firm may use its
dominance in one sector to advance another line of business. This concern is
heightened in the context of vertically integrated platforms, which can use
insights generated through data acquired in one sector to undermine rivals in
another. Potential ways to address this deficiency include scrutinizing mergers
that would enable a firm to acquire valuable data and cross-leverage it, or introducing
a prophylactic ban on mergers that would give rise to conflicts of interest.

One way to address the concern about a firm’s capacity to
cross-leverage data is to expressly include it in merger review.
Under the current
approach, only mergers over a particular monetary threshold require agency
la revue
—yet the monetary value of
a deal may not be a good proxy for the scope and scale of data at stake. Ainsi,
it could make sense for the agencies to automatically review any deal that
involves exchange of certain forms (or a certain quantity) of data. Data that
gave a player deep and direct insight into a competitor’s business operations,
for example, might trigger review. Under this regime, Facebook’s purchases of
WhatsApp and Instagram,

for instance, would have received greater scrutiny from the antitrust agencies,
in recognition of how acquiring data can deeply implicate competition. International
transactions granting foreign corporations access to data on U.S. users would
also require close review. Uber decision to sell
its China operations to Didi Chuxing,
China’s dominant ride-sharing service—a deal through which Uber
will also gain partial ownership over its main U.S. rival, Lyft
—is one deal that would prompt
scrutiny under this regime.

A stricter approach would place prophylactic limits on
vertical integration by platforms that have reached a certain level of
dominance. This would recognize that a platform’s involvement across multiple related
lines of business can give rise to conflicts of interest by creating
circumstances in which a platform has an incentive to privilege its own
business and disadvantage other companies.
Seeking to prevent the industry
structures that créer celles-ci
conflicts of interest may prove more effective than policing these conflicts.
Adopting this prophylactic approach would mean banning a dominant firm from
entering any market that it already serves as a platform—in other words, from
competing directly with the businesses that depend on it.
In the case of Amazon, for
example, this prophylactic approach would prohibit the company from running tous les deux a dominant retail platform and a
dominant platform for third-party sellers. These two businesses would have to
be separated into different entities, in part to prevent Amazon from using
insights from its role as a third-party host to benefit its retail business, as
it reportedly does now.

This form of prophylactic ban has a long history in banking
loi.
A core principle of banking law is
the separation of banking and commerce.
“U.S. commercial banks generally are
not permitted to conduct any activities that do not fall within . . . la
statutory concept of ‘the business of banking.’”
More specifically, the
Bank Holding Company Act of 1956 forbids firms that own or control a U.S. bank
from engaging in business activities other than banking or managing banks.
The main exception is that
a bank that qualifies as a “financial holding company” “may conduct broader
activities that are ‘financial in nature,’ including securities dealing and
insurance underwriting.”

The policy goals of this regime are worth reviewing because
they have analogues in antitrust and competition policy. The main
justifications for preserving the separation between banking and commerce have
“included the needs to preserve the safety and soundness of insured depository
institutions, to ensure a fair and efficient flow of credit to productive
[businesses], and to prevent excessive concentration of financial and economic
power in the financial sector.”

All three concerns are linked to the fact that banks serve as critical intermediaries
in our economy. The “safety and soundness” concern traces to the idea that our
banking system is too vital to be subject to the risks of other business
Activités.
The concern about fairness
and efficiency centers on the idea that allowing banks to be affiliated with
commercial companies may encourage banks to issue credit on the basis of how
those lending decisions will affect their commercial affiliates, thereby
distorting competition. The practices this may trigger—“price discrimination, unfair
restriction of access to credit, and other anticompetitive banking
practices”—would both “hurt the individual commercial companies not affiliated
with banks” and undermine national “productivity and growth.”
Lastly, seeking “the
prevention of excessive concentration of economic . . . power” among
“large financial-industrial conglomerates” recognizes that this market power
tends to concentrate political power
while also creating
systemic dangers of “too-big-to-fail” conglomerates.

Like bank holding companies, Amazon—along with a few other
dominant platforms—now play a crucial role in intermediating swaths of economic
activité. Amazon itself effectively controls the infrastructure of the internet
economy. This level of concentrated control creates hazards analogous to those
recognized in banking law. In light of this control, the conflicts of interest
created through Amazon’s expansion into distinct lines of business are
especially troubling. As in banking, enabling an essential intermediating
entity to compete with the companies that depend on it creates bad incentives.
Allowing a vertically integrated dominant platform to pick and choose to whom
it makes its services available, and on what terms, has the potential to
distort fair competition and the economy as a whole.

The other two concerns—safety and soundness, and excessive
economic and political power—are also worth considering. It is true that Amazon
(and other dominant platforms like Uber and Google)
have extended directly into financial services.
But its level of
involvement in these businesses, at least at the current scale, is unlikely to
concentrate financial risk in ways that warrant concern. Rather, the systemic
risks created by concentration among platforms are of a different kind. One involves
concentration of data. That a huge share of consumer retail data may be
concentrated within a single company makes hacks of or technical failures by
that company all the more disruptive. The 2013 hack into Target’s system—as a
result of which up to 110 million consumers had personal information stolen
—could have been orders of
magnitude more disruptive had the hacked entity been Amazon. A few instances
where Amazon Web Services crashed led to disruptions for scores of other
businesses, including Netflix.

Lastly, there is sound
reason to ask whether permitting Amazon to leverage its platform to integrate
across business lines hands it undue economic and political power.
While this subject invites
much deeper consideration than what this Note will provide, studies
interviewing the host of businesses that now depend on Amazon—retailers,
manufacturers, publishers, to name a few—reveal that the power it wields is
acute.
History suggests that
allowing a single actor to set the terms of the marketplace, largely unchecked,
can pose serious hazards. Limiting Amazon’s atteindre
through prophylactic bans on vertical integration—and thereby forcing it to
split up its retail and Marketplace operation, for example—would help mitigate
this concern.

B. Governing Dominant Platforms as Monopolies Through Regulation

As described above, one option is to govern dominant
platforms through promoting competition, thereby limiting the power that any
one actor accrues. The other is to accept dominant online platforms as natural
monopolies or oligopolies, seeking to regulate their power instead. In this Section,
I sketch out two models for this second approach, traditionally undertaken in
the form of public utility regulations and common carrier duties. Industries
that historically have been regulated as utilities include commodities (water,
electric power, gas), transportation (railroads, ferries), and communications
(telegraphy, telephones).
Critically, a public utility regime
aims at eliminating competition: it accepts the benefits of monopoly and
chooses instead to limit how a monopoly may use its power.

Although largely out of fashion today, public utility
regulations were widely adopted in the early 1900s, as a way of regulating the
technologies of the industrial age. Animating public utility regulations was
the idea that essential network industries—such as railroads and electric
power—should be made available to the public in the form of universal service
provided at just and reasonable rates. The Progressive movement of the early
twentieth century embraced public utility as a way to use government to steer
private enterprise toward public ends. It was precisely because essential
network industries often required scale that unregulated private control over
these sectors often led to abuse of monopoly power. Famously, the Interstate Commerce
Commission—which instituted a form of common carriage for railroads—was created
partly in response to the abusive conduct of railroads, whose control over an
essential facility enabled them to pick winners and losers among farmers.

In the United States, the first case applying public utility
regulations to a private business was Munn
v. Illinois
, in which the Supreme Court upheld state legislation establishing
maximum rates that companies could charge for the storage and transportation of
grain.
When one “devotes his
property to a use in which the public has an interest, he, in effect, grants to
the public an interest in that use, and must submit to be controlled by the
public for the common good,” Chief Justice Waite wrote.
“[W]hen private property
is devoted to a public use, it is subject to public
regulation.”
While the decision ushered
into doctrine the principle of common carriers, the question of when a business
was truly “affected with the public interest” was highly contested.

Most importantly,
“public utility was seen as a common, collective enterprise aimed at managing a
series of vital network industries that were too important to be left exclusively
to market forces.”
At the level of policy, public
utility regulations also enabled “utilities to secure capital at lower cost and
to channel it into very large technological systems,” and thus was a way to
“socialize the costs of building and operating” a centralized system while
“protecting consumers from the potential abuses associated with natural
monopoly.”

Given that Amazon increasingly serves as essential
infrastructure across the internet economy, applying elements of public utility
regulations to its business is worth considering.
The most common public
utility policies are (1) requiring nondiscrimination in price and service, (2)
setting limits on rate-setting, and (3) imposing
capitalization and investment requirements. Of these three traditional
policies, nondiscrimination would make the most sense, while rate-setting and
investment requirements would be trickier to implement and, perhaps, would less
obviously address an outstanding deficiency.

A nondiscrimination policy that prohibited Amazon from
privileging its own goods and from discriminating among producers and consumers
would be significant. Given that many of the most notable anticompetitive
concerns around Amazon’s business structure arise from its vertical integration
and the resulting conflicts of interest, applying a nondiscrimination scheme
would curb the anticompetitive risk. This approach would permit the company to
maintain its involvement across multiple lines of business and permit it to
enjoy the benefits of scale while mitigating the concern that Amazon could
unfairly advantage its own business or unfairly discriminate among platform
users to gain leverage or market power.
Coupling nondiscrimination
with common carrier obligations—requiring platforms to ensure open and fair
access to other businesses—would further limit Amazon’s power to use its
dominance in anticompetitive ways.

Rate setting would be trickier. This would involve setting a
ceiling on the prices that Amazon can charge to both producers and consumers.
Traditionally, governments used rate setting by identifying a “fair return”
that a company deserved for its investment, and then calculated consumer or producer
prices accordingly.

But calculating “fair return” may prove more challenging in the online platform
context than it did with traditional public utilities. One potential source of
difficulty is that Amazon has invested so widely across such a range of
projects that it is not clear which the government should peg to “rate of
return.” Another complicating factor is that part of Amazon’s investment in
these platforms, so far, hasinvolved
losing money through below-cost pricing.

Lastly, it is not clear that imposing capitalization and
investment requirements would be necessary. A traditional reason for these
policies has been that that the economics of creating and running a utility can
be unfavorable, occasionally leading private companies to scrimp on investing
and upkeep. In Amazon’s case, the company is choosing to expand at a speed and
scale that is pushing it into the red—but it is not clear that the activity is
intrinsically loss generating. That said, a public utility regime could also be
justified on the basis that succeeding as an online platform requires incurring
heavy losses—a model that Amazon and Uber have pursued.
This approach would treat market-share chasing losses as a capital investment,
suggesting the public
utility domain may be appropriate.

Practically, ushering
in a public utility regime may prove challenging. Public utility regulations
suffered an intellectual and policy attack around mid-century. For one, critics
challenged the theory of natural monopoly as an ongoing rationale for
regulation, arguing that rapid economic and technological change would render
monopolies temporary problems. Second, critics portrayed public utility as a
form of corruption, a system in which private industry executives colluded with
public officials to enable rent seeking. Ultimately these lines of criticism substantially
thinned the very concept of public utility.
The trend was part of a
broader effort to idealize competitive markets and assume that nonintervention
was almost always superior to interference. Although the concept of public
utility regulation remains somewhat maligned today, there are signs that a
robust movement to apply utility-like regulations to services that widely
register as public—such as the internet—can catch wind. The core of the net
neutrality debates, for example, involved foundational discussions about how to
regulate the communication infrastructure of the twenty-first century.
The net neutrality regime
ultimately adopted falls squarely in the common carrier tradition.

Given Amazon’s growing share of e-commerce as a whole, and
the vast number of independent sellers and producers that now depend on it,
applying some form of public utility regulation could make sense. Nondiscrimination
principles seem especially apt, given that conflicts of interest are a primary
hazard of Amazon’s vertical power. One approach would apply public utility regulations
à tout of Amazon’s businesses that
serve other businesses. Another would require breaking up parts of Amazon and
applying nondiscrimination principles separately; so, for example, to Amazon
Marketplace and Amazon Web Services as distinct entities. That said, given the
political challenges of ushering in such a regime, strengthening and
reinforcing traditional antitrust principles may—in the short run—prove most
feasible.

A lighter version of the regulatory approach would be to
apply the essential facilities doctrine. This doctrine imposes sharing
requirements on a natural monopoly asset that serves as a necessary input in another
marché. As Sandeep Vaheesan explains:

This doctrine rests on two basic premises: first, a
natural monopolist in one market should not be permitted to deny access to the
critical facility to foreclose rivals in adjacent markets; second, the more
radical remedy of dividing the facility among multiple owners, while mitigating
the threat of monopoly leveraging, could sacrifice important efficiencies.

Unlike the prophylactic ban on integration, the essential
facilities route accepts consolidated ownership. But recognizing that a
vertically integrated monopolist may deny access to a rival in an adjacent market,
the doctrine requires the monopolist controlling the essential facility to
grant competitors easy access. This duty has traditionally been enforced
through regulatory oversight.

While the essential facilities doctrine has not been
precisely defined, the four-factor test enumerated by the Seventh Circuit in MCI Communications Corp. v. American Telephone
& Telegraph Co.
forms the basis of an essential facility claim today.
Under that test, a
facility is essential and must be shared if four conditions are met: (1) a
monopolist controls the essential facility; (2) a competitor is unable
practically or reasonably to duplicate the essential facility; (3) the
monopolist is denying use of the facility to a competitor; and (4) providing
the facility is feasible.

le MCI court also held that, in
order to be deemed essential, the facility must be a “necessary input in a distinct, vertically related market.

While the Supreme Court has never recognized nor articulated
a standard for “essential facility,” three Supreme Court rulings “are seen as
having established the functional foundation” for the doctrine.
In 2004, however, the
Court disavowed the essential facilities doctrine in dicta,
leading several
commentators to wonder whether it is a dead letter.This
decision by the Court to effectively reject its prior case law on essential
facilities followed challenges on other fronts: notably from Congress,
enforcement agencies, and academic scholars, all of whom have critiqued the
idea of requiring dominant firms to share their property.

Treating aspects of Amazon’s business as “essential
facilities” seems appropriate, given that factors two, three, and four of the MCI test are likely to hold for at least
one line of business. The first factor—whether Amazon is a “monopolist”—is
subject to the risk that doctrine takes an excessively narrow view of what
constitutes a “monopolist,” a definition that may be especially out of touch
with dominance in the internet age.

Essential facilities doctrine has traditionally been applied
to infrastructure such as bridges, highways, ports, electrical power grids, and
telephone networks.

Given that Amazon controls key infrastructure for e-commerce, imposing a duty
to allow access to its infrastructure on a nondiscriminatory basis make sense. Et
in light of the company’s current trajectory, we can imagine at least three
aspects of its business could eventually raise “essential facilities”-like
concerns: (1) its fulfillment services in physical delivery; (2) its
Marketplace platform; and (3) Amazon Web Services. While the essential
facilities doctrine has not yet been applied to the internet economy, some
proposals have started exploring what this might look like.
Pursuing this regime for
online platforms could maintain the benefits of scale while preventing dominant
players from abusing their power.

conclusion

Internet platforms mediate a large and growing share of our
commerce and communications. Yet evidence shows that competition in platform
markets is flagging, with sectors coalescing around one or two giants.
The titan in e-commerce is
Amazon—a company that has built its
dominance through aggressively pursuing growth at the expense of profits and
that has integrated across many related lines of business. As a result, the company has positioned itself at the
center of Internet commerce and serves as essential infrastructure for a host of
other businesses that now depend on it.
This Note argues that Amazon’s business
strategies and current market dominance pose anticompetitive concerns that the consumer
welfare framework
in antitrust fails to recognize.

In particular, current law underappreciates the risk of
predatory pricing and how integration across distinct business lines may prove
anticompetitive. These concerns are heightened in the context of online
platforms for two reasons. First, the economics of platform markets incentivize
the pursuit of growth over profits, a strategy that investors have rewarded.
Under these conditions predatory pricing becomes highly rational—even as
existing doctrine treats it as irrational. Second, because online platforms
serve as critical intermediaries, integrating across business lines positions
these platforms to control the essential infrastructure on which their rivals
depend. This dual role also enables a platform to exploit information collected
on companies using its services to undermine them as competitors.

In order to capture these anticompetitive concerns, we should
replace the consumer welfare framework with an approach oriented around
preserving a competitive process and market structure. Applying this idea
involves, for example, assessing whether a company’s structure creates
anticompetitive conflicts of interest; whether it can cross-leverage market
advantages across distinct lines of business; and whether the economics of
online platform markets incentivizes predatory conduct and capital markets
permit it. More specifically, restoring traditional antitrust principles to
create a presumption of predation and to ban vertical integration by dominant
platforms could help maintain competition in these markets. If, instead, we
accept dominant online platforms as natural monopolies or oligopolies, then
applying elements of a public utility regime or essential facilities
obligations would maintain the benefits of scale while limiting the ability of
dominant platforms to abuse the power that comes with it.

My argument is part of a larger recent debate about whether
the current paradigm in antitrust has failed. Though relegated to technocrats
for decades, antitrust and competition policy have once again become topics of
public concern.
Last year, the le journal Wall Street reported that “[a] growing number of industries
in the U.S. are dominated by a shrinking number of companies.”
In March 2016, the Economist declared, “Profits are too
high. America needs a dose of competition.”
Policy elites, too, have
weighed in, issuing policy papers and hosting conferences documenting the
decline of competition across the U.S. economy and assessing the resulting harms,
including a drop in start-up growth and widening economic inequality.
Antitrust even made it
into the 2016 presidential campaign: Democrats included competition policy in
their party platform for the first time since 1988, and in October of the same
year, presidential candidate Hillary Clinton released a detailed antitrust platform,
highlighting not only a need for more vigorous enforcement but for an
enforcement philosophy that takes into account market structure.

Animating these critiques is not a concern about harms to
consumer welfare,

but the broader set of ills and hazards that a lack of competition breeds. Comme
Amazon continues both to deepen its existing control over key infrastructure and
to reach into new lines of business, its dominance demands the same scrutiny. À
revise antitrust law and competition policy for platform markets, we should be
guided by two questions. First, does our legal framework capture the realities
of how dominant firms acquire and exercise power in the internet economy? Et
second, what forms and degrees of power should the law identify as a threat to competition?
Without considering these questions, we risk permitting the growth of powers that
we oppose but fail to recognize.





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