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The Federal Trade Commission’s 172-page complaint against Amazon is the culmination of a five-year investigation into the e-commerce giant’s monopolistic practices.
Yesterday, the Federal Trade Commission filed a 172-page compendium of tantalizing black bars purporting to allege that Amazon is an illegal monopoly. The complaint was the culmination of the agency’s five-year investigation into the operations of perhaps the most ambitious company in the history of commerce. But attempting to read it was something akin to the experience of arriving at a store late at night with a long list of urgent necessities, only to find virtually every last thing you came for stowed away on locked shelves and no one in sight in possession of a key. Sometimes, like an unlocked bin of last season’s conversation heart candies in an otherwise desolate San Francisco Walgreens, you’d find amid five or six pages of redactions a random unblackened sentence or two, like the line on page 82 in which an Amazon executive reflects on a [redacted] tweak in one of the company’s algorithms: “For a lot of people on the team, it was not an Amazonian thing to do.” Whatever Amazon did, in other words, Amazon knows it did wrong.
And yet the agency nevertheless felt compelled, at least at the outset, to drown its case against the “superstore” in (my fast-depleting supply of) black toner. Similar to a complaint the agency filed last week against a private equity firm, this case against Amazon was scrubbed of virtually every number meant to quantify the company’s epic scope and sweep: the unit number of orders fulfilled by Amazon in 2020; the unit number of orders Amazon fulfilled, per resident of the United States, in 2020; the dollar value of goods sold through the Amazon store in 2021; the number of countries with a gross domestic product smaller than the dollar value of Amazon’s gross 2021 sales; the number of subscribers to its ubiquitous Prime service; the internally calculated percentage share of the gross merchandise value sold in 2021 by a redacted internally maintained list of a redacted number of competitors, and so on and on.
This was exasperating, because a “monopoly” is, legally and in the popular understanding, an inherently quantitative phenomenon, and knowing that, for example, Amazon’s consumer sales are expected to reach a trillion dollars just over a year from now is, I think, vital to explicating the company’s unprecedented control over our economy.
The FTC has said that it hopes to get many of the redactions “swiftly removed.” But you can begin to see the forming of a precedent in real time. While redactions are common at the early stage of a public case where evidence comes from internal business records, the experience of not just this lawsuit but the ongoing trial against Google is that publicly traded companies are asserting a right to shield the public from basic financial information that they are bound by federal law to disclose. The goal isn’t just to frustrate business reporters like myself, but to actively mute public understanding of the issues at play. It’s an effort to maintain dominance through silence.
WHEREAS LAST WEEK’S FTC COMPLAINT against U.S. Anesthesia Partners at least had a conceivable narrative holding it together, the case against Amazon has been ransacked of most of its story line. I think the case’s most salient feature is its focus on Amazon’s punishment of merchants who sell their wares on competing marketplaces or their own Shopify sites for lower prices than they charge on Amazon. Currently, Amazon extracts close to half the revenue of its third-party sellers in commissions and fees, and most full-time sellers would love to sell more of their wares on alternative platforms with lower commissions. But they cannot for fear of retaliation from the superstore, and they cannot leave Amazon entirely, because it so dominates online commerce.
According to the complaint, Amazon “deploys a sophisticated surveillance network of web crawlers that constantly monitor the internet [for] discounts that might threaten Amazon’s empire. When Amazon detects elsewhere online a product that is cheaper than a seller’s offer for the same product on Amazon, Amazon punishes that seller” by systematically suppressing their search results on its own platform.
This isn’t exactly news: The California attorney general, who along with 16 other state AGs joined yesterday’s FTC lawsuit, sued Amazon over these practices last September, shortly before the German Competition Authority announced its own investigation into them. Moreover, Amazon’s history of imposing explicit discounting prohibitions on sellers is well documented. That’s probably why the FTC was able to leave intact sections of the complaint pertaining to it.
If Amazon’s backdoor price-fixing is the focus of the complaint, it’s probably a shrewd one, because the practice of rooting out rogue discounters for retaliation so unambiguously subverts what we imagine to be “market forces,” to the detriment of both sellers and customers. Both Amazon sellers and consumers alike intuitively grasp that they are paying more than ever for the same crap: Seller fees rose 30 percent during the pandemic alone, as the Consumer Price Index rose 20 percent. Amazon’s gross profits roughly doubled over the same period. (This is, by the way, pretty much the exact result FTC chair Lina Khan envisioned in her endlessly cited 2017 Yale Law Journal article, “Amazon’s Antitrust Paradox,” which observed that Amazon had used the ostensibly illegal practice of “predatory pricing”—burning cash for a sustained period of time so as to run all the competition out of business—to monopolize e-commerce, and that while the company had sacrificed profits for growth for its first two decades, its “valuation and share price point to a strong market expectation of recoupment and profits.”)
If Amazon’s backdoor price-fixing is the focus of the complaint, it’s probably a shrewd one.
If the complaint were fully accessible to the public, it could potentially stand as a defining—and redeeming—moment for a kind of Evidence-Based Populism that the White House has clumsily dubbed “Bidenomics,” in which old-school small-d Democrats attempt to bring rule of law to the unaccountable corporations using unfair and extralegal tactics to exploit workers, small businesses, and consumers alike.
But as it was filed, the redactions made the moment frankly more disorienting than edifying. With a few random exceptions like those above, every potentially interesting quote from an Amazon executive, former Amazon executive, [redacted] e-commerce/would-be Amazon competitor executive, and Amazon third-party seller was redacted. An extensive quote by Amazon’s former head of Global Fulfillment Services on the subject of something redacted was redacted. Whole pages on the topics of the financial obstacles Amazon sellers face if they attempt to establish distribution channels separate from those warehoused and controlled by Amazon, the relevance of Amazon’s Prime Video empire to its Prime delivery empire, the interplay of the advertising business with the marketplace business, and something called the “Chicken and Egg” problem, about which Amazon had apparently composed an internal presentation, were missing. Likewise, an entire section on something called “Project Nessie,” a system by which Amazon apparently monitors trends to determine when it can charge more for certain items, which the FTC alleges to be an anti-competitive practice, was completely black.
According to a motion filed alongside the complaint, agency rules require the commission to temporarily redact information obtained in its investigations from public filings so that defendants have a period of time to ask the judge to permanently seal the information. An FTC lawyer posted a quote attesting that the agency “share[s] the frustration that much of the data and quotes by Amazon executives … that describe what we allege is monopolistic and illegal behavior is redacted” and suggesting that some of the redactions might be lifted within 14 days unless Amazon could offer the judge “compelling reasons” to make them permanent.
If concurrent history is any guide, the public should not take much comfort in this. The federal judge currently presiding over the Justice Department’s antitrust trial of Google has refused to allow public video or audio recordings, temporarily blocked the DOJ from releasing documents referenced during the testimony, and banished the handful of journalists and law students attempting to attend the trial in person from entering the courtroom for more than half of the proceedings so far (including the Prospect’s own Luke Goldstein).
Tellingly, Google’s chief argument against public disclosure of its trial is that it might generate “clickbait,” also known as public interest, the very thing public servants are supposed to defend. In taking on the Big Tech gatekeepers, Joe Biden’s antitrust enforcers are not simply attempting to reverse 40 years of Chicago school monopoly denialism, but antagonizing the biggest and most widely used consumer brands on the planet. It’s a laughably asymmetric war, against behemoths that have employed millions of engineers and collected untold terabytes of data in the service of analyzing exactly what causes humans to click. If they’re going to reel in even one big fish (much less the Moby Dick in question), they’re gonna need “clickbait.”
It’s hard to imagine John Coughenour, the judge overhearing the case, an 82-year-old Ronald Reagan appointee who in the aftermath of September 11 publicly blasted the widespread use of secret military tribunals to prosecute suspected terrorists, observing such obeisance to Amazon, if only because he’s old enough to have personal memory of an era in which antitrust laws were widely considered to be real laws and not relics of an obsolete past. [UPDATE: Coughenour recused himself on Wednesday; the case will now be heard by Biden appointee John Chun.]
But the information blackout provided an easy opportunity for Amazon’s army of shills and sycophants to do what shills and sycophants always do when their clients are caught breaking laws, which is to glibly pronounce the allegations variously as old news, “nothingburgers,” and/or the product of some kind of creepy personal vendetta. “Talk about anticlimactic,” chirped the Silicon Valley subscription cheerleader service The Information, which recently published a sympathetic account of former Amazon logistics czar Dave Clark’s embarrassing ouster from his new gig at upstart logistics competitor Flexport. Barron’s and Axios swiftly dismissed the case, despite being conspicuously unable to access vast swaths of it. The top result on Google News to a search for Amazon is literally the company’s own response to the lawsuit, which is hard to read as anything other than monopolists sticking together.
An attorney who represents Amazon sellers in disputes with the platform and has become disillusioned with the FTC dismissed the lawsuit to the Prospect as a duplicative virtue-signaling effort that “feels like it’s more about getting Amazon versus making meaningful change.” At the same time, he added, defending a small business that has been arbitrarily terminated or otherwise victimized before Amazon’s mercurial and opaque internal justice system has gotten substantially easier since Khan was named FTC chair. “There are some things you can actually bring to Amazon’s attention now, especially if they are things the FTC has been focused on,” he said. “For the past two years Amazon has legitimately been trying to clean up its act.”
