The Federal Trade Commission’s (FTC) probe into Amazon’s potentially anticompetitive business practices is picking up steam. On May 31, Bloomberg reported that the FTC was re-interviewing potential witnesses for a case against Amazon and that Chair Lina Khan assigned John Newman, an antitrust professor and a deputy director of competition at the commission, to lead the investigation.
The FTC allegedly asked witnesses about Amazon’s recent merger with MGM, which could be in the crosshairs of Newman’s team.
The potential challenge comes on the heels of a 2021 FTC settlement in which Amazon agreed to reimburse over $60 million worth of tips withheld from drivers for Amazon Flex, Amazon’s delivery service. The FTC was also reportedly investigating privacy and data security concerns with Amazon’s Ring doorbell cameras, but suspended the work.
These minor fights with Amazon increasingly soured relations between Khan and the firm, with the tech giant demanding her recusal from all cases regarding their company. This request has been dismissed. And Khan, who has long been outspoken about Amazon’s ill, may be preparing for its biggest probe yet.
For several months, the FTC refused to hold votes on challenging several large mergers, fearing a 2-2 deadlock. During this period, many mergers closed, but through spokespeople and letters to the firms involved, the FTC repeatedly warned that closed mergers could be subject to a later challenge. After a lengthy nomination process, Alvaro Bedoya was recently sworn in as a commissioner, giving the FTC a 3-2 Democratic majority and the ability to pursue Lina Khan’s ambitious antitrust agenda without Republican support.
“It is possible that matters that could not be voted out earlier because of the 2-2 split may come up for a vote again,” Betsy Lordan, an FTC spokeswoman, told the Daily Dot.
One of the largest mergers fitting this description is Amazon’s $8.5 billion acquisition of MGM, the United States’ fifth-largest film studio, which owns the rights to dozens of major television and movie franchises including Rocky, James Bond, and The Real Housewives franchise.
Amazon’s own media production arm, Amazon Studios, struggled to produce popular content and has a negligible market share. Upon the closing of the merger, Amazon founder Jeff Bezos celebrated the “vast, deep catalog of much-beloved intellectual property” that his company acquired.
In the weeks leading up to the merger’s closing, the FTC considered hiring expert witnesses for a future trial, but without a majority on the commission and despite warnings from progressive politicians and consumer advocacy groups that competition might be hindered, the merger went through.
The uncertain timing of Bedoya’s confirmation left many wondering if the merger would be challenged until the last minute, but it closed in March 2022. It wasn’t until two months later that Senate Majority Leader Chuck Schumer (D-N.Y.) put Bedoya’s nomination to a vote on the Senate floor.
Multiple FTC spokespeople declined to comment on whether the commission was considering challenging Amazon’s acquisition of MGM. Amazon did not respond to requests for comment.
The Strategic Organizing Center, a coalition of large labor unions, expressed their concerns over the merger in a public letter directed to Holly Vedova, the FTC’s active director at the Bureau of Competition. They alleged the merger would “bolster Amazon’s ability to leverage power across multiple lines of business related to the streaming video-on-demand (SVOD) market” by using its juggernaut e-commerce platform to provide Prime Video at below-market rates.
An Amazon Prime subscription costs $14.99 per month and includes dozens of perks, including free same-day delivery for millions of products, discounts at Whole Foods, and access to Prime Video, Amazon’s streaming service. As part of this larger bundle, Prime Video is comparatively a fraction of its competitors’ prices, which allowed it to quickly gain market share against Netflix, Hulu, and HBO Max.
Prime Video can also be purchased independently of Amazon Prime for an $8.99 monthly fee. But a 2017 independent analysis by The Motley Fool found that “it’s clear Amazon is taking a significant loss on Prime Video, but it’s easily subsidized by the increased shopping the average Prime subscriber does on Amazon.com.”
Industry experts predict that Amazon’s acquisition of MGM could lead to a wave of similar acquisitions in which streaming services that deliver content purchase the companies which produce it. The Strategic Organizing Center shares this concern, believing a wave of vertical integrations would stifle consumer choice, limit available content, and impose restrictive contract terms on competing streaming services.
“Every merger or acquisition Amazon proposes should be met with great skepticism and trepidation,” Ron Knox, an antitrust expert and senior researcher at the Institute for Local Self-Reliance, told the Daily Dot.
The FTC rarely challenges consummated mergers, fearing it could create uncertainty in the marketplace, but it nevertheless has in significant cases. When asked for examples, an FTC spokesperson pointed to the FTC’s challenge of 7-Eleven’s acquisition of Speedway, and cases in the markets for prosthetic knees and body-worn cameras used by law enforcement. The 7-Eleven challenge was initiated after Khan’s appointment broke a previous 2-2 tie at the commission and resulted in 7-Eleven having to divest hundreds of its newly acquired retail locations to competitors.
After Amazon’s acquisition of MGM was consummated, Amazon received a letter from the FTC warning that the deal will still be investigated and could be open to a later challenge.
If the FTC mounts a challenge, a protracted legal battle is expected. Amazon has “nearly infinite legal and lobbying resources at its disposal. It will also face a judicial system rigged in favor of monopoly power after decades of pro-business case law,” Knox warns.
But if Amazon’s acquisition with MGM is successfully challenged, Amazon might be forced to divest some of its new intellectual property or revise the agreements by which it licenses its content to competitors. It would also be a massive victory for Khan, who has overseen several investigations into Amazon’s conduct and first gained national prominence for analyzing how the firm “marched toward monopoly.”
A monopoly that Khan might be ready to truly challenge.