Regulatory bodies on both sides of the Atlantic are encircling the big tech companies. Among them is consumer goods giant Amazon (US:AMZN), which is facing criticism from the American Federal Trade Commission, House Judiciary Committee as well as the wrath of the European Union Commission. But to tighten their grip on Amazon, these regulators face a difficult battle. Current competition laws are designed to protect the consumer, meaning Amazon – which has pushed down prices, pioneered online shopping and made life easier for its millions of customers – is on the right side of regulation. As Lina Khan argues in her Yale Law Journal article 'Amazon’s Antitrust Paradox', to regulate the big tech companies, competition laws needs updating.
In painstaking detail in the article, which catapulted Ms Khan from law student to 'Amazon's number one enemy', she argues that the antitrust laws drafted in the 1970s and 1980s are no longer appropriate for the modern market. She says they are designed to assess competition according to consumers' short-term interests, rather than the health of the market as a whole. Especially in the case of online platforms, antitrust laws should take into consideration the underlying structures and dynamics of markets.
Ms Khan writes that Amazon has established its dominance through two elements of its business strategy: integration across business lines and a willingness to lose money and invest aggressively. Both elements are aptly demonstrated by the $13-a-month Amazon Prime service, which offers customers free next-day delivery and access to the company's expanding content library. In 2011 it was estimated that each Prime member cost Amazon at least $90 (£69.50) a year in lost shipping and film revenue, meaning the company lost $11 per customer annually. But Prime is considered crucial to Amazon’s growth as an online retailer and it is estimated that customers increase their purchases from Amazon by around 150 per cent after they become Prime members. They also become more likely to buy from Amazon rather than other platforms. In this way, Amazon’s strategy allowed it to use predatory pricing methods without drawing the attention of pricing laws.