Open and Shut, the Amazon Way

AmazonWe’ll never know what questions the Federal Trade Commission asked Inc. about its plan to shake up grocery shopping by buying Whole Foods Market Inc.

Three brief, bland paragraphs said the agency was not going to further pursue its investigation of the deal, meaning the companies avoided a cumbersome in-depth review that would have stretched for months. Now the deal is closing this week.

There was no information from the FTC about market shares. There was no public evaluation of how the transaction could affect wages or prices or squeeze out competitors. Those were all issues that consumer advocates pleaded with the agency to consider.

That’s how the FTC works. It operates behind closed doors, and all investigations are sealed. Even the decision to issue the cursory statement was out of the ordinary. Most deals approved on the 30-days-or-less fast track are announced in a uniform daily FTC digest. The same is true of Justice Department investigations of mergers.

Antitrust officials are bound by the Hart-Scott-Rodino Act, which closes investigations to the public, partly to protect confidential business information. But the FTC can publish full statements that explain what theories of competitive harm were analyzed during an investigation, as it did when it approved Google’s acquisition of internet advertising server DoubleClick Inc. in 2007.

Some practitioners say U.S. regulators should take a page from the European Commission, which operates much more in the sunlight than its U.S. counterparts. The commission demonstrated its commitment to transparency last week when it opened an involved probe into Bayer’s $66 billion proposed combination with Monsanto Co. amid concerns the takeover could reduce competition for pesticides, seeds, and plant traits.

Like the Amazon-Whole Foods tie-up, Bayer-Monsanto has attracted outcry from consumer and industry groups.

Margrethe Vestager, the EU’s competition commissioner, took an extra step to respond to the public criticism. In an unusual move, she posted a statement on the EU’s website explaining she would be “carefully investigating the merger,” but her review would be (appropriately) limited to competition issues. Other concerns about the deal fall under different EU and national rules to protect food safety, consumers, the environment, and climate, she said.

Bayer-Monsanto opponents may be only slightly appeased by Vestager’s efforts, but the FTC provided no such reassurance. A clear and detailed explanation from the FTC about why it didn’t pursue further review of Amazon-Whole Foods could have provided some comfort to those worried about the growing power of technology companies. As antitrust becomes a more common theme of a populist political agenda, people who once ignored the work of the FTC and the DOJ will tune in. If regulators can’t at least try to give them answers, the frustration will grow, along with pressure for change.

The pressure is starting already. Sen. Amy Klobuchar (D-Minn.), the ranking Democrat on the Senate Judiciary Committee’s antitrust subcommittee, said Friday that she’ll be calling on the FTC to explain why they “made such a quick decision” on the merger.

“I am concerned about the Federal Trade Commission's decision not to fully review Amazon's acquisition of Whole Foods,” she said. “Amazon's increased access to data on consumers and their behavior, and its dominance in internet retail sales, raises questions about whether this merger harms consumers and suppresses competition.”

Consumer groups, unions, and lawmakers concerned about consolidation across industries have few legal avenues to fight the big mergers they see as contributing to the problem. Antitrust law is limited to questions about competition within specific markets, making it an awkward vehicle to address broader worries about big, dominant companies.

A better understanding of how antitrust works, and why regulators make the choices they do, could at least elevate the dialogue above an accusatory shouting match.

Quote of the Week

“I'm sympathetic to the view that the U.S. antitrust agencies ought to do more in the way of substantively meaningful closing statements as frequently as possible.  In my view, those statements are most valuable when a proposed acquisition raises novel or close calls of antitrust law. This deal didn't.” (Emphasis added.)

--Josh Wright, former Republican FTC commissioner

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