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U.S. antitrust regulators face growing public pressure to scrutinize Amazon.com Inc.’s bid to acquire Whole Foods Market Inc., although analysts say there are no strong legal arguments for a government challenge.
Opponents of the $13.7 billion deal say it would squelch innovation and increase Amazon’s online dominance, discouraging entrance into the emerging online grocery market. The United Food and Commercial Workers International Union (UFCW) is the most recent group to raise alarms since the transaction was announced last month, asking the Federal Trade Commission July 17 to examine the deal. Congressional Democrats have also said regulators should look into it.
The outcry illustrates a debate about the limits of antitrust law in the U.S. Critics of the Amazon-Whole Foods deal contend that its potential dominance over the online grocery market highlights the need for a more creative and forward-thinking approach to antitrust enforcement. But antitrust lawyers say the transaction likely won’t present significant antitrust problems for regulators since it involves companies that aren’t direct competitors.
“We’re living in a moment where an increasing share of our commerce and communications are being mediated by a handful of dominant platforms, and that has huge ramifications for competition in ways that it’s becoming clear the current antitrust regime is not fit to address,” Lina Khan, a fellow with the Open Markets program at the New America Foundation, told Bloomberg BNA.
But expanding antitrust law may not be the answer, according to Christopher Sagers, a Cleveland State University professor whose focus includes economics and antitrust law. Sagers said the Amazon-Whole Foods deal is unlikely to trigger a fundamental change in how mergers are reviewed, at least not for the foreseeable future. “Even if it weren’t politically implausible, I don’t think it’s good policy,” Sagers told Bloomberg BNA.
For one thing, he said, Amazon has done exactly what innovators are supposed to do. “Above all, Amazon has succeeded by being an exceptional innovator, apparently mostly in logistics — it has revolutionized the distribution of goods and services. Just smacking it simply because it has succeeded by doing well is pretty self-defeating,” Sagers said. “I favor looking seriously at Amazon, but I don’t favor changing antitrust so that we break up big firms just for the sake of it.”
To the extent that Amazon has grown its market position by doing things other than making a better product, he said, the current antitrust law is capable of dealing with it. “I see this as an opportunity to enforce the antitrust laws, as they are, more vigorously.”
Regardless of how regulators determine the correct legal analysis of the Amazon-Whole Foods tie-up, critics are increasingly citing wage and employment worries. In its letter to the FTC, the UFCW said thousands of Whole Foods workers could be adversely affected, among other potential harms.
But the letter acknowledged that traditional antitrust analysis may discount those kinds of “threats.”
“Because of the impact of online shopping, technology, and automation, our economy and the retail grocery landscape is changing dramatically,” Marc Perrone, the group’s president, wrote. “As such, the very definition of how mergers, such as the proposed Amazon and Whole Foods merger, would impact grocery competition, customer choice, the price of goods, and, especially hard-working retail workers, must be rethought.”
Rep. David Cicilline (D-R.I.), a key Democrat on the House Judiciary Committee, recently called for a congressional hearing to examine such concerns, citing the possibility of “decreased wages.” He specifically cited the inability of antitrust regulators to examine employment and inequality in merger analysis. As such, the antitrust subcommittee, of which he is the ranking member, “should have an active oversight role in determining whether this trend serves the public interest,” he argued.
Rep. Ro Khanna (D-Calif.) was one of the first members of Congress to say U.S. antitrust regulators must undertake a review that considers the merger’s impact on jobs and wages, as well as prices.
Thus far, however, regulators and Republicans in Congress aren’t publicly responding to the requests and challenges raised by opponents.
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