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Antitrust Ain’t Groovy

Here’s a letter to the Wall Street Journal:


Slip into a mini-skirt and do the Watusi, for the 1960s are returning – at least if we judge by trends in antitrust enforcement. As you report, California today announced a major antitrust action against Amazon (“California Sues Amazon, Alleging Antitrust Violations Inflated Prices and Stifled Competition,” Sept. 14). This action heralds a revival of the hyperactive, arrogant, and anticompetitive antitrust interventions of 60 years ago. It’s not groovy.

Chief among California’s specific complaints is that Amazon requires third-party merchants who offer their wares for sale on Amazon to sign agreements that punish them for offering these same wares at lower prices on competing sites, such those of Target and Walmart. California’s Attorney General Rob Bonta alleges that Amazon thereby “coerces merchants into agreements that keep prices artificially high, knowing full-well that they can’t afford to say no.”

This allegation fails the smell test. Third-party merchants have no incentive to agree to such terms with Amazon unless they get something of at least equal value in return from Amazon. Perhaps that something is especially high exposure to consumers. Or maybe it’s unusually trustworthy or complete customer testimonials. Who knows precisely what this something is, but we can be sure that merchants dig it because otherwise – especially given merchants’ easy ability to offer wares for sale on other sites owned and operated by competing retail giants – Amazon couldn’t entice merchants to voluntarily agree to these terms.

It’s far out for Mr. Bonta to complain that merchants “can’t afford to say no” to Amazon’s contractual terms. His complaint really amounts to unintentional praise of Amazon for being so entrepreneurially competitive as to offer merchants a service that’s obviously too good to miss out on.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030