My Mercatus Center colleague Alden Abbott – a man not prone to hyperbole – describes the FTC’s newly announced assault of Amazon as “perhaps the greatest affront to consumer and producer welfare in antitrust history.” A slice:
The fact that so many firms seek to affiliate with Amazon’s platform tells you that they perceive economic benefits in doing so. And that is not surprising, because consumers love Amazon, both here and abroad (see, for example, here, here, here, here, and here).
A recent survey of Amazon users by Adlucent found that: (1) “consumers pick Amazon because they have a better product selection”; (2) “people pay for Prime memberships to get free shipping”; and (3) “consumers buy electronics, home goods, and books on Amazon.”
Adlucent focused on the consumer benefits generated by Amazon’s model as something retailers should emulate in order to compete effectively: “retailers who want to compete with Amazon need to focus on offering a wide product selection, affordable and fast shipping, and excellent customer service.”
In sum, Amazon’s success derives from an innovative system that consumers enjoy patronizing. This is a manifestation of procompetitive consumer-welfare-enhancing innovation, not exclusionary anticompetitive harm. The FTC’s plans to dramatically change Amazon’s business practices are therefore nothing less than an attack on a vibrant competitive process.
The FTC is once again demonstrating a bureaucratic pretense of knowledge in believing that government can tinker with and thereby improve a highly innovative business system that has showered enormous benefits on both consumers and producers (as have other platforms, see here). This is a particularly odious manifestation of the nirvana fallacy (see Harold Demsetz’s seminal article on this topic), for the FTC is not merely purporting to “perfect” a clearly good institution (the Amazon business system, which benefits consumers), but is rather mischaracterizing it as competitively harmful.
That scale has naturally earned Amazon more than its share of irate customers, sellers and rivals, and some of the company’s actions certainly have been questionable. But Amazon as a monopolist doesn’t square with the fact that the company still accounts for less than a third of total e-commerce sales in the U.S. over the last four quarters, according to the government’s latest retail sales data.
And even that huge distribution footprint doesn’t exactly allow Amazon to just set prices; Amazon commands the lowest operating margins among its big tech peers, and the company’s retail operations have lost money in seven of the last eight quarters. Overbuilding of its fulfillment network actually caused Amazon to burn cash over the last two years.
Competition is also growing of late instead of diminishing. Walmart’s U.S. e-commerce revenue has averaged 39% annual growth over the last four years and is expected to hit nearly $62 billion in the fiscal year ending January, according to consensus estimates from Visible Alpha. Meanwhile, Shopify has more than tripled its revenue over just the past three years precisely by powering e-commerce sales for a variety of large and small merchants looking for an alternative to selling on Amazon.
Writing in the Wall Street Journal, Columbia University law professor Philip Hamburger argues that the U.S. Supreme Court should uphold the 5th Circuit’s injunction against the Biden administration’s social-media censorship. A slice:
The chilling of one insightful opinion from a scientist or physician can profoundly alter scientific and medical debate. So can the suppression of one patient’s report of an adverse vaccine event. Therefore, when vast numbers of Americans are chilled in their scientific and medical speech, it dangerously injures all of us, who suffer a diminished opportunity to learn and to reconsider and refine our own views. The government’s chilling policies appear to have had a massive and cascading effect in reducing the diversity of opinion and the quality of public discussion.
Through its chilling policies, the government has injured the plaintiffs and all other Americans directly, not only through the platforms. And because that censorship deprives everyone of access to a variety of views, the plaintiffs can’t be protected without an injunction against the full range of censorship.
In dampening public discussion, the government has directly affected every one of us, confining what we hear as well as what we say. Each of us, including the plaintiffs, suffers from the injury to the rights of others. None of us have our full freedom of speech unless everyone else has it too.
The hypocrisy of the Biden administration is most evident in WTO dispute settlement, which it has crippled by refusing to join other WTO members in appointing new judges on the trading system’s final tribunal of appeal, the WTO Appellate Body.
Elsewhere, Stellantis’ chief Carlos Tavares has echoed much the same: They can’t profitably build a $25,000 EV and meet the UAW’s demands. “Part of the things we need to discuss with our union partners is how we make affordable EVs in the U.S. that the middle classes can buy and that they are sustainable because they are profitable, ” Tavares said. If high costs or tariffs block those types of cars from the U.S. market, the EV transition will be more difficult (at best).
Speaking of Detroit Three profitability, that’s another big problem with the UAW’s plan. As Yahoo Finance’s Rick Newman explained, there was a short-term surge in automaker profits (thanks to stimulus-fueled, big-spending U.S. consumers and limited auto inventories), but that profitability is “meaningless” when you look at how these companies compare to other big automakers and Tesla, over both the short and long term.
Speaking of Biden’s dirigiste policies, River Page reports that “a new government grant program that aims to build ‘tech hubs’ in the middle of nowhere is littered with political patronage, dei tomfoolery, and self-erected barriers to success.” (HT Steve Hardy) Here’s his conclusion:
If you take all the ridiculous requirements at face value, the ideal candidate for a Tech Hub grant is one which promises that local, non-English speaking, wheelchair bound Native Americans without any particular skills or education relevant to the tech industry will successfully transform a small town in North Dakota into the city of Wakanda under the auspices of a nearby HBCU. If we are lucky, only the vast majority of our tax dollars are wasted in pursuing such fantasies, and one or two mid-sized cities will get grants and somehow find a way to turn their tiny tech sector into a medium-sized one by recruiting kids from the engineering department at a nearby “minority serving” university. I don’t think this ends in a single, actual new tech hub, and certainly not 20 of them. More likely, this ends in money being wasted in unique ways we’d never considered before.
I guess innovation isn’t dead after all.