Should Amazon decide to break itself up, that should be a decision freely taken in response to market forces and be in the interests of its shareholders.
For decades now (and to oversimplify), the goal of U.S. antitrust enforcement has been held to be “consumer welfare.” One classic interpretation of what this means can be found in a Clinton-era case:
“[A]n act is deemed anticompetitive under the Sherman Act only when it harms both allocative efficiency and raises the prices of goods above competitive levels or diminishes their quality”.
There is, of course, plenty of scope for debating what “consumer welfare” should mean and does mean, but what that test does do is act as a valuable brake on the abuse of antitrust enforcement by regulatory authorities, particularly those who, like the Soviet planners of old, believe that bureaucratic fiat is a better way to shape the structure of an economy than the operation of free markets. That’s not to say that there cannot be a role for (a light touch of) regulation, but looking at the historical record, the freer the market, the greater the prosperity is a principle that has stood the test of time.
Unfortunately, the FTC seems set on imposing a centralized, ideologically driven template on the American economy. If it succeeds, that is likely to be good news for the bureaucratic and political class, as well as those enterprises, such as law firms, that do very well out of helping companies navigate the system Washington has imposed, but, outside that cartel, few will have much to celebrate. To the extent that free markets are “about” anything, they are about wealth creation (something that, in turn, has contributed to once unimaginable human flourishing). Aggressive economic regulation, by contrast, is about power, and, often, the rewards that flow from power.
So, even if it was hardly a surprise, it was depressing to read this by Matthew Lynn in the Daily Telegraph:
It might be this week. It might wait until the middle of August. It might even drag on until the start of September. But in the United States the Federal Trade Commission is expected to launch its blockbuster legal action against Amazon very soon.
Coming at the same time as British and European Union regulators are targeting the internet giant, the forced break-up of one the world’s most powerful businesses is getting more likely all the time. And the stage is set for an epic series of legal battles as Amazon tries to keep its corporate empire together.
British and EU regulators are, of course, only interested in the law. Smashing up an American success story that shows up the relative failure of their own economic models has nothing to do with it. Absolutely not. Nothing at all. No really. . . .
There’s plenty to argue about in the article (which is paywalled) not all of which I agree with, but that’s for another day.
Lynn’s central point is:
There is a smarter strategy. Amazon could simply save all the lawyers a lot of trouble and break itself up. In fact, it can be divided neatly into three businesses; retailing, streaming services, and cloud computing.
And there’s plenty to argue about that too.
But should Amazon decide to break itself up, that should be a decision freely taken in response to market forces and be in the interests of its shareholders. It should not be a damage-limitation exercise in response to regulators that want more power over the economy and, in the case of the Brits and the EU, a protectionist victory over the U.S.