The US House of Representatives should examine whether Amazon’s dominance in online retail will cause its proposed takeover of the Whole Foods supermarket chain to damage other grocery retailers and the communities and workers they serve, a senior member of the House antitrust subcommittee said yesterday.
Representative David Cicilline of Rhode Island, the ranking Democrat on the subcommittee, wrote to the Judiciary Committee’s leadership asking them to hold a hearing on Amazon’s $13.7 billion acquisition of Whole Foods, ostensibly to probe antitrust concerns surrounding the deal.
Amazon has defended the Whole Foods deal as a way to expand the company’s offerings and deliver more convenience and innovation to customers. But since the companies announced the merger last month, critics concerned about Amazon’s immense power over online shopping in the US say its attempt to enter the brick-and-mortar supermarket sector could damage a host of adjacent businesses and magnify the company’s disruptive effect on markets and employment.
Cicilline’s comments mirrored those concerns, and his letter now stands as perhaps the strongest legislative championing of the view that antitrust law can and should be used to address economic inequality and employment, rather than simply the cost of goods to consumers.
“The congressman’s suggested approach is new,” said Steven Salop, an antitrust professor at Georgetown University.
Cicilline’s letter, like recent speeches by Senators Elizabeth Warren and Bernie Sanders, suggests that such mergers raise questions about whether the antitrust laws effectively safeguard low prices and choice, as well as the broader concept of economic opportunity. Despite assurances by antitrust observers that the Amazon deal would leave competition intact, Cicilline said that “it nevertheless occurs amidst waves of consolidation in recent decades that have decreased wages and resulted in gross inequality in the workplace.”
He asked the full subcommittee to consider whether the deal would “harm consumers, workers and small businesses in our communities.”
While such concerns break with the antitrust orthodoxy built over the past four decades, in which consumer welfare as measured in prices, output and innovation has reigned supreme, they are not entirely unexpected.
William Kovacic, the former head of the Federal Trade Commission, said lawmakers often focus on how mergers will affect jobs. “It was the foremost concern of most elected officials I dealt with,” Kovacic said.
But Cicilline’s letter went much further than mere employment concerns. He suggested, as some pundits have, that Amazon’s enormous market power and customer footprint has already sent shockwaves through the supermarket industry, even though the Whole Foods deal likely has months to go before the FTC decides whether to approve the takeover.
Quoting multiple news stories and critics, Cicilline suggested that Amazon has grown its powerful e-commerce platform to the point that it can exert control over pricing and promote its own products over those of other sellers. Adding Whole Foods to that powerful platform could expand the company’s dominance into online retail grocery sales, the letter suggests.
The congressman also delved into areas that have been excluded from antitrust analysis and enforcement for the better part of the past half-century. The Amazon deal comes amid a wider, long-term trend of corporate concentration in the US that is “essentially allowing a small number of monopolists to” dominate economic growth at the expense of productivity and wages, he said in the letter.
“In this vein, some have expressed concerns that the proposed acquisition will result in additional consolidation in the retail sector, erode American jobs through increased automation and threaten local communities through diminished economic opportunity for hardworking Americans,” Cicilline wrote.
While Cicilline’s letter reflects a public resurgence of New Deal-era antitrust principles that champion small business and economic diversity, it is unclear whether either federal antitrust agency is prepared to, or capable of, challenging potentially benign deals such as Amazon/Whole Foods under the current interpretation of the antitrust laws.
“I doubt that the FTC would be interested in pursuing the adverse impact on workers sketched out in the letter,” Salop said. Unless the merger would lead to Amazon having monopsony power over workers, such concerns likely fall outside of the Clayton Act, he said, although some believe the government should be able to block mergers that involve potential competitors under the Clayton Act’s “incipiency” standard.
Randal Picker, a professor at the University of Chicago’s law school, said that had Hillary Clinton won the presidency, the subjects touched on in Cicilline’s letter might comprise a wider conversation over the proper focus of antitrust law. Under a Trump Administration, that conversation is less likely to transpire, at least in the halls of government.
But Picker said concerns over platform competition are being raised in Europe, where the European Commission has already charged and fined Google for abusing the power of its dominant search platform in online shopping.
“Those are traditional antitrust issues, but in a new setting and quite complicated,” Picker said. “That said, there is a perception that the leading tech firms are quite dominant right now and that Europe seems interested in looking at that in detail and the US – so far – less so.”
As for Cicilline’s interest in antitrust law as a means of defending jobs and economic equality, Picker said the antitrust agencies have shared no such interest over the past few decades.
“I don’t know what the [Department of Justice’s] Antitrust Division or FTC will do,” he said. “They have addressed these issues in more conventional settings – the Silicon Valley anti-poaching investigation comes to mind – but this would be much less traditional.”
No hearing has been set to discuss the merger in either the House or the Senate.
Counsel to Amazon
Sullivan & Cromwell
Partner Renata Hesse in Washington, DC
Covington & Burling
Partner Thomas Barnett in Washington, DC