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What do the antitrust cases against Amazon reveal about contestability in the EU and the US?

Publishing date
11 December 2023
Authors
Fiona M. Scott Morton
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Ongoing US antitrust cases against Amazon reveal that the ecommerce giant has developed algorithms that mimic the price protection contracts known as ‘most favoured nation’ contracts (MFNs). Amazon dropped the formal contracts years ago, but the cases suggest that new enforcement may be needed.

The lawsuits state Amazon demotes merchants from the place where most sales occur (the Buy Box) if the company finds a lower price for the product on a rival ecommerce site. This policy creates incentives for a merchant with significant sales on Amazon to set higher prices on rival marketplaces. MFNs are banned for gatekeepers under the Digital Markets Act (DMA) – which will apply to Amazon’s marketplace under the Commission’s designation decision made in September 2023.

A ban works for the US, as it should restore competition with minimal harmful side effects. The cases describe a different Amazon scheme that penalises brands if Amazon must lower its retail prices to match a rival retailer. But because ‘retailing’ is different from running a marketplace, the DMA may not directly prohibit this Amazon policy.

Delivery and logistics are another area of interest to regulators. Both the Federal Trade Commission (FTC) and the European Commission find that Amazon’s policy of tying its own logistics service to Prime status raises entry barriers to rival ecommerce providers. If a merchant ran its own logistics, those could be utilised by Amazon and rival platforms – who then would have the same delivery costs as Amazon. Requiring the entrant to both set up ecommerce and a delivery system raises the cost of entry. The European remedy redesigns the Buy Box and gives rival logistics services access to consumers, providing a useful benchmark for the FTC and California to consider as they litigate. Both jurisdictions gain from the enforcement actions of the other.

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About the authors

  • Fiona M. Scott Morton

    Fiona M. Scott Morton is the Theodore Nierenberg Professor of Economics at the Yale University School of Management.  Her field of economics is industrial organization and within this field she focuses on empirical studies of competition. The topics of her current research are the economics of competition enforcement and competition in healthcare markets. From 2011-12 Professor Scott Morton served as the Deputy Assistant Attorney General for Economic Analysis (Chief Economist) at the Antitrust Division of the U.S. Department of Justice, where she helped enforce the nation’s antitrust laws. She frequently presents to, and advises, government agencies tasked with enforcing competition law. At Yale SOM she teaches courses in the area of competitive strategy and competition economics. She served as Associate Dean from 2007-10 and has won the School’s teaching award three times. She founded and directs the Thurman Arnold Project at Yale, a vehicle to provide more competition policy programming to Yale students and the wider competition community. Professor Scott Morton holds a BA from Yale and a PhD from MIT, both in Economics.

Theme
Digital economy, labour markets, skills and health
Keyword
WhyAxis newsletter innovation digital economy
Language
English

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