Introduction
The companies in the United States face a host of new and ongoing challenges relating to antitrust problems. The companies need to identify and understand the intersection of the antitrust law and the current competitive realities, as well as the antitrust law’s take on some particular old issues in the growing market. The law pays close attention to competitor collaboration, pricing, and mergers. For instance, antitrust enforcement efforts have for a long time been concerned about particular types of collaborations among competitors. However, over time, it has been observed that benchmarking, joint ventures, as well as information exchanges, can promote competition when done properly. It is also important to realize that emerging technologies always present both opportunities for pro-competitive collaboration as well as anti-competitive collisions that may harm the economy (Soper, 2017). As such, trade associations and joint lobbying often keep antitrust counsel busy as counselors may find it necessary to advise on industry-wide meetings normally called by top politicians.
On the other hand, price signals to both buyers and sellers are crucial to any economy. However, it is worth noting that new retailing methods present new twists on some age-old antitrust issues in the economy. For instance, some particular online sellers found themselves in trouble by discussing the pricing algorithms that adjust their prices quickly and automatically. Therefore, there is need to review the antitrust laws to effectively addressed the current antitrust problems ailing the current economy. Mergers also present potential antitrust issues in the United States economy. It is clear that the number of mergers as well as their size and complexity have significantly increased in recent years. Although law enforcers may try to challenge variously proposed mergers, media reports indicate that some merging parties are currently turning to lobbying administration officials outside the enforcement agencies to have their way at the expense of the public.
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Amazon.com is one large Unites States organization that is faced with a significant antitrust problem regarding its decision to acquire Whole Foods Company. This has raised a concerned to the effect that Amazon.com might be getting too big. It is argued that the company’s acquisition of Whole Foods is a wave of consolidation that may lead to decreased wages and result in gross inequality in the workplace (Turner, 2017). Additionally, it is believed that Amazon.com’s acquisition of Whole Foods would significantly harm other tax paying retailers in the United States. As observed over the past view decades, the American economy has resembled something more like a stagnant pool (Soper, 2017). As a result, entrepreneurship has been affected negatively as measured by the rate of new business formation. There has been a general decline in the number of new businesses being formed . As such, the Millenials are on the record for being the least entrepreneurial generation. The decline in dynamism has been attributed to the emergence of extraordinarily large and profitable firms that look discomfortingly like the oligopolies and monopolies of the nineteenth century. Amazon.com is one such firm that has seen it undergo both vertical and horizontal expansion in the recent past. The acquisition of Whole Foods is seen as a major antitrust problem as it is likely to harm the economy. The United States has since become the home of the big and the consolidated.
Amazon.com Inc.
Amazon.com is an American e-commerce and cloud computing company that is based in Seattle, Washington. Jeff Bezos founded the company on July 5, 1994. It is the largest internet based retailer in the world by total sales, as well as market capitalization. The company started in 1994 as a bookstore. It later diversified to sell DVD, CDs, Blu-rays, MP3 downloads and streaming, video downloads and streaming, videogames, software, furniture, apparel, food, jewelry, and toys. Additionally, the company also produces consumer electronics such as Fire tablets, Kindle e-readers, Echo and Fire TV. Amazon.com is also the world’s largest provider of cloud infrastructure services and sells low-end products like USB cables under its in-house brand AmazonBasics.
The company has various separate retail websites for the United States, UK, and Ireland, Canada, France, Italy, Germany, Spain, Netherlands, Australia, Japan, Brazil, China, Mexico and India. Moreover, Amazon.com also offers international shipping services to certain countries for some of the products it sells. Amazon.com surpassed Wal-Mart in 2015 as the most valuable retailer in the United States by market capitalization. It is the fourth most valuable public corporation in the world. Furthermore, Amazon.com is the largest internet company in the world by revenue and the eighth largest employer in the United States of America. The company announced their plans to acquire Whole Foods Market for $13.7 billion in 2017. The company planned to complete the transaction by the end of 2017. This would vastly increase Amazon’s presence as a physical retailer in the United States. In fact, some interpreted the move as an attempt to challenge Walmart as a physical store in the United States.
Amazon.com’s Anti-trust Problem
Amazon hit the headlines recently following its plan to acquire Whole Foods Market. As a result, Amazon.com has become the most interesting and important problem in American Antitrust law. The company is considered the most rapacious and remorseless organization as it once again brought into sharp focus the deepest tensions in the country’s antitrust law. The new acquisition must, therefore, undergo a major federal antitrust review. Over the years, the antitrust establishment in the United States has been quiet about the case of Amazon.com. This could have been majorly because of the fact that the company’s visible conduct fits awkwardly with the current ideas regarding what should be considered illegal (Sainato, 2017). However, the acquisition of Whole Foods could change things because it represents a new level of audacity that could potentially impact the economy. Although the company has been able to acquire hundreds of other firms in the past, it has never bought a significant brick-and-mortar operation. Over time, critics have raised significant concerns regarding the company’s history of fairly nasty aggression. The company’s tentative forays into terrestrial stores of its own have even raised eyebrows among the curious public. The company’s conduct seems to confirm a deliberately predatory and monopolizing strategy aimed at eliminating competition. In fact, Amazon.com kills off brick-and-mortar retail by using desperation prices to take over the physical presence of the rivals as soon as they are gone. It is important to realize that Whole Foods is not only among the larger chains in the food industry but also among the best-known names in American retail.
Amazon.com’s acquisition of Whole Foods constitutes a significant antitrust problem because it has the potential for discouraging innovation from competitors through its dominance. As such, the deal has raised hackles in Washington and Wall Street has taken note. For instance, one of the United States lawmakers has already called for hearings on the proposed move by Amazon.com. This is aimed at considering the ramifications of the Whole Foods acquisition for shoppers and workers. There were even concerns raised regarding the likelihood of the antitrust concerns eroding the value of Amazon.com. However, that has not been the case because the shares of Amazon.com gained value. Some critics initially thought that the risks associated with potential government regulatory issues would affect the value of the firm but that never became the case. On the other hand, experts and analysts have taken an optimistic stance. They have largely dismissed antitrust threats for the largest online retailer in the world because Amazon.com does not have a large market concentration in any one product category. Additionally, Amazon.com is on record for helping keep prices low for shoppers. However, it is important to realize that Amazon.com’s expansion may significantly discourage future innovation from its competitors in the market. As such, the key legal question is whether the company has grown to the point of impeding innovations from competitors hence constituting an antitrust problem. The acquisition could be part of a wave of consolidation that could potentially lead to decreased wages and gross inequality in the workplace. The proposed acquisition raises important questions regarding competition policy, such as how the deal will affect the future of retail grocery stores, whether antitrust laws are working effectively to ensure economic opportunity, choice and low prices for all American families and whether platform dominance could impede innovation.
On their part, Amazon.com could defend themselves by telling a plausible story to regulators and courts by citing that it only seeks to buy a troubled firm in need of a boost and to support its entry into a space that it could not successfully venture on its own. It is important to note that Amazon.com has been trying to get a foothold in the grocery market for almost a decade. Its only success has been in England where it successfully partnered with the traditional grocer, Morrisons. Although many people think that Amazon.com’s case calls for some new conceptualized antitrust law, the existing law could effectively deal with the acquisition deal as long as particular established theories are taken seriously. The first argument is that the company will acquire Whole Foods mainly to kill off an online grocery rival in the future. This, therefore, impedes future innovation from potential competitors. The antitrust law protects both dynamic and static competition and, therefore, mergers are illegal where they will hinder technological or other developments that pose future competition. In fact, when considered seriously, Amazon.com is legendary for such maneuvers, as in its bare-knuckled acquisitions of Diapers.com and Zappos, as well as various other dozens of smaller acquisitions of otherwise threatening start-ups. It is worth noting that online grocery is currently still small. As such, the industry still expects it to grow as there are several would be entrants. However, this may not be the case because the futures of such would be entrants have been made bleak by Amazon.com’s impending actions.
The overall conduct of Amazon makes out a claim of illegal monopolization, even under the current antitrust law. The planned acquisition, as well as a series of various other prior acquisitions, have delivered a market position in which Amazon.com is such a powerful buyer that it can compel its suppliers to sell at sub-competitive prices. The enforcement agencies could even prove such a claim by showing that, indeed, Amazon.com has very large shares of sales in specific products and that such shares reflect the actual market power because the company has historically acquired unique economies of scope that not retail entrant could challenge. Furthermore, such shares were gotten through a series of acquisitions that constituted a monopoly in combination (Bauer & Kratzke, 2002). The company’s acquisitions are driven by monopolistic objectives aimed at gaining online dominance in the industry. Through the use of its Amazon Marketplace platform, Amazon.com was able to gather analytics on its Marketplace partners that it used to enter their markets. As such, it used its data advantage and crushing terms to overtake the space. This enables Amazon to entrench its dominant position in the market despite competition.
The company has built, expanded and acquired the infrastructure that their competition depends on. It exploits this power in the market to eliminate any neutrality in the competitive process. Its size, as well as its broad scope, enables it to selectively choose who uses its services, how and on what terms. This enables Amazon.com to tip the competitive balance in their favor. It can be concluded that dominant online platforms like Amazon are inherently monopolistic and they represent a case of antitrust problem in the industry. Amazon has aggressively pursued expansion at the expense of profit with the objective of gaining dominance in the market and finally enjoys monopolistic advantages. Such a monopolistic model comes at the expense of workers and small businesses (Lande, 2010). For instance, Amazon.com and its managers use unattainable productivity goals to maximize employee output and exploit their job insecurity. As such, the company has had to deal with several employee lawsuits partly due to its unwillingness to pay workers for time spent in mandatory security lines exiting the warehouse. It is clear that the company uses a predatory business model to exploit low-ranked employees in the company to cut on costs. Although the company prides of low prices in the market, employees and small workers suffer in the process.
The Ethical Dilemma
A significant ethical dilemma exists in the company’s acquisition deal. Amazon.com’s expansion activities have both advantages and disadvantages in layman’s terms. Although the company’s expansion through acquisition has significantly caused disruptions in the industry, it is very hard to say that Amazon is acting illegally. In fact, the company’s acquisition of Whole Foods is expected to lower prices in the stores (Lunsford, 2017). This can be seen as a relief to consumers who should be protected from stores that charge exorbitant prices. Furthermore, Amazon is hiring rapidly in the United States. For instance, the online behemoth has pledged to hire more than 100,000 more workers by 2018. The company has been holding job fairs all over the United States of America. In several cases, fired departmental store workers are ending up at Amazon fulfillment centers.
Despite the benefits associated with Amazon.com’s expansion, the growth has had negative ramifications on its workers and small business. The company’s increasing online dominance has the effect of discouraging future innovations from competitors. Additionally, the company has seen various small businesses close shop due to the intense competition it unleashes. In fact, a rash of chains has filed for bankruptcy in 2017 alone. Such chains include Payless Inc., Gymboree and HHGregg Inc and RadioShack. Amazon.com’s conduct is monopolistic, and it harms other players in the industry. However, the mainstream antitrust establishment has been silent about it conduct because it fits awkwardly with current ideas regarding what should be considered illegal (Crane, 2010). This has made it difficult to deal with such predatory businesses.
Ethical Framework
It is important to realize that ethics permeate everyday life. Therefore, ethics should concern all levels of life. As such, organizations should make responsible decisions that promote the common good in the society. The management at Amazon.com utilizes the Egoistic approach to ethics whereby they pursue their self-interest. They use a utilitarian calculation to produce the greatest amount of good for themselves. According to Amazon, might make right. The company believes that building, expanding and acquiring the infrastructure that their competition depends on, gives them the right to tread on its employees and small business. The company pursues expansion at the expense of profit to gain dominance hence might.
References
Bauer, J. P., & Kratzke, W. P. (2002). Federal antitrust law: a treatise on the antitrust laws of the United States.
Lande, R. H. (2010). New Options for State Indirect Purchaser Legislation: Protecting the Real Victims of Antitrust Violations.
Crane, D. A. (2010). Optimizing Private Antitrust Enforcement. Vand. L. Rev. , 63 , 673.
Sainato., M. (February 15, 2017). Amazon has some antitrust issues. CounterPunch https://www.counterpunch.org/2017/02/15/amazon-has-some-serious-anti-trust-some-issues /
Lunsford., M. (June 18, 2017). Will Amazon’s purchase of Whole Foods lower costs? Citizen Times https://www.cittizen-times.com/story/news/local/2017/06/16/amazons-purchase-whole-foods-lower-costs/402968001/
Soper., S. (July 14, 2017). Amazon antitrust concerns emerge in Washington and Wall Street. Bloomberg https://www.bloomberg.com/news/articles/2017-07-14/u-s-congressman-calls-for-hearings-on-amazon-s-whole-foods-bid
Turner., G. (August, 16, 2017). Trump says Amazon does great damage to retailers. Bloomberg https://www.bloomberg.com/news/articles/2017-08-16/trump-says-amazon-does-great-damage-to-retailers-shares-fall
