Italy vs Amazon
The Italian antitrust body has fined Amazon for $ 1.3 billion, a very substantial amount considering that the company’s net income in 2020 was $21.3 billion. I’ve written on the matter for Project Syndacate.
The Italian antitrust authority:
…fined Amazon as a marketplace, on the grounds that it requires sellers who want to benefit from its Prime service also to enroll in its own logistics service, Fulfillment by Amazon (FBA). Because Prime subscribers receive free shipping and rapid delivery of packages for select goods, many merchants will pay Amazon to ensure that their products fall into this category (which includes being showcased in promotions like Black Friday, Cyber Monday, and Prime Day). It is not surprising that Amazon would tether these two services together. To keep its promise to Prime subscribers, it must ensure timely deliveries, and the best way to do that is to have direct control of the logistics.
This approach is hardly unique to the digital economy or Big Tech. Amazon is dealing with a basic issue of commercial distribution. A company can promise you express delivery only insofar as it thinks it can keep that promise. Otherwise, its business model would be at the mercy of variables beyond its control, such as the reliability of vendors or the efficiency of the postal service.
…A marketplace’s success depends on its reputation, and Amazon has staked its platform’s reputation on reliability. A record of reliability takes a long time to build, and it inevitably sets the bar higher for new market entrants. By declaring the relationship between Amazon’s Prime service and its logistics infrastructure to be an abuse, the Italian trustbusters are implying that the two can be unbundled. On the theory that Amazon is killing competition from independent (though presumably less reliable) couriers, it has ordered the company to allow merchants into Prime without requiring them to enroll in FBA.
What surprised me the most, reading the ruling (which is a pretty interesting detailed description of how marketplaces work), was the absence of any worry in terms of consumer welfare. Antitrust scholars have been busy in burying the approach to such matter influenced by the Chicago school for years now, so that should not be surprising. But the fact that even lip service is not paid to those kind of worries is, I think, telling. Those who are interested in restoring a more balanced approach to competition policy have loads of work to do, like our forerunners in the 1960s and 70s.