The FTC was up first but before they began their presentation, Judge Chun pointed out the last sentence in AMZ’s brief.
Judge Chun: I underscore "to the detriment of consumers." What harm to consumers is the FTC seeking to prove? Lower quality, higher prices?
x.com/vidushi_law/status/1897719259956232556
FTC: we are challenging the course of conduct prohibiting rivals from competing, which indirectly raises pricers for sellers and shoppers
Judge Chun: aren’t you going to hypothesize what would happen absent the conduct you’re challenging, and whether rivals would have gotten scale?
FTC: we posit that price and selection were impacted. But we can't quantify what would have occurred or create a but-for world that would have developed.
Judge Chun: who are AMZ’s competition in online superstore mkt?
FTC: there can be smaller markets, we have "few cuts" of markets under consideration. But don't have definitive answer” on who is in mkt
Judge Chun: is there case law that recognizes your proposed mkts?
FTC: can’t think of any, but market analysts report market shares in this industry
Judge Chun: is the term “online superstore” and your other market
generated by the FTC or is it found in economic literature?
FTC: not certain, we didn’t cite to any documents where that term was drawn from
On market definition, the FTC distinguished between defining competition and recognizing competition.
Defining comp is the process in which firms: try to win biz from other firms, drive firms to lower price and increase quality, and otherwise offer a better deal to customers to win biz
Recognizing comp looks at the degree of comp driven by availability of substitutes and how close those substitutes are. If there are lots of good alternatives, sign of strong competition. If few/no good alternatives, a sign of weak competition.
Law on mkt def says products can compete in multiple valid markets, there is no specific methodology required, and no precise bounds/metes.
Economic principles look at reasonable substitutes, demand substitutes, assess whether comp within candidate market matters to market outcomes and barriers to entry
On monopoly power, Judge Chun asked how many 3P sellers are in anti-discounting agreements with AMZ
FTC: until 2019, all sellers were in price parity agreements with AMZ. But after 2019, AMZ applies algorithm to filter out sellers from the buy box
Judge Chun: how do you define reasonable substitutes for AMZ? Do you look at general shoppers or someone who is looking for a pair of shoes?
FTC: relevant analogy is one-stop shop, we are looking at competition to be the go-to store for shoppers
One big yikes moment for the FTC: Judge Chen asked if the harmed “consumer” is actually the seller, as opposed to the shopper.
The FTC replied yes. Judge Chun then called out a consumer case (Hogan v. Amazon), that he also oversees and where arguments took place yesterday.
“Keep an eye on that.”
Why? Well that case mirrors some of the FTC’s case and is going pretty poorly.
How poorly? Well here’s an idea:
This is good chance to plug my Medium article on how these consumer copy-cat case, including the one Judge Chun called out, may actually turn out to be nails in the coffin for the FTC’s case (though I use a stinky cheese analogy ;)).
medium.com/chamber-of-progress/legal-holes-have-opened-up-in-the-ftcs-antitrust-case-against-amazon-f25aecef7e67
Judge Chun also referred to the Hovenkamp quote in AMZ’s brief that customer shopping habits don’t limit them to one retailer or even type of retailer- you can buy kitchen appliances at AMZ, Target.com, a brick and mortar store.
FTC replied that there is a distinction between store level and product-by-product competition.
On anti-discounting tactics, the FTC stated that AMZ trains other retailers to not discount, creating price mirroring. They also alleged that AMZ uses game theory which could be shown by economic analysis of strategic interactions.
On fulfillment coercion, AMZ reduces other stores’ access to sellers due to increased multi-homing cuts and a reduced store neutral ecosystem. Judge Chun asked if the FTC could point to a good analogy in other cases.
The FTC cited restricting access as relevant, saying, "Cutting off access or weakening supply…that’s what I think was happening here.”
Pan over to AMZ's attorneys looked baffled, as AMZ neither stops sellers from selling elsewhere nor requires exclusivity.
Judge Chun: Big picture, millions of shoppers are happy with AMZ. They like the convenient service & they’re happy with prices. Are you saying they are the proverbial frogs in water that is getting warmer but they can’t tell?
FTC: Yes, b/c they don’t know what they’re missing.
Vidushi Dyall
@vidushi_law_1
@progresschamber Breaking down key developments in important tech cases you should be following. Tech policy, cybersecurity, competition. Fordham Law alum.