Bloomberg reports that the Federal Trade Commission (FTC) plans a suit against Amazon to force the divestiture of the company’s logistics service. The suit, if correctly described, would try and do through litigation what could not be achieved through legislation, when Congress did not enact the American Innovation and Choice Online Act (AICOA).
A successful divestiture would destroy Amazon Prime and thereby destroy hundreds of billions of dollars (just a guestimate) in consumer surplus (see the numbers on Facebook for a point of comparison). What’s more, an efficiency-destroying logistics divestiture would dissuade other entrepreneurial firms from pursuing innovations—with incalculable social costs.
Under current Section 2 case law, the FTC would fail to win an Amazon divestiture case based on logistics-division divestiture (see the principles well-enunciated here) and the FTC could not win on a standalone Section 5 count. But even assuming that Amazon won this legal battle, the litigation costs and in terrorem effects of dissuading third-party innovation would be substantial—so producer’s surplus would also be sacrificed.
There’s another problem: Chair Lina Khan’s anti-Amazon articles and public statements raise substantial ethics issues. Even if recusal were not legally required, reviewing judges undoubtedly would view askance Khan’s participation in an Amazon suit.
Congress will not be oblivious to the fact that Amazon services in general—and Amazon Prime, in particular—are extremely popular with the general public. The future of the FTC’s competition mission (see Sen. Mike Lee’s (R-Utah) bill to strip FTC of its antitrust jurisdiction) could be put in jeopardy.
Will Congress be willing to give the FTC additional resources for its antitrust mission in light of an Amazon divestiture suit and cost-raising new pre-merger rules? I have some doubts.