- The FTC sued Amazon this week alleging antitrust violations.
- The DOJ is trying to prove Google is a monopolist, and Apple has been sued on antitrust grounds.
Earlier this week, the FTC filed a 172 page antitrust complaint against Amazon. The response was a giant shrug.
"*yawn*," Bernstein Research sales specialist Mark Schlisky wrote in a note to investors the morning after. "You know how many inbounds I fielded yesterday on this particular issue? Zero."
His advice: Invest in companies that are accused of being monopolies.
US antitrust law is mostly about consumer prices. Have prices for regular people gone up due to a company's market dominance?
FTC struggles to show this in its suit against Amazon. The complaint even details how the company had an algorithm to monitor lower prices elsewhere online and punished sellers who didn't also offer the same low prices on Amazon.
This gets to the core of the problem with Big Tech in the US. They have evolved to skirt US antitrust laws, all the while becoming incredibly dominant in their markets. There's very little that Lina Kahn or anyone else can do about it.
Insider has asked Apple, Google and Amazon for comment on various antitrust allegations in the past. They all say they don't break antitrust laws.
Congress could pass a new law, but they can't even seem to run the government right now, and Big Tech companies spend millions of dollars every year on lobbying to avoid this fate.
Google's search dominance
Google has 89% of the search engine market in the US, according to Statcounter data. Wow, that's dominant. Easy to prove. But consumers don't pay for Google Search. It's free. So winning a US antitrust case is very hard.
The real customers of Google are businesses who pay for search ads. Those entities have been paying more and more over the years. This is easy to see by looking at Google's sales growth. It pulled in $43 billion "Search and other" revenue in the second quarter, up from $24 billion four years ago. Its profit margins are fat and haven't moved much over the years. Usually, over time, big profits are competed away by new rivals entering the same market. That hasn't happened to Google.
Searching for a ski pass
Instead, the situation today is this. On Tuesday evening, I searched for "Epic Pass" on Google to find Vail Resort's season pass for skiing later this year. The first result was an ad from Ikon, Epic's main competitor. I didn't want to see that. I told Google specifically that I wanted Epic, not Ikon, and yet Google gladly encouraged Ikon to bid on that search term so it could steal traffic from Epic. The only way to counter this is for Epic to spend more than Ikon on an ad for that query.
Vail Resorts, the owner of the Epic Pass, has very little choice because, again, Google controls so much of the online search market. So, sure enough, Epic paid and shows up second in the results with its own ad.
When more ads show up on the top of results, organic results get pushed down further, which forces businesses to spend even more on ads. In US antitrust terms, this is legal because I am the customer in theory and I'm paying nothing. So the DOJ's antitrust case against Google, which went to court recently, is also going to be tough.
The Amazon situation is similar. The company's most profitable e-commerce customers are not shoppers like you and me. It's small businesses trying to sell stuff online. Amazon prods, punishes, and extracts huge fees from these businesses.
Marketpulse estimated earlier this year that Amazon sellers pay more than 50% of their revenue to Amazon in fees now. The response to that should be to go elsewhere to sell online. But again, Amazon is so dominant in this market that merchants have no choice but to list on Amazon's marketplace and pay all these fees. Amazon's share of the value of goods sold by online superstores is well above 60% and rising, according to the FTC's complaint.
The FTC focuses a lot on seller fees. But the evidence showing how this might flow through to consumer prices is relatively thin.
Searching Amazon for ski gloves
One of the biggest new fees that Amazon charges is advertising, and it uses the same technique that Google does to push sellers into buying ads.
Yesterday evening, I continued my ski quest and searched for "Burton ski gloves" on Amazon.com. The first result was an ad from Savior Heat, a type of heated ski glove. The second was an ad for Spornit gloves. Again, I told Amazon exactly what I wanted: Burton gloves. It ignored me and allowed these random other ski glove sellers to pay to show up first.
Even Apple does this in its App Store. I searched there last night for "Epic Ski Pass" and the first result was an ad from Backtrack, some sort of ski-related app that I really really do not care about.
Apple's App Store business is hugely profitable. It controls about two-thirds of the spending on apps, according to Sensor Tower data. So, app developers have no choice but to pay various fees and levies for the right to reach customers through Apple's platform.
The fee that really hurts is the payment processing one, where Apple takes 30% of many app payments. You can see this when a popular app costs 30% more on Apple versus the web. This is, finally, a real example of Big Tech dominance causing consumer prices to rise.
But, when Epic Games took Apple to court over this, it lost. If Apple won that case, then Google and Amazon are probably going to prevail, too.
The losers will be the businesses that have to keep paying ever-rising tolls to these digital gatekeepers to reach customers online.