The Federal Trade Commission has filed a lawsuit against Amazon alleging that the company has engaged in “anti-competitive” activities. But before we can evaluate the legitimacy of this claim, we must first be clear about what it means to be anti-competitive Unfortunately, anti-trust laws don’t provide us with that clarification. Instead, they are a mish-mash of laws that allow nearly any business activity to be declared anti-competitive.
If a company charges less than its competitors, it could be charged with “price dumping”—selling below the production cost in order to drive competitors out of business. If it sells products or services for the same price as competitors, it could be charged with “price fixing” or “collusion.” If it charges more than competitors, it could be charged with “price gouging.”
If we remove all of the legalese associated with anti-trust law, it comes down to one clear premise: If you compete too successfully, then you will be persecuted. The government will force you to change how your business operates. Competing too successfully, we are to believe, is anti-competitive. If you look at any anti-trust lawsuit, from Standard Oil to Microsoft, from IBM to Amazon, you will find that the persecuted company competed more successfully than its competitors.
A business succeeds by offering superior values than its competitors. This might mean lower prices, it might mean a broader selection of products, it might mean superior customer service, it might mean any number of things that can vary with each individual consumer. Consumers have many options when selecting a company with which to do business, and they choose the company that they think will best satisfy their needs and desires. A company grows by meeting the needs and desires of more and more people. Amazon has done this amazingly well. How is performing in a superior manner anti-competitive?
Some sports teams train better than others. Some have better athletes. Some have better coaches. Some prepare for each game better than their opponents. No rational person would call any of these actions anti-competitive. The essence of competition is to do better than competitors. Nobody denounced as anti-competitive the Boston Celtics, the UCLA teams under John Wooten, the New York Yankees, the Dallas Cowboys, the New England Patriots, or any other sports team that dominated its sport for a long period of time. The fact is, they competed much more successfully than their competitors. We should celebrate their success in rising to the top and staying there for many years. It’s not easy to rise to the top, and it’s even more difficult to stay there. As evidence, consider what eventually happened to each of the sports dynasties noted above. All became mediocre teams in time. The same occurs with a business that doesn’t continue to innovate and improve. Amazon might dominate today, but that position is not guaranteed in perpetuity.
The defenders of anti-trust equate economic power with political power. As Ayn Rand noted, economic power is the power to produce. Political power is the power to coerce. Amazon has gained economic power by producing superior values on a massive scale. The government now wants to use political power to dictate how Amazon operates and interacts with customers and vendors.
The website for the Federal Trade Commission (FTC) states that it is unlawful for a company to “maintain or acquire a dominant position by excluding competitors or preventing new entry.” Amazon can’t force anyone to do business with it. Not consumers, not vendors, not advertisers. Anyone who does business with Amazon does so voluntarily and they do so because they believe that it will be beneficial to them. Amazon can’t prevent anyone from competing with it. Indeed, there are countless retailers, both brick-and-mortar and online, competing with Amazon. Amazon can’t force anyone to act as it desires. The government can and does force individuals and businesses to act as it desires.
The FTC’s website goes on to note that monopolies per se are not illegal. A company violates the law when it “tries to maintain or acquire a monopoly through unreasonable methods.” To determine what is unreasonable, the FTC tells us that courts determine whether “the practice has a legitimate business justification.” Consequently, whether a company thinks that its practices have a legitimate business justification is irrelevant. The courts will decide this after the fact. The courts, not the marketplace, will determine what is legitimate and what isn’t. Judges, not consumers, vendors, and advertisers, will determine whether Amazon’s policies are unreasonable.
Every time we spend a dollar, we are casting a vote for the business we are patronizing. Amazon has garnered an unprecedented number of votes because it produces values on a unprecedented scale. Justice demands that we should celebrate Amazon rather than persecute it.