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AMAZON D.C. ANTITRUST LAWSUIT [EXPLAINED] - YouTube
Channel: Mirko Olmos | LawFinTech
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amazon is a tech giant everyone wishes
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had invested back in 1997
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when it went public or late 2001
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when the dot-com bubble busted and how
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not
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if you had invested 1 000 us dollars
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when it
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ipod you would now have more than 1.5
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million dollars it is impossible to deny
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the impact
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this behemoth of a company has had from
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its inception
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until today where it does not only deal
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with e-commerce but also include cloud
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computing
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streaming ai and even
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physical commerce per se thanks to its
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subsidiary whole foods market
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these few weeks it has been on the news
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as the attorney general of washington dc
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carl razim
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initiated an anti-trust or competition
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case
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against it while not the first
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anti-trust lawsuit fill against
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amazon in the world this lawsuit is
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indeed
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the first in the united states against
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amazon
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to the data of this video no other u.s
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states have joined
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dc hello friends it's mirko thank you
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for coming back
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in this video i'll explain the main
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issues concerning the recent
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antitrust case against amazon for this
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i'll fast give you some background
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then i'll explain some issues concerning
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the most
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favored nation clause or most favorite
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customer clause
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after this i'll explain the complaint
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failed
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by the dc attorney general against
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amazon
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and at the end i'll give some final
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remarks
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this is not the first time amazon has
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suffered regulatory scrutiny
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as far as 2013 the german and british
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competition authorities have initiated
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investigations against
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amazon for alleged breaches of domestic
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and european antitrust regulations
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during these investigations both
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authorities stated
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that amazon had breached antitrust or
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competition regulations
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due to having a price parity policy
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applicable to third party sellers who
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used amazon's platform
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according to them these clauses did not
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allow sellers to offer their products
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at a lower price on platforms that were
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not
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amazon in august 2013
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amazon told the authorities that it
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intended to abandon the use of the prize
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priority classes
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and finally both of these investigations
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were dropped between november
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and december 2013 after they confirmed
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that amazon hatch
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finally stopped using them eu-wide
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in 2019 the house judiciary subcommittee
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on antitrust
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held a hearing to inquire
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representatives from facebook
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amazon apple and google the
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investigation lasted for a year
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and resulted in a report with some
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recommendations
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in this report the subcommittee found
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that amazon hatch aggressively enforced
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price parity rules on amazon
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marketplaces
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third third-party sales in the us
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amazon's
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most favorite nation classes which we'll
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explain later
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were reused until 2019 when they were
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changed
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to fair pricing policies according to a
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letter submissions by online matching
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skill to the committee
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they found that they had the effects of
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blocking sellers from offering
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lower prices to consumers on other
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retail sides
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fast forward today the dc attorney
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general has declared
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that is suing amazon for the continuing
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of use of the most
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favorite nation closer mfn clause to
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thatch party sales that use its platform
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the mfn clauses congress also
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expressed deep concern about the mfn
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clauses
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and sure enough amazon sought to placate
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congress's concern
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but actually did a bait and switch they
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changed the name of the clause and put
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the same
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language in another part of its
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agreement
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and with respect it has stated that
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amazon did a patent switch
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and it just changed the name of the
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close without addressing its effects
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what is the real deal with the so-called
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platform most favorite nation closes let
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me explain to you what these clauses
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really are
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and what they really do as the name
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implies
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most favorite nation clauses are a term
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that comes from international
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trade law and international investment
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law in a nutshell
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by using these classes states seek to
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guarantee
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equal treatment in trade operations
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among them
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in the context of antitrust law most
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favorite
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nation clauses are also called most
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favorite customer clauses
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what they do is they allow customers to
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acquire products at the best
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possible price from a determined seller
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when compared
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to other salads in the market so for
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example
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we have mr apples mr apples sells apples
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to
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three chefs why chefs you ask well
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because i couldn't
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find another good image to go with this
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example
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so well we have chef a b
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and c mr apple sells its apples at one
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dollar per pound
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chef c wanting to ensure that it gets
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the best prices
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has entered into an agreement that
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includes an mfn clause with mr apples
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let's say that chef a comes to mr apples
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and tells him that
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it wants to buy gargantuan numbers of
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apples in bulk
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but i want mr apples to lower the price
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to 50 cents per pound
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if mr apples were to agree with chef a
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then
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chef c would also get to have the price
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at
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50 cents per pound due to the mfn clause
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these clauses do not breach antitrust
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laws per se
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but may be subject to scrutiny in the us
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they are assessed on a case-by-case
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basis
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what authorities consider is the scope
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and structure of the markets covered
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and the precise terms and reasons of the
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clause in a 2010 case that involved the
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blue cross blue shield of michigan
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and insurer the blue cross entered into
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an agreement that included
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an mfn clause with almost 70 hospitals
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in michigan the agreement obliged
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hospitals to charge other insurers no
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less and even sometimes more than what
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was
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charged to blue cross what this did was
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that hospitals
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had to increase prices to blue cross's
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competitors
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guaranteeing that they could not obtain
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hospital services
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for their subscribers as cheaply as blue
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cross
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and this is when mfn clauses will likely
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face some kind of
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issue with the authorities when they
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restrain trade
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create monopolies or create price
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discrimination
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against customers so what is going on
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what they're doing is they're making
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third-party sellers
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price the goods throughout the internet
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on amazon
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and on other sites at an artificially
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high
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price that includes amazon's commission
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according to the dc attorney general
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the effect that amazon's clauses have is
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that they oblige
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third-party sellers that is any
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non-amazon seller using
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amazon to sell products to sell at high
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prices due to the prohibition of selling
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at slower prices in other platforms than
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the prices put in amazon
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exactly how the market leader uses its
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dominance
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to force the third party seller to
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either access
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its marketplace and other marketplaces
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under amazon's term
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or not play on the amazon marketplace
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and we think that is
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an incorrect use of monopoly power
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as once reported by bloomberg in 2019
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amazon allegedly scanned competitors
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prices to find whether they are lower
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if they merchant offered a lower price
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on other platforms
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amazon did not oblige them to lower the
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price but rather apparently made
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constant reminder to merchants to lower
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them as sellers
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mainly used amazon to sell the products
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it was presumably more likely for them
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to
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increase their prices on other platforms
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dc's attorney general complaint is an
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interesting document
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if you want to read it yourself you can
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access it in the link in the description
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below
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to cut the long story short the dc
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attorney general explains
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that a amazon is a dominant player in
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the u.s
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online retail sales market b it
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disadvantages
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thatch party sellers and consumers on
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its online platform
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c amazon's business services agreement
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suppresses
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price competition and in practice what
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the fair pricing policy does
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is to mirror platform most favorite
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nation classes
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thus allegedly penalizing sales for
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offering products for better
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prices in other platforms d amazon's
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inflated selling fees raise
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prices for consumers across the online
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retail sales
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market how so well when a third party
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seller
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registers on amazon it has the option to
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request an additional service from
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amazon
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the fulfillment by amazon if it opts in
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then amazon will handle most of the
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process of the purchase and sale of
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products what the dc attorney general
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argues is
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allegedly this fulfillment by amazon
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service and other
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additional amazon services are
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indirectly mandatory for tps
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because it is the primary way for
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products from third-party sellers to
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become
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prime eligible and to be eligible to
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amazon's buy box which is
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this one both of which are a necessity
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to grow in the platform and actually
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sell
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products then e it is finally argued
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that amazon supposedly abuses its market
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power in the u.s
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online retail sales market by having a
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dominant
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market share that is protected by
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barriers to entry which means
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it is significantly hard for a new
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amazon to enter the online commerce
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market
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and it allows amazon to control pricing
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and its conduct
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and policies only reinforce its dominant
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market share
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all of this according to dc attorney
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general
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hum customers tp's and competition by
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increasing prices and having less
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choice considering this amazon was
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charged with four
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counts horizontal agreement in restraint
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of trade
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vaccinal agreement in restraints of
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trade legal maintenance of monopoly
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and attempted monopolization
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well as you can see amazon may be up for
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a tough one how much of a travel one we
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cannot yet say
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for once to date only dc has brought
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charges against amazon
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and in the near to mid future more
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states could join it
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also just to be clear this is not
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legal or financial advice i am not a
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used lawyer
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and i am not starting to be one i am not
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an expert
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and i am not in favor against any of the
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involved parties for the lawsuit was
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announced on may 25
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the price of amazon stock only dropped
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one percent
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antitrust cases are complex and many
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interests
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are at stake the really big ones such as
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this case usually take up to a few years
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for example
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google is also facing an antitrust case
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and
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the potential date for its trial was set
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on 2023
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that's two years from now we do not know
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when amazon's trial will be
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but we can expect something similar and
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many things can happen between now
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discovery and trial
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and could this lawsuit impact amazon's
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underlying value well surely but the
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question is
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to what extent and i'm really sure about
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that i'm not an expert
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i'm not a legal or financial advisor but
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if you ask me
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i'm not 100 sure whether a change in
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price
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parity clauses will break over amazon's
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business
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as we saw at the beginning of this video
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amazon has a lot
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going on for now all we can do is wait
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and see if you saw until here
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thank you very much if you want to dig
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in deeper please feel free to check out
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my sources
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in the links in the description below
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and as always
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do your own research and only invest
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what you're willing to lose thank you
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and see you on the next one
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