FTC Suit Against Amazon: Lina Khan's White Whale Of A Lawsuit Misses The Point

Yesterday, Sam Walton, founder of Walmart, must have been looking down from heaven and smiling as the FTC and 17 States Introduced a Suit in the Western District of Washington Against Amazon. I read through the lawsuit, and wanted to highlight a few things the lawsuit claims:

* Amazon Has a Durable Monopoly In Online Superstore and Online Marketplace Categories In the United States

* The Feedback Loops Between These Monopolies Amplify Amazon's Advantage

* Anti-Discounting Rules and Fulfillment By Amazon Reinforce These Monopolies

The FTC has to prove quite a bit for the lawsuit to matter. First, that these markets (superstore and marketplace) are the right ones. That there is a monopoly, that these specific tactics prop it up, and that there is market harm. It's always a far bridge to prove this kind of stuff.

Let's workshop three likely outcomes from this lawsuit if the claims are proven:

1 - Amazon gets fined if the FTC and the States can prove a specific amount of consumer harm.

(Most likely outcome, Amazon pays the fee and moves on - stronger)

2 - Amazon's retail, fulfillment, and marketplace arms break up.

(Too complex and difficult - who decides how? and now you have a weaker US tech ecosystem)

3 - Our "highly functional" Congress looks at the lawsuit, decides specific consumer protections should be in place regarding price-matching and discounting, and makes wise regulations.

(What planet are we on that we think this one is likely to happen?)

Here are a few things no one is talking about:

* All the consumer benefit that has come from Amazon. Someone has to say it.

* Walmart, perhaps the largest player in all retail in the world, literally runs the same playbook as a "second-mover". And it's working.

* Shein and Temu becoming billion-dollar companies in the same US market almost overnight, seemingly not needing to participate in Amazon's game.

* Millions of entrepreneurs starting on Shopify and other DTC platforms, not needing Amazon.

Finally, the lawsuit doesn't address another obvious key point that Marc Andreessen has pointed out from the beginning of the Internet that the scaled platforms obey a power law distribution. Meaning - the (very few) winners make all the money and have all the influence, and the losers get all the scraps. The reason is that once you get a first-mover advantage on the right formula, you attract consumers, you have better data, you can monetize better, which improves your reach, which attracts more consumers, and so it continues.

This power law has sprung up in almost every sector of the Internet platform market. As a result, the FTC's game of monopoly-whack-a-mole is not going to work.

The FTC should instead work with Congress on particular consumer protections. But that's assuming we have a functioning Congress, which of course, I can barely even write that sentence with a straight face.