Too Low or Too High? A Transatlantic “Morton’s Fork” for Amazon in Antitrust

According to Encyclopedia Britannica, the sixty-sixth Archbishop of Canterbury, John Morton, defended a tax increase for the crown by arguing that the wealthy could afford to pay, while the poor must be frugally hiding wealth. This sort of argument came to be known as a “Morton’s Fork,” which arises when an argument is structured so that, whichever way the facts point between two contrary states of affairs, the same undesirable conclusion follows. This logic aptly describes the ongoing transatlantic antitrust assault against Amazon: The Federal Trade Commission (FTC) in the United States and national enforcers in Europe—especially the German Bundeskartellamt (FCO) and the Italian Competition Authority (AGCM)—have sued Amazon for essentially the same behavior but for opposing reasons. In sum, European enforcers contend that prices are too low; U.S. enforcers allege Amazon’s prices are too high. Opposite premises, same false prosecution.

Amidst all the actions against America’s leading technology firms being pursued by the European Commission under the Digital Markets Act (DMA)—not to mention new lawsuits against Google and Meta under longstanding EU competition law—it is easy to overlook that last month the FCO sought disgorgement of $70 million from Amazon for violating its own new “mini-DMA,” as well as EU competition law, through pricing practices that it claimed harmed competition with third-party sellers. And, in January, the AGCM confirmed that Amazon will pay a nearly $900 million fine, the largest it has ever imposed, for allegedly leveraging its e-commerce platform to benefit its logistics business by conditioning third-party sellers’ access to Prime and other benefits on using Amazon’s own Fulfillment by Amazon (FBA) delivery service.

If these claims sound familiar to American antitrust ears, they should: Both form the basis of, as ITIF has discussed, the FTC’s own complaint against Amazon, which effectively transposed the German and Italian claims that were underway before it filed its lawsuit. But there is a twist. First, consider the treatment of Amazon’s various pricing policies by the FCO and the FTC. Specifically, while the FTC targets Amazon’s practice of only featuring a seller’s lowest price in its Buy Box as supposedly facilitating seller price coordination and having the second-order effect of foreclosing rival marketplaces, the FCO is focused on Amazon excluding rival sellers by, in the words of its President Andreas Mundt, “interference in their pricing,” which “may result in them no longer being able to cover their own costs, forcing them out of the Marketplace.”

These divergent concerns about the same basic Amazon pricing policy of seeking to offer the lowest prices on its platform—for the FTC, seller coordination; for the FCO, seller exclusion—evince the conflicting nature of both theories of harm. That is, whereas the FTC is concerned that Amazon’s so-called “anti-discounting” practices create a price floor that facilitates coordination among sellers, the FCO worries that Amazon’s pricing policies create a price ceiling that harms rival sellers by reducing their revenues. For this reason, although the FTC’s case has at least the pretense of being concerned about harm to consumers through higher prices, for the FCO low prices in the form of “price caps” on sellers are precisely the problem.

The FTC and the FCO’s theories about Amazon’s pricing practices cannot both be true: Either Amazon harms retail competition by raising prices, as the FTC contends, or by lowering them, as the FCO suggests. But who is correct? Alas, neither is.

As ITIF has explained, contrary to the FTC, Amazon’s use of the traditional retail stratagem of ensuring that it offers the lowest prices doesn’t raise prices for consumers; rather, it lowers them. Moreover, contrary to the FCO, supporting lower prices on Amazon shouldn’t be deemed an anticompetitive practice but rather a quintessential form of competition on the merits, precisely because Amazon operates not just as a retailer but as a marketplace that wants to win users by offering them the lowest prices. Indeed, if Amazon were really trying to exclude rival sellers, the last thing it would do would be to prevent them from charging higher prices that would incentivize consumers to (you guessed it) buy more from Amazon retail!

The situation differs little with respect to the second allegation against Amazon, under which the FTC and the AGCM challenge the company for purportedly leveraging dominance in e-commerce to benefit its FBA logistics business. Yet the theories again diverge. The FTC claims that Amazon’s practice of conditioning Prime eligibility on the use of FBA maintains its supposed e-commerce monopoly. The AGCM, by contrast, focuses its theory of harm in the logistics market, arguing that rival delivery firms lose business when sellers use FBA to obtain Prime eligibility and related advantages. In other words, while the FTC is fixated on the exclusion of rival e-commerce platforms, the AGCM zeros in on the exclusion of rival logistics providers.

Both accounts fail, albeit for different reasons. Like the FCO, the AGCM suggests that Prime and other consumer benefits are problematic because they give Amazon a competitive advantage over logistics rivals, even if there is no basis for thinking Amazon will achieve dominance in this market and harm consumers. The FTC, by contrast, claims that Amazon’s conditioning of Prime eligibility on the use of FBA somehow maintains its supposed monopoly power in e-commerce because rival logistics providers lose scale, which in turn means there is less demand for complementary rival e-commerce platforms. But this is an attenuated and spurious argument, given that FBA is not restricted to Amazon’s platform; indeed, Amazon has every incentive to want to have more deliveries with FBA for sales on other retail platforms.

At bottom, whereas the FCO and AGCM are going after Amazon for practices effectively because prices were too good for competitors to compete, the FTC spins a story about how Amazon was increasing prices online—a difference that is consistent with the historic discrepancy between the European ordoliberal approach of ensuring that markets have a sufficient number of competitors and the U.S. consumer welfare antitrust model. But, rather than issuing unprecedented relief in the form of disgorgement (FCO), record fines (AGCM), or wasting taxpayers’ money (FTC), competition authorities in Germany, Italy, and the United States would do better to let competition and consumers benefit from the tremendous value Amazon offers.