House lawmakers have advanced a bill that could potentially require Amazon [NASDAQ: AMZN] to divest its logistics business.
The Ending Platform Monopolies Act, co-sponsored by Reps. Pramila Jayapal, D-Wash., and Lance Gooden, R-Texas, was debated and passed by the House Judiciary Committee on Thursday by a vote of 21-20. The bill will next be considered by the full chamber.
The legislation “eliminates the ability of dominant platforms to leverage their control across multiple business lines to self-preference and disadvantage competitors in ways that undermine free and fair competition,” according to a summary.
Amazon Marketplace, where consumers go to shop online, and Fulfillment by Amazon (FBA), Amazon’s logistics service, are potential targets of the bill’s goal of breaking up vertically integrated business operations, a source familiar with the legislation told FreightWaves.
The bill was among five other antitrust bills introduced on June 11 and subsequently advanced by the committee aimed at reining in Big Tech market power.
“From Amazon and Facebook to Google and Apple, it is clear that these unregulated tech giants have become too big to care and too powerful to ever put people over profits,” Jayapal said in a statement. “By reasserting the power of Congress, our landmark bipartisan bills rein in anti-competitive behavior, prevent monopolistic practices, and restore fairness and competition while finally leveling the playing field and allowing innovation to thrive.”
The bills are the result of a 16-month congressional investigation that led to a report released by the Democratic staff of the judiciary committee’s antitrust subcommittee in October. A slate of recommendations from the 450-page report includes “structural separations to prohibit platforms from operating in lines of business that depend on or interoperate with the platform.”
The report asserts that there is a “strong link” between Amazon Marketplace and FBA, and that Amazon uses its dominance in each area in which the two divisions operate to strengthen its position in both.
“FBA combines warehousing, packing and shipping services, and most importantly, access to Prime customers,” according to the report. “For a seller’s products to get the Prime badge, which is essential to making sales on the [Marketplace] platform, a seller must either qualify for Amazon’s Seller Fulfilled Prime program or use Amazon’s FBA service.”
Jayapal explained as the bill was being debated that the legislation itself would not cause the breakup of Amazon, but would establish a starting point in the process.
“Based on our record (compiled during the investigation), you could say that Amazon’s e-commerce and logistics service, Fulfillment by Amazon, be separated from Amazon Marketplace,” Jayapal said. “But that’s a decision that the agencies [the Department of Justice, for example] would make independently based on the facts before them, which would then be subject to judicial review.”
More than 73% of all Amazon Marketplace sellers reportedly rely on FBA, the report states, which encompasses the company’s network of aircraft, heavy-duty trucks, trailers, intermodal containers and delivery vehicles. That market share has prompted the Online Merchants Guild (OMG), which represents e-commerce sellers, to compare FBA customers to railroad customers that are captive to a single rail line.
“Amazon has monopoly power over its merchants, who cannot hope to replicate Amazon’s railroad-like infrastructure, and there is no competitor on the horizon who can offer a competing railroad — not even the massive Wal-Mart which cannot compete with the over 100 million US households whose attention has been locked on Amazon via their Prime membership,” OMG Executive Director Paul Rafelson wrote in a letter to the committee prior to Wednesday’s hearing.
“Simply put, small businesses who want to access the national e-commerce market have no choice but to use Amazon’s railroad on Amazon’s terms, which often benefit Amazon, rather than consumers or the market generally.”
Asked to comment, Amazon did not specifically address the potential for a breakup of its logistics services if the bill were to be signed into law. However, Brian Huseman, Amazon’s vice president of public policy, said that taken collectively, the group of antitrust bills would have “significant negative effects” on Amazon’s third-party sellers and the “tens of millions of consumers” who buy products on Amazon.
“More than a half million American small- and medium-sized businesses make a living via Amazon’s marketplace, and without access to Amazon’s customers, it will be much harder for these third-party sellers to create awareness for their business and earn a comparable income,” Huseman said in a statement. “Removing the selection of these sellers from Amazon’s store would also create less price competition for products, and likely end up increasing prices for consumers.”
Rep. Zoe Lofgren, D-Calif., whose district includes San Jose and parts of Santa Clara County, said the bill in its current form goes too far. “This bill mandates the breakup of these companies – I think that’s an extreme remedy,” Lofgren said. “This bill would take a grenade, roll it into the tech economy, and blow it up and see what happens.”
The October 2020 staff report cited analysis by Morgan Stanley that concluded Amazon will overtake UPS and FedEx in package delivery market share by 2022, noting that Amazon has already surpassed the U.S. Postal Service “which downsized dramatically under its current leadership.”
Amazon announced on Wednesday that its seventh annual Prime Day — which took place over 48 hours on Monday and Tuesday — was the biggest two-day period ever for Amazon’s third-party sellers. “Prime members in 20 countries … purchased more than 250 million items worldwide and saved more than any Prime Day before.”
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