The stakes are high in the Federal Trade Commission’s lawsuit against Amazon for anticompetitive practices.
Lina Khan, the FTC commissioner, has had a couple of big swings and misses in her two-and-a-half year tenure–to the delight of some hedge funds. She failed to stop the merger of Microsoft and video games maker Activision, as well as drug maker Amgen’s takeover of Horizon. Losing another high-profile case wouldn’t be good for either Khan or the FTC’s reputation.
She should be on more familiar ground this time. Back in 2017, well before she became a government official, she wrote an academic paper about Amazon that propelled her to prominence.
It’s not clear how much of the current lawsuit is based on the paper, though. Back then, she was trying to reframe antitrust law in general, arguing that just because Amazon offers low prices, that doesn’t mean it isn’t undermining competition.
The FTC is now arguing that Amazon’s dominant market position allows it to prevent competitors from lowering prices, overcharge sellers, and reduce the quality of the things shoppers buy. At first glance, Amazon’s lack of online competitors makes it ripe for a challenge, even if Target and Walmart are doing their best to keep up.
Amazon has probably seen this suit coming since Khan was made head of the FTC, so it’s fair to assume it’s well prepared. The company said in a statement Tuesday that the practices Khan is criticizing ultimately benefit consumers.
The case will likely take years to go through the courts. The shares fell 4% on Tuesday but they’re still 50% higher since Jan. 1.
And even if the FTC eventually wins this case, it’s not obvious what comes next. If it means a breakup, there’s a debate to be had as to whether shareholders would be better off. Otherwise, Amazon might just be able to pay a fine and move on.
—Brian Swint
*** Join MarketWatch real estate reporter Aarthi Swaminathan and Skylar Olsen, chief economist at Zillow, today at noon to find out when the high price of homes and 7% mortgage rates will start to fall, and where they will fall. Sign up here.
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FTC Accuses Amazon of Being a ‘Monopolist’
The Federal Trade Commission and 17 states filed a long-anticipated lawsuit against
Amazon.com,
accusing the online retailer of being a “monopolist” that strategically uses its dominant online marketplace to keep prices high, degrade quality for shoppers, overcharge sellers, and stifle competition.
- FTC Chair Lina Khan said Amazon exploits its monopoly power to enrich itself while raising prices and lowering service for its customers and merchants. Between paying for its logistics program, advertising and other services, “Amazon now takes one of every $2 that a seller makes.”
- David Zapolsky, Amazon’s general counsel, said the practices the FTC is challenging have encouraged competition and innovation in the retail industry, and have given shoppers greater selection, faster shipping, and lower prices. He said Amazon looks forward to making its case in court.
- The FTC’s lawsuit doesn’t seek specific fixes, but uses the term “structural relief” needed to restore fair competition, which can mean the divestiture or breakup of a business. Khan gained fame in the antitrust world after penning a law review article about Amazon in 2017, while at Yale Law School.
-
The government is aiming at other companies over competition issues. The Justice Department already has begun its antitrust case against
Alphabet’s
Google, saying the search giant arranged with
Apple
and others to dominate online search. FTC also sued
Meta Platforms
over its dominance in social media.
What’s Next: Khan wouldn’t say whether the agency would be seeking a breakup of Amazon, telling Bloomberg after the lawsuit was made public on Tuesday that at the very least, the retailer should have to halt those tactics. Amazon said the FTC is “wrong on the facts and the law.”
—Janet H. Cho and Angela Palumbo
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The Hollywood Writers Strike Ends Happily Ever After
The Hollywood writers strike came to a close early Wednesday morning, after the Writers Guild of America agreed to a deal with representatives from the movie-and-TV industry.
- The WGA confirmed the end of the strike and published details of the deal that it reached with the Alliance of Motion Picture and Television Producers late Tuesday. The AMPTP was representing companies including Netflix, Disney, Amazon.com, Paramount Global and Warner Bros. Discovery.
- The deal includes increases to minimum pay rates, a new residual for streaming services based on viewership, and regulations on the use of artificial intelligence.
- The end of the strike allows writers to return to work during the ratification process but doesn’t affect the WGA membership’s right to make a final decision on approving the deal, the union said.
What’s Next: The deal should unblock a number of movies and TV series which were forced to halt or delay production during the strike, which began on May 2. However, the deal also means a potential financial hit to the companies. The WGA estimated the value of the three-year deal at $233 million annually, and the Screen Actors Guild remains on strike, meaning continued disruption for now.
—Adam Clark
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FCC Seeks to Return Net Neutrality to Broadband Services
New rules for broadband access could be coming after Federal Communications Commission Chair Jessica Rosenworcel said she wanted to bring back net neutrality, which defines broadband access as an essential service akin to electric power and water. She said internet access needs to be open, accessible, and affordable.
- Rosenworcel unveiled her plan at the National Press Club in Washington. She wants to bring back a 2015 policy that was gutted in 2017 under the Trump administration. Democrats took majority control of the FCC on Monday for the first time since President Joe Biden took office.
- With net neutrality, internet providers have to treat web traffic the same, meaning they can’t manipulate traffic such as forcing a streaming provider to pay for faster access to end-customers, or block or slow that internet traffic.
-
Providers such as
AT&T,Comcast,
and
Verizon Communications
are likely to push back. Industry group USTelecom said Tuesday broadband providers are committed to an open internet and the proposed rules could derail the industry’s efforts to achieve universal connectivity. - The Bipartisan Infrastructure Law included $65 billion to expand affordable high-speed internet access to communities across the country, including programs that will build that infrastructure.
What’s Next: The FCC’s proposal also seeks to prevent internet service providers from speeding service to favored websites. The agency plans a vote on Oct. 19 whether to advance the draft rules and solicit public comment.
—Liz Moyer
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New-Home Sales Fell in August as Affordability Issues Remain
Sales of newly built homes slumped more than expected in August from the prior month to the lowest rate since March, reinforcing earlier data that showed housing starts fell in August as home builders came up against affordability issues for buyers worried about rising mortgage rates.
- New home sales fell 8.7% from July’s revised rate to 675,000, the Census Bureau and Housing and Urban Development department said, though sales did rise 5.8% from August 2022. Home builders earlier this year were benefiting from a low supply of existing homes available for purchase.
- The 30-year fixed mortgage rate climbed above 7% for the first time since late 2022, and hit 7.19% last Thursday, Freddie Mac said. Existing homes in August were sold at the slowest seasonally adjusted annual rate since January, but the median home price rose 3.9%, to $407,100.
- Home prices surpassed year-ago levels for the first time since February, and more recent data show the trend continued in August. Housing costs in 20 of the nation’s large metropolitan areas increased 0.1% in July from the prior year.
- Repurposed barns are in demand as guesthouses, party rooms, or extra living spaces, Mansion Global reported. About 4,090 active listings featured such “barndominiums,” up 26% from last year, according to Realtor.com. Television channel HGTV hosts Chip and Joanna Gaines highlighted the trend.
What’s Next: September home sales could weaken because of rising rates. Already, pending home sales measured by Redfin for the four weeks through Sept. 17 were down 13% from a year ago. The rising yield on the 10-year Treasury suggests mortgage rates will continue to climb.
—Shaina Mishkin and Janet H. Cho
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Air Travel Could Take a Hit If Federal Government Shuts Down
Add air travel to the long list of activities that could be disrupted by a possible federal government shutdown, including longer security screening lines at airports, possible flight delays, and even possible interruptions to airport construction projects. It’s another headache for airlines as ticket prices continue to fall.
- The U.S. Travel Association estimates that a shutdown would cost the U.S. travel economy $140 million a day, including flight delays, longer screening times, and passport processing delays. That’s more than the estimated $100 million daily impact during the 2018-2019 shutdown.
- The White House warned that air-traffic controllers and Transportation Security Administration officers would have to keep working without pay, which could lead to “significant delays and longer wait times” for travelers at airports nationwide, as happened during previous shutdowns.
- During the last shutdown, which lasted 34 days and ended on Jan. 25, 2019, the TSA’s unscheduled absence rate reached 10% on the final Sunday—up from 3.1% on the same day the previous year. Miami International had to close terminals, and New York’s LaGuardia Airport grounded planes.
- Transportation Secretary Pete Buttigieg said a shutdown would halt critical training for 2,600 air-traffic controllers amid a shortage, and that a shutdown lasting a few weeks “could set us back by months or more because of how complex that training is.”
What’s Next: A proposed Senate bill to extend government funding into November includes a measure to extend the Federal Aviation Administration’s authorities through the end of 2023, rather than allowing them to expire on Saturday. It needs to be approved by the House before midnight Saturday to be adopted.
—Janet H. Cho and Callum Keown
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Dear Quentin,
When preparing to sell our family home, I found an old will, or what appears to be a will, that my father wrote about three years before he died. He cut my brother out of the will due to reasons I won’t go into here, but he had substance-abuse issues, among other problems. My father wanted me to have his two cars, plus a cabin upstate — a former family farm — that’s valued at around $135,000. However, our father’s estate was split three ways between me, my sister and my brother.
When I told my sister and brother about the will I found, they did not seem surprised. In fact, I could see it written across their faces that they either knew of this will or even had a copy in their possession. They met my questions with silence. I could have done with that money to help pay off my mortgage and pay medical bills. It feels like a nightmare. I thought I could trust my family, but realize I can trust no one. This has not only changed my financial future, but it has altered my view of the world.
My mother passed away in 2008 and my father passed away six years ago. Is this will valid? What can I do?
—Sick to My Stomach
Read the Moneyist’s response here.
—Quentin Fottrell
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—Newsletter edited by Liz Moyer, Rupert Steiner, Callum Keown
Read the full article here
