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Will Amazon Be Broken Up?

· Amazon,American Retail,Antitrust,Consumer

Will Amazon Be Broken Up?

Amazon's market control promoted the Federal Trade Commission to launch an antitrust probe against Amazon and other major technology companies. Politicians and lawyers believe that Amazon violates the Sherman Antitrust Act and the Clayton Antitrust Act by undermining market competition and threatening consumer welfare.

Amazon's digital market place allows consumers to search for the cheapest products easily; thus pressuring brick-and-mortar retail stores to lower prices, and in turn, promoting consumer welfare and overall market output. With this said, an article published in the Yale Law Review illustrates that the Sherman and Clayton Antitrust Acts exclusively measures anticompetitive practices through prices and production, which does not account for the abstract nature of current technologies companies. The article also addresses that Amazon's size allows them to engage in predatory pricing that could financially cripple under-resourced, or small retail stores. These concerns, coupled with the company's trillion-dollar valuation, encourages public sentiment to support antitrust legislation.

Amazon's five primary business divisions are, AWS, Alexa, Whole Foods Market, and Amazon Prime. The company's strategy to integrate different businesses creates complex, intangible advantages over companies that might specialize in a distinct sector of the market. The "Amazon Effect" is a phenomenon that represents the stock depreciation that businesses experience when Amazon decides to acquire a business in a specific market. This phenomenon indicates that investors believe Amazon's size is intrinsically monopolistic.

Similar to Amazon's online retail segment, Amazon Prime's music, and movie services and Alexa pressures other entertainment providers such as Apple, Netflix, and Google to lower prices and increase product and service quality, which promotes better customer experiences. Amazon's recent merger with Whole Foods prompted similar developments in the retail grocery industry by incentivizing companies like Walmart and Target to expand into the e-grocery space. The competition that Jeff Bezos' innovation has inspired helps not only consumers but also generates business for niche businesses that specialize in software and services for e-commerce platforms and supply chain efficiency.

With this said, if antitrust legislation forces Amazon to split, it is reasonable to predict that Bezos would split-off Amazon's AWS segment. Amazon Web Services provides database storage, computing power, and other web applications services. As an independent company, AWS would be able to focus exclusively on developing its software and service, which could increase gross margins and profitability. In short, expert's arguments diverge regarding antitrust action against Amazon, however, separating AWS from Amazon's parent company would not only deter antitrust investigations but also aid the development of AWS.

Written by James Mueller, Edited by Alexander Versfeld & Alexander Fleiss

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