Speaker 1: Amazon's blockbuster thirteen point seven billion dollar deal to buy
Speaker 1: Whole Foods is a step toward dominating every part of
Speaker 1: the consumers shopping experience. It's by far the largest acquisition
Speaker 1: in the company's history, and some say it may cause
Speaker 1: a seismic shift in the seven hundred billion dollar grocery
Speaker 1: store business. Amazon already competes in a broad range of retail,
Speaker 1: from clothing and home goods to music and comic books.
Speaker 1: So when does Amazon become so big and stifle so
Speaker 1: much competition in the retail sector that it is subject
Speaker 1: to antitrust scrutiny. Here to answer that question and many
Speaker 1: more is Bloomberg Intelligence senior litigation analyst Jennifer ree Jen.
Speaker 1: Is there an antitrust issue with the Amazon Whole Foods merger?
Speaker 1: You know, it doesn't seem likely June. You know, I,
Speaker 1: I know there's always a reaction when there's a really
Speaker 1: big deal like this in a company like Amazon that's
Speaker 1: that's dominated a lot of industries and is now moving
Speaker 1: into another industry. But you know, at the end of
Speaker 1: the day that there is a framework. We have a
Speaker 1: framework and laws that have been interpreted by the court
Speaker 1: over time that really just don't put this merger in
Speaker 1: a place that seems like it might concern antitrust regulators.
Speaker 1: You know, you don't have a major horizontal overlap. They
Speaker 1: aren't competitors with each other. And to the extent there
Speaker 1: even are vertical issues here, which is sort of like
Speaker 1: two companies within a supply chain, one acquiring the other,
Speaker 1: like like a manufacturer acquiring the input supplier. Um, you don't,
Speaker 1: you don't have some of the harm they can often
Speaker 1: come from vertical mergers in this merger, either because Whole
Speaker 1: Foods isn't very dominant, particularly in grocery. But there are
Speaker 1: some congressmen already calling for a look at this. Representative Rokana,
Speaker 1: a Democrat representing California in the House of Representatives, said
Speaker 1: the Justice Department and the Federal Trade Commission must undertake
Speaker 1: a review that considers not just the merger's impact on prices,
Speaker 1: but also the impact on jobs and wages. So people,
Speaker 1: even congressmen, are saying, this is so big and it's
Speaker 1: just getting bigger and bigger. That's right, And I think
Speaker 1: that this goes back to kind of a debate that
Speaker 1: is going on a little bit in the anti trust world. Now,
Speaker 1: the law has developed over the last twenty years in
Speaker 1: a certain way, you know, such that they're very specific
Speaker 1: kind of harms and consumer welfare that's protected by the
Speaker 1: antitrust laws. You know, they try to make sure that
Speaker 1: we have a healthy competitive market such that consumer prices
Speaker 1: stay low. But there are some that believe that this
Speaker 1: has failed the American consumer, that over time that the
Speaker 1: way antitrust has been enforced has created too much consolidation
Speaker 1: and too much concentration in many industries that ultimately can
Speaker 1: have affect consumer wages, can even affect you know, political concentration.
Speaker 1: And so there is this this debate that's ongoing, and
Speaker 1: I think that statement by by that representative sort of
Speaker 1: is on that side of the debate that we need
Speaker 1: to change per HAPs our approach, our our antitrust philosophy.
Speaker 1: And now but putting aside that debate June, you know,
Speaker 1: and whether or not we do need to change our
Speaker 1: philosophy here in the United States or not, or how
Speaker 1: we approach these things. The way the law developed has
Speaker 1: developed today, and the tools we use traditionally today to
Speaker 1: assess a merger's potential harmful effects in the market simply
Speaker 1: are unlikely to find that this merger is anti competitive.
Speaker 1: During the campaign, President Trump said that Jeff Bezos has
Speaker 1: a huge anti trust problem because he's controlling too much,
Speaker 1: and that it that went under his watch, he would
Speaker 1: be looking at those problems. Might that impact what goes
Speaker 1: on in terms of review of this deal. Well, I
Speaker 1: think we have to look at think about two different
Speaker 1: things now. The first thing is his statement about Amazon
Speaker 1: controlling just too much and being too big under our
Speaker 1: antitrust laws. Even right up in the Federal Trade Commission's website,
Speaker 1: it says it is not unlawful for a company to
Speaker 1: be big and to be powerful, and even to charge
Speaker 1: high prices, as long as that position was obtained in
Speaker 1: a fair manner, not through unfair or unreasonable acts to
Speaker 1: harm their competitors and to prevent new entry. So the
Speaker 1: fact of the matter is, if Amazon has gotten big
Speaker 1: and powerful, um as President Trump has pointed out, through
Speaker 1: fair methods of competition, that is what it is, and
Speaker 1: it doesn't violate our antitrust laws. So that's on one side.
Speaker 1: And on the other side, you know, we do have
Speaker 1: a Federal Trade Commission and Department of Justice that are
Speaker 1: meant to operate independently and and even if the President
Speaker 1: tries to influence what they do here. They assess these
Speaker 1: deals using a set a set of guidelines that they've
Speaker 1: used that have developed over time, that are ingrained. They
Speaker 1: use economic analysis to apply to these deals to ask
Speaker 1: whether they have the potential to cause harm or whether
Speaker 1: there could be an incentive to cause harm. And they're
Speaker 1: really only going to take one of these deals to
Speaker 1: court where they have evidence to back them up. Suppose
Speaker 1: this deal goes through and and we find at the
Speaker 1: grocery competitors are struggling or going out of business. Is
Speaker 1: there anything that can be done at that point legally, Well,
Speaker 1: it will depend on what it is that's causing them
Speaker 1: to struggle and go out of business. If they simply
Speaker 1: just are not as efficient and are struggling because they
Speaker 1: can't meet lower prices, their prices are too high, they're
Speaker 1: losing customers, they can't gain internal efficiencies that allow them
Speaker 1: to lower those prices. They're just struggling against greater competition.
Speaker 1: You know that perhaps there isn't recourse under the antitrust law. However,
Speaker 1: if after the merger there is some allegation that that
Speaker 1: Amazon and Whole Foods, it's it's subsidiary. Let's say, Whole
Speaker 1: Foods have done engaged in unfair competition to try to
Speaker 1: prevent new entrants in delivering delivering groceries or new entrants
Speaker 1: in grocery. You know, there might be a legal case there,
Speaker 1: you know, such as entering let's say exclusive deals that
Speaker 1: that keep a source of supply from competitors. Things like that. Now,
Speaker 1: a different deal, Draft Kings merger with fan Duel, is
Speaker 1: facing a challenge by the US according to Federal Trade Commission.
Speaker 1: Tell us a little bit about that. Well that Now, see,
Speaker 1: if I had been a betting person, I think I
Speaker 1: would have bet against this deal going through back when
Speaker 1: it was announced in November two thousand sixteen, because you know,
Speaker 1: we have these two companies and what they do are
Speaker 1: they are you know, online gaming. They are daily sports
Speaker 1: fantasy league. So people can pick go in and pick
Speaker 1: a player and create a team, and they game by
Speaker 1: game look at how their players do, and they can
Speaker 1: win prizes in money on that basis. And what the
Speaker 1: FTC said is, hey, you're the only two pretty much
Speaker 1: of the market controlled by the two of you, and
Speaker 1: that's really a clear case of monopolization. Um so I
Speaker 1: think it's not a surprise that the FDC chose to
Speaker 1: go and it was two to zero vote by the commissioners,
Speaker 1: one Democrat and one Republican to go after this deal.
Speaker 1: So is there any response that the two can give
Speaker 1: to save the deal? You know, I think they probably
Speaker 1: believe they have a good argument that the market should
Speaker 1: have been defined the competitive market should have been defined
Speaker 1: more broadly, because they may say, well, hey, we also
Speaker 1: compete against online gaming entities that allow you to bet
Speaker 1: for the season. Let's say pick a game, pick a
Speaker 1: team with players, see how they do for the season,
Speaker 1: and perhaps even other kinds of sports fantasy leagues and
Speaker 1: betting and things like fantasy teams. And if you go
Speaker 1: broader and you define that market more broadly, their combined
Speaker 1: shares probably much lower and might not trigger this sort
Speaker 1: of Hey, this has the harm to potential to harm competition.
Speaker 1: But obviously the FDC didn't buy that. Jennifer, it's always
Speaker 1: a pleasure to have you on. You break down antitrust
Speaker 1: into the simplest, most understandable terms. Thank you, and we
Speaker 1: appreciate it. And for more of Jennifer's analysis, go to
Speaker 1: VI I go on the Bloomberg terminal that's Jennifer Ree.
Speaker 1: She's a senior litigation analyst at Bloomberg Intelligence