Amazon vs. Regulators vs. Walmart

0:28The truth is AI security is identity security. identity security fabric can help you secure the next generation of identities, including your AI agents. Visit Okta.com. That's O-K-T-A dot com. Capital One's tech team isn't just talking about multi-agentic AI. They already deployed one. It's called Chat Concierge, and it's simplifying car shopping. Using self-reflection and layered reasoning with live API checks, it doesn't just help buyers find a car they love. It helps schedule a test drive, get pre-approved for financing, and estimate trade in value. Advanced, intuitive, and deployed. That's how they stack.

1:09That's technology at Capital One.

1:17Welcome to Big Technology Podcast Friday edition, where we break down the news in our traditional cool-headed and nuanced format. We have a packed show for you today in a packed week of news. Amazon, well, it's in the sights of the FTC. The big one might be coming for the company. It's also right now under threat with another lawsuit from the Federal Trade Commission about its practices with Prime. First of all, Ranjan Roy is here with us as always on Fridays. Welcome, Ranjan. This is going to be a fun one. We also have Jason Del Rey. He's the author of the brand new book, Winner Sells All, Amazon, Walmart, and the Battle for Our Wallets.

1:53Welcome, Jason. Thanks for having me, guys. Thanks for being here. Matt Stoller is here. He's the director of research at the American Economic Liberties Project, and he also writes a great newsletter on Substack called Big. Welcome, Matt. Thanks for having me. Thanks for being here. This is a dream panel, honestly, dream group of folks to talk about some massive, massive stories. So why don't we just start with the first one, which is that the big one, right, which is how Bloomberg titled it, the big case against Amazon that it seems like Lena Khan at the FTC has been rearing up, ready to bring.

2:28It looks like it's on its way. It might even be here before August. Matt, you are the one who's been following the antitrust stuff, you know, probably more than most in the world. What is going to happen? Oh, stop it, you. Oh, you. He wrote the book. Yes, sir. What is the big one? So, right. So one way to think about what's happening is you have this person, Lena Kahn, at the Federal Trade Commission, who's just got it out for Amazon and wants to do something to rein in their power. And that's not the way that I see things. There are a series of arguments from a lot of different people in the economy and a series of legal actions to address what are basically practices, unlawful practices that harm consumers and third party sellers and companies that produce goods and sell online and rival retailers and fundamentally communities in America.

3:22And those unlawful business practices have to be distinguished from the awesome stuff that Amazon does as a new and innovative retailer. So there are a bunch of different antitrust suits from basically state attorneys general and then private plaintiffs that talk essentially about Amazon Prime and some of the unlawful business practices around Amazon Prime that end up harming consumers in different ways. The FTC suit, which Bloomberg reported, so we don't know if that's the extent of the suit. There might be stuff on cloud, there might not be, the suit might look different. But it looks like the FTC suit is going to be fairly similar to some of the other antitrust suits that have come out of Washington State, Washington, DC, some private plaintiffs and I believe in California.

4:13And what they essentially say is that Amazon Prime, in order to finance two-day shipping, right, or same-day shipping and keep prices lower than everywhere else, right? How do they do that? They're not magicians, right? They have some good logistics technology, but it doesn't make sense that you would be able to get a good or service from Amazon plus free shipping and not be able to find it anywhere else online for cheaper, why, how are they able to do that? Well, the answer is they sign, they say, if you want to sell through Amazon, right, if you want to sell particularly to Prime members, and remember, there's 150 to 200 million Prime members.

4:56So that basically means if you want to sell online, period, then you have to keep your prices elsewhere through other non Amazon channels, including walmart.com or other retail channels, including your own website, you can't sell for a cheaper price than is listed on Amazon to Prime members. And this pushes up prices everywhere in the economy. And so while to the consumer, it looks like Amazon Prime is the best deal right it's the cheapest price that's only because amazon has prohibited other firms who might be able to sell it cheaper or more um efficiently or in through other you know differentiated ways prohibits them from doing it and that's the practice that these antitrust lawsuits have attacked and it looks like that's the practice that the federal trade commission is gonna attack well jason there are a few other things yep jason your your book is all about competition between Amazon and Walmart.

5:59It's not like Amazon is competing against a lightweight here. I mean, you have Walmart, which is the biggest commerce company in the globe. So what do you think about these allegations? And if they're true, why hasn't Walmart been able to punch back? Yeah. So I mean, I think just in recent years, Walmart's finally been able to at least hold their own a little bit more. And they have in the past, I outlined in the book, some anecdotes about sort of a pricing war between the two companies where walmart's going and squeezing you know competitors uh sorry squeezing brands that are selling on amazon and vice versa because of amazon's algorithm driving down the price and so there's been you know in recent years walmart's gotten their act together a little bit but the history of how amazon got ahead of walmart you know who many thought would never be you know uh upended you know, has a couple of different reasons for it.

6:56So one is, you know, you could make the argument as some do that, you know, government was asleep at the wheel for a long time and as it pertains to antitrust. Amazon also had, you know, the tax advantage online for many years where they were not collecting sales tax from customers and so not charging sales tax, which some argued, you know, was just an inherent pricing advantage um but really prime was you know the key piece of the amazon machine or what they would call the flywheel for many many many years and so if you attack prime as ftc did in their in the lawsuit in the past week and and in some ways it seems like will in the antitrust suit you know a whole lot of a whole lot could change about amazon's advantages Well, on this, because Matt, you'd mentioned the price goes up elsewhere in the economy.

7:52Like, how do we differentiate Prime from a consumer standpoint? Obviously, people generally seem to love it. You get your video, you get two-day shipping, you get everything. So how does the case lay out how this actually negatively affects the economy as a whole when every individual consumer seems to be pretty happy? Right. So it's a great question. So first of all, the suit that Jason's referring to that the FTC filed a week ago is about how it's like really hard to unsubscribe from Prime. And it's a consumer deception claim. As they say, Amazon sort of tricks people into signing up for Prime in certain ways.

8:30And then they make it, it's like, I don't know, six clicks and lots of different screens to like unsubscribe. So, and I think that the point, and there are internal discussions at Amazon about, They call it, I think, the unsubscribing process Project Iliad after - It's a Homeric odyssey to try to - Yeah, yeah, yeah. That was incredible. It's kind of hilarious. But I think it shows the importance of what Jason was saying. Prime is really important to Amazon to the point where I think the FTC would claim they're deceiving users into canceling it. So I think now that you may not agree with that, but like, I think that the premise that people really like it is kind of undercut by the fact that Amazon makes it really hard to quit.

9:16So clearly people are canceling and they are trying to prevent people from canceling. But I think your broad point that people really like Prime is true. But the reason that they really like it is because they never see any alternatives because rivals have, except for Walmart, which has massive amounts of capital, no one else really is legally allowed, I think, based on Amazon's practices to actually give a better price or better service, right? It's like if I have a widget and I'm selling it on Amazon and it say it costs$6 for me, you know, the price, and then it's$4 for me to use Amazon's fulfillment business to make sure that the shipping conforms to prime standards, right?

10:07I can't break that out to customers and say it's$6 for the product and then$4 for all the fees that I have to pay to Amazon, I just say it's$10. And then everywhere else in the economy, maybe not in like retail stores, but everywhere else online, it's going to be at least$10. I could if Amazon and then if I say, oh, it's actually$6 here plus$4 shipping, or if you want to get it for a little bit later,$1 shipping or something. If I do that, then Amazon will not make that product accessible to Prime members. And so my business will get wiped out. And that's called a, they used to do that in contract.

10:47It was called a price period agreement. Then the Senate wrote them and said, this looks illegal. And Amazon said, oh, we're not going to do that anymore. And now they just do it through algorithm. And so I think the reason that consumers love Prime and see it as a great service is that they don't know that they're getting a worse price. And instead, Amazon takes that$4, which is not just shipping, but also just about$150 billion of extra cash for Amazon, and they pump it into all of these services like music and movies and games and all of these things that nobody's actually trying to pay for themselves.

11:24And they just get this stuff that looks free. But in fact, it's not free. People are paying for it. They just don't know they're paying for it. It is interesting the way that the FTC is approaching this stuff. So last week, so we've talked a little bit about how hard it is to cancel Prime. And last week, I was like, all right, let me give this a shot. And I went and tried to cancel Prime. And it took me less than a minute. And when I tweeted about that, I'm like, what am I missing? Jason pointed out that they had actually made some changes, right? And they had done this in response to some of the action that they're getting from government, whether it's in Europe or in the US.

11:57And, you know, it is interesting. I think the main question about the FTC now is the unwillingness to compromise that they have with these companies or the unwillingness to let them fix the problems and the desire to go ahead and sue no matter what. So this is coming from Bloomberg, where it talks about the compromises that Europe's made. And the story says, well, Amazon could make a similar offer to the US market, kind of signaled opposition to such compromises, telling a Senate committee last year that the FTC would strongly disfavor such remedies. So Jason, you know, I'm curious because again, like you're looking at this from the competition element, you know, on your, you know, in your book, I'm curious, why do you think the FTC is so strongly in opposition to the companies taking moves to like, quote unquote, you know, self-regulate and how do the companies feel inside?

12:48I mean, you're covered Walmart and Amazon in your book, right? These are the two companies that have like some of the most government scrutiny on them. they're probably used to this type of stuff but it does feel like there's a different uh regime right a regulatory regime in place so how are they handling i mean i i think matt also would would have some interesting insights on this but my sense is we've gone decades with no action right and so to now put it in the hands of these companies and trust that they will self-regulate I mean, just seems like beyond wishful thinking, just very naive. And I think - But isn't there a point where like, it's not self-regulation, but it's bring the action, see how they respond and then decide whether you're satisfied with that response or not?

13:37Yeah. I mean, I think some of it or a lot of it might also be about the optics and sending a message and we are here and we're not going away. I don't know what Matt thinks about that idea, but you're talking, Alex, essentially, just to make sure i'm understanding like why not just settle like the ftc has with smaller companies with you know similar practices versus you know filing the suit let's go back to that example i gave about the prime cancellation right obviously prime is a lot easier to cancel now than it was previously yet the ftc is still bringing that suit so i'm curious you know is it like more like don't keep doing this or we're going to punish you or like what is the purpose in that in that moment can yeah yeah so i i wouldn't okay so so first of all i think it's a you know i'm not totally sure you might have had a an easier experience canceling prime that's not necessarily true for everyone amazon's very complicated and there's lots of of of you know they can personalize experience i could have had the tech reporter flow who knows right um but i think there's a But there's a couple of important points in your story.

14:50First of all, Amazon changed their process because of legal pressure, which is something that we see in general. They've also changed some of the ways that they handle third-party sellers in response to potential legal pressure from the FTC on this antitrust suit. They've reopened seller fulfillment and other antitrust suits. So you're already seeing legal pressure work. But one of the things to understand about Amazon is that it has engaged in extremely bad faith for a long time vis-a-vis regulators and pressure. So in 2018, Senator Richard Blumenthal wrote Amazon and said, you have these price parity agreements.

15:33This seems problematic. It seems like you're raising prices on consumers. And Amazon said, oh, yeah, yeah, OK, we'll get rid of them. And they just lied like they didn't. Right. And you might think it's not a big deal to lie to the Senate, but - No, I do not think that. Do you think that, Alex? No, no. I would not recommend that to anybody listening. I was being passive aggressive. That's the way you do it. That's why I - Wait, but actually, Matt, on that, you mentioned that they got rid of the - They said they're getting rid of price parity agreements, but then they kind of hit it within an algorithmic function.

16:04Like they tried to use an algorithm as a cover. How do they get away with that? Or how does an algorithm provide you cover from like a specific contractual agreement? Or does it? And it does the way that. Okay. It doesn't. You have to bring a lawsuit, right? I mean, that's the thing is it's like they, you know, they just say, oh, well, we're not going to force you to, you know, give us the best price with a contract, but we're just not going to let you sell on Prime through the buy box if you do. Right. And we're just going to hide it in an algorithm. That's the same thing functionally. It's just there's no document saying it necessarily.

16:40So that just requires more investigation and evidence. So the other thing about Amazon, if you read the complaint on Prime, the subscription service one, it's pretty clear that Amazon repeatedly refused to honor document requests, lied about document requests, lied about their internal processes. and effectively the reason the FTC was able to keep the case going is because Business Insider got a leak about how hard it was to cancel Prime and then the FTC was like they have been asking Amazon for documents you're legally compelled to give documents to the FTC and Amazon just wouldn't and then they lie they're like oh there's nothing here then it came out that Business Insider like Yeah, there are lots of documents.

17:30And so it's like, this is a great service and lots of consumers use it, but it's also like an almost an organized crime racket, right? Like you can't lie to the government repeatedly without consequence. And so what the FTC is probably seeking with the prime suit is not just some sort of remedies here beyond what they've already done, but also a cease and assist order, like an order that's set from a court that says you can't do this anymore. Because the thing is, is that if you compromise with these firms and you say like a bad faith actor, like if it's a, you know, I think they compromise with Epic Games, right?

18:08And Epic Games said, oh, yeah, we're not going to do like deceptive user interface anymore. And that's because Epic Games, you know, was willing to change their practices or lots of smaller firms, firms that just operate in good faith, give documents. Most firms do that. Amazon doesn't. They hire a bunch of people from the FTC and they go to work. They fund the Chamber of Commerce in D.C. to like basically get a tax on Lena. I mean, they're just trying to destroy the government. Like that's what's really going on here. So they engage in this bad faith. And what the FTC is seeking is a cease and desist order so that if Amazon violates that cease and desist order, There are real teeth that say the FTC has authority to really make changes to your business if you do not actually stop deceiving consumers.

19:01And with a potential compromise with a firm like that, if Amazon just says, oh, we won't do it anymore, we've already seen that they're willing to just like not do what they said they were going to do. So I think there's like a pretty good reason. I think it's a lot of what Jason said. It's like there's been a hands up policy for a really long time. and these companies the big ones look at the law as a kind of suggestion set of suggestions rather than actually something to and smaller firms don't don't do that they pay attention to law and try to obey it it's so it's like amazon and a few of the big ones that don't that clarifies things for me for sure jason like you have some very interesting stuff in your book that talks a little bit about amazon's strategy at fighting the government i mean it's very fascinating so So for instance, they will fight and try to dunk on politicians on Twitter.

19:49So I'm just kind of curious. Didn't go well. What is going through the company's head in terms of this stuff? And do they have – I mean what Matt is saying is pretty damning. So do they have any like – what would be their argument against that? Yeah. So I mean there are a couple of things at play here in recent years. One is there is I mean, and executives who are fans of the company would tell me this, not just critics of the company, that at the very highest level of the company, there is a complete bubble around the leadership team in a way where. And I think part of it is how long they've been at the company that they really believe they are just a force for good and like cannot accept really any valid criticisms without attacking it as conspiratorial or, you know, something along those lines.

20:46And, you know, a lot of that came from Jeff Bezos himself and the group of, you know, mostly men he's had around him over the course of the company's history. And so you're referencing, you know, tweeting at, you know, snarky or adversarial comments at senators, I think, and also congressmen, you know, that was back in, I'm forgetting all my years are running together, but in the last couple of years, like that was, as I reported back then, and then I think the Wall Street Journal added to my reporting. um that was like bezos being pissed that they were getting attacked too much and he you know he he thought in an unfair way and so i think the journal and they're purporting he and the former head of public relations uh jay carney former obama spokesman uh they like were crafting tweets themselves i mean it sounds ludicrous and it is ludicrous yeah but you know so there's this there's this like feeling that we are still we we are this young innovative company and like we're a force for good and like these are all haters like that's that's part of it another thing is you know they've long they've always been combative with critics and i think there were some really smart folks internally who had experience in dc who were trying to force them into sort of a different path not a path of like being walkovers when when you think the government's wrong, but just, you know, not being sort of arrogant.

22:16And many of those folks, you know, either got pushed out or chose to leave because Amazon didn't seem to be learning any lessons from, you know, even a player like Walmart, which, you know, decade or two ago would at least pretend to listen to critics and, you know, sort of go on a listening tour, whether that was totally self-serving or not, you know, sort of beside the point. But anyway, so that's some of the reporting I uncovered while writing the book. And yeah, it doesn't seem like all that much has changed under Andy Jassy, as CEO. Again, he's been at the company a really long time, but I think they made more enemies than they needed to in DC over the last couple of years with their approach.

23:05Can I just give a quick anecdote to kind of confirm what Jason is saying. Absolutely. Because I think a lot of this is just, so two things. So they bought MGM, right? And then they like wrote down a lot of the value because it was a stupid acquisition. And it's just like, that's just a bad business decision that they made. And no one's going to be held accountable for it internally. And that's the symptom of a giant bureaucracy that's just kind of a little bit out of touch. But the other one, and I think this is the kind of thing that really upsets people, and there's no defense to it, is there's a chemical called sodium nitrite, which is teenagers, it's like really useful if you want to commit suicide, right?

23:40And so there was this trend where teenagers would go on Amazon, and they would buy it if they wanted to kill themselves. And then Amazon's algorithm was like, hey, you people who bought this also bought like this guidebook on how to kill yourself and like all of these different tools. And it was just like them, just horrible. And so there's a plaintiff's lawyer who said to, you know, representing some of these families of kids who bought this and killed themselves, that went to different online retailers and said, would you please stop selling sodium nitrite? And all of them did except Amazon.

24:14And they were just like, it's our right to sell sodium nitrite. And they fought it legally. And they're still fighting a lawsuit. Now there are state proposed laws saying you can't sell sodium nitrite unless you're selling it to a business. And it's like, why are you doing that? That's That's crazy. And economies of scale work until they become diseconomies of scale. It's not a good thing that it's really easy to get yourself a package of stuff that makes it easier for kids to kill themselves. So that's the kind of thing. And there are a lot of examples of that. And so that's the kind of thing that indicates that there's a little bit of an out of touch vibe at the top of Amazon, but also it's going to really upset people across the aisle.

25:00Well, when you're obviously hearing terrible things like that, make it seem like how come more people don't know about it and are aware of, you know, have a negative view of Amazon versus I get all my stuff in two days. How do you think the FTC is playing out their strategy in terms of kind of like combating the optics of Amazon is the greatest way to shop online? Already, the way you laid it out is kind of interesting to me. It's like starting with the subscription FTC suit and basically making it clear that no, not everyone loves Prime and it actually is difficult to cancel. And starting there, then going for the big one seems to be kind of strategic in that way.

25:38But again, I hear that Amazon is crushing its suppliers or putting owner's terms on them so I can get some giant package in 24 hours still doesn't necessarily turn me off. How does LinaCon battle that whole perception. Yeah. I mean, I think, so you have to look at it in a broader context and I'm not just saying that because that's an easy way to dodge a question when you say something like that. It is though. It's really about the broad context here. Yeah. Let's take a step back. Let's take a step back and talk about something different. The real issue is. So, okay, we're going to stop, guys. All right.

26:25There is a monopoly crisis in America writ large. Okay. And I think that's like where Lena Kahn comes out of and also Jonathan Cantor, the anti-trust division, and a lot of politicians at a state and local level and at a federal level. And Joe Biden, right? He just gave a speech on this last week. You know, there's consolidation everywhere and it's driving down wages. It's driving up costs in all sorts of areas like pharmaceuticals. I don't know if you've noticed, those are not cheap. And there's also all sorts of shortages. And that's because you have similar dynamics within the pharmaceutical supply chain as you do with Amazon.

26:59And you can see it. I do a lot of like writing about different monopolies. There's monopolies in everything from mail sorting software to cheerleading to, you know, you see an oligopoly in airlines right now, like United is a disaster. So there's a broader dynamic here, like too big to fail in 2008, 9, 10. is actually something that is a problem across the economy. I mean, not even to mention banking. So like it's really easy to like say, oh, Lena Kahn is crazy and focus on her. And there's a lot of attempts to sort of personalize this. But the truth is Americans writ large are upset with big companies because they are causing a lot of problems.

27:39And we saw that very clearly during the financial crisis. but we keep seeing those problems over and over and over and over. And Amazon is a little bit of a pace setter here for these kinds of exploitation of loopholes, for example, like the sales tax, which is where Amazon got its start with that advantage, predatory pricing, selling below cost, which we've seen Uber and Lyft do and destroy taxi markets everywhere. The tactics that Amazon has pursued really define the modern economy. And so this case, whatever comes, is really important, not just for Amazon, but for this broader monopoly power crisis.

28:19Okay, so with that in mind, how do you make the case about a product and service that consumers broadly like? I mean, I think the answer is you can disaggregate the idea of flight, right, this great technology from the business practice of a baggage fee, right? People can understand those two things. I like to be able to fly places. That's amazing. I don't like getting nickel and dimed. And so I think that's kind of the core messaging challenge from the FTC. Like this is not anti-Amazon. This is about specific unlawful practices that cause problems for rivals who are trying to compete in a fair market.

29:01And there are at this point hundreds of thousands of people who have the experience of trying to use the Amazon marketplace, maybe millions at this point, who understand at a core level that there's something rigged and unfair about what Amazon is doing. And I also think, broadly speaking, while people do love Amazon, they also know that there's something dangerous about having a firm that is so big and so powerful and essentially unregulated. So that I think there's a there's a messaging challenge here, but I would move it a little bit away from the personalization here of Lena Khan and sort of recognize that it's a there's a broader dynamic.

29:40She's she's obviously a leader in this, but she's also a product of this broader dissatisfaction that we see with big with big business in general. Yeah. And another thing people really don't like is just like the revolving door between the, you mentioned, Matt, for instance, that Amazon has hired a bunch of people from the FTC. I mean, ex-FTC employees and lawyers are all over big tech right now. And the conflicts of interest go even deeper. So this is actually a story. This story just broke as we were about to go on air today. But this is meta, but I think it's relevant to sort of what we're talking about, where L 'Oreal Panky, who's the FTC's designated agency ethics official, asked Lena Khan to recuse herself from the meta case.