NEW YORK/SAN FRANCISCO (Reuters Breakingviews) - Ambitious American lawmakers crafting an antitrust shopping list are putting Amazon near the top. Jeff Bezos’ $880 billion retailing behemoth deepened its hold on consumers again in the third quarter. The dominant internet retailer spent heavily on faster shipping, propelling revenue growth of 24%. Ruthless expansion in areas, such as advertising, where its existing operations give it a leg up, and new markets such as healthcare, bring a showdown with City Hall closer than ever.
Amazon’s best defense against critics remains that it doesn’t act like a traditional monopolist. Instead of soaking consumers and maximizing profits, it keeps prices low, subsidizes delivery, and expands. That doesn’t always please investors – the stock fell sharply after earnings disappointed.
Yet the firm’s growing power, and especially its ability to use digital dominance to best rivals, increasingly makes European regulators and American lawmakers uneasy. Take internet advertising. Items not on the first page might as well not exist for many shoppers, forcing sellers to pay up to be a featured good. Amazon doesn’t break out advertising, but it accounts for most of the “other” line in the firm’s sales, which grew over 40%.
Sure, the company’s relatively lackluster estimated revenue growth of 11% to 20% in the fourth quarter may indicate competition is heating up – but this will only make Bezos more aggressive.
Amazon has been touting initiatives that help society and provide political cover. This week it announced renewable energy projects and funding for high school computer science classes. It may not be enough. On Thursday, White House hopeful Senator Elizabeth Warren asked the Federal Trade Commission to see if a security lapse in Amazon servers was partly to blame for a Capital One Financial hack that affected 100 million people.
It’s a matter of time before Bezos faces a D.C. grilling, which he has avoided so far. On Wednesday, Facebook’s Mark Zuckerberg made another public appearance before Congress. Sundar Pichai of Google and Jack Dorsey of Twitter have also endured hearings.
Regulators are also watching Bezos’ expansion into new markets. This week, Amazon purchased Health Navigator, which can digitally triage patients. The firm’s small size means this deal won’t be in lawmakers’ crosshairs. But Amazon’s own shopping, and the perception that regulators too easily permitted its $13.7 billion Whole Foods Market acquisition, means future M&A will face tougher criticism.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.