27.09.2023 – The Federal Trade Commission and 17 states have filed an antitrust suit against the online mail order company Amazon. Investors reacted slightly alarmed.
The FTC accuses Amazon of preventing merchants on its platform from offering lower prices on other marketplaces. In addition, Amazon forces sellers to ship their products with its own logistics service if they want to be part of the Prime subscription. This leads to higher prices for consumers. Amazon shares fell after the FTC announcement in New York, here is the four-hour chart. But before you panic sell now, we advise a sharp look behind the scenes
Source: Bernstein Bank GmbH
Of the two states now suing, only two are Republican-led. Thus, it looks like the Democrats are going after Amazon quite decisively. Which we don’t believe – this looks like theatrical thunder in the nascent presidential campaign; as if the Dems are fighting for the little people against the big corporations they themselves have nurtured for years. Or there is an internal party battle going on between the idealists and the monopoly forces. We don’t see a real threat of break-up.
Amazon donates to the Dems
Because according to “OpenSecrets”, Amazon donated around $4.5 million in the 2022 political cycle, almost all of it to Democrats. This has been going on for years. Far more important is the fact that Amazon CEO Jeff Bezos is the owner of the “Washington Post” – and this is the house paper of the left-wing cultural chic.
Coincidentally, the WaPo has just put two shots across Joe Biden’s bow: First, columnist David Ignatius, icon of the Dem elite on the East Coast, called for Biden not to run about a fortnight ago. And then the WaPo followed up with a poll together with ABC News: According to the poll, Trump is a whopping 10 percentage points ahead of Biden. No other study has come up with such figures so far.
Shadow boxing against the mega-caps
It is also worth taking a closer look at FTC head Lina Khan. She is considered part of the progressive Democratic camp and was appointed by Biden. Before Khan took up her post at the FTC in June 2021, she was involved in an investigation in the US Congress in which Apple, Amazon, Facebook and Google were declared monopolies and “structural separations” were proposed. Nothing has happened. Moreover, the current antitrust suit is already the fourth that the FTC has filed against Amazon.
In addition, the lawyer has suffered several defeats – including trying to prevent the takeover of Activision by Microsoft. Did we forget to mention that the mega-caps mentioned are all big donors to the Democrats?
Our conclusion from all this: we currently lack the belief that Amazon is really in danger. Admittedly, a negative news flow is likely to hurt the stock, and who knows, maybe there will be some surprising turns. But at some point the issue will be off the table; and a split might even appeal to investors. So keep an eye on the real-time news. Bernstein Bank wishes you successful trades and investments!
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