The FTC's Misguided Assault on Amazon Endangers Small Business Success
Among the Federal Trade Commission’s (FTC) responsibilities is protecting consumers from deceptive practices and ensuring fair competition. In contrast, a recent FTC lawsuit against Amazon raises serious concerns about the agency's priorities and the potential consequences for entrepreneurs. This FTC suit fails to recognize the potential negative impact on the entrepreneurs it claims to support.
The FTC's complaint against Amazon centers on its alleged dominance of the online retail market. This lawsuit provides a vision of the digital marketplace that is out of touch with how it actually works in post-COVID e-commerce. It's puzzling to think that consumers only flock to Amazon, Walmart, Target, and eBay in a world where there are countless options for online shopping. It ignores the diverse choices consumers actually have in today's e-commerce landscape.
Among the most baffling aspects of this lawsuit is the FTC's criticism of Amazon for removing high-priced products from featured section deals for consumers. Essentially, the FTC asks why Amazon does not display more expensive items to customers. This perspective contradicts the agency's mission of protecting the public from unfair and deceptive business practices. It could be argued that positioning higher-priced products as the "best deals" is precisely what the FTC is supposed to prevent.
In addition, Amazon is accused of forcing sellers to use its fulfillment services. Although Amazon sellers can use their own fulfillment services, many choose Amazon's because of its exceptional value, which includes two-day delivery across the country. This is a choice, not a coercion, and it benefits both buyers and sellers.
The FTC's portrayal of Amazon as a giant crushing small businesses is far from the reality - the roughly 2 million small businesses that account for 60% of sales on Amazon are proof of that. Looking closer, 94% of them elect to use optional services like Amazon fulfillment because they recognize the value of affordable two-day shipping. The unvarnished truth is that Amazon is a critical stepping stone in the growth of millions of small businesses.
As an example, consider Mr. Tortilla. It was hard for Anthony and Ronald Alcazar, founders of Mr. Tortilla, to get their low-carb tortillas onto supermarket shelves, where larger brands dominated. The company found success on Amazon, expanded to Walmart.com, and launched its own retail website. In contrast to the FTC's arguments, their story demonstrates how Amazon's platform actually enables small businesses to reach global markets and gain more customers.
Anthony Alcazar, co-founder of Mr. Tortilla, emphasized the pivotal role that Amazon has played in their success, saying, “Amazon gave us the opportunity to compete fairly and we became #1 over our billion-dollar competitors. When we needed money to grow and the whole world told us “NO” you don’t qualify, Amazon lent us over $1 million dollars that was instrumental to our growth. I gave a speech at the summit of the Americas explaining what e-commerce and tech means to small businesses, I wish I had a platform to share that speech with everyday Americans - so they could understand why it is so important to support Amazon and Walmart.”
Overall, this lawsuit seems like a solution in search of a problem. While the FTC focuses on Amazon, other corporations under its purview, that have long and documented histories of consumer abuses, are once again facing serious allegations of unfair and deceptive practices. By way of example, the extensive list of lawsuits and settlements exceeding $27 billion in fines and penalties linked to Wells Fargo Bank illustrates this point. While the FTC has the power to oversee such matters, Wells Fargo's predatory behavior somehow manages to escape its scrutiny. At a time when the economy is in a state of uncertainty, and our nation’s small business community is facing mounting challenges, one should wonder why the FTC has singled out a company like Amazon, that actually supports small businesses and entrepreneurship.
The FTC's suit raises the question of whether we have become a society that punishes success at the expense of legitimate concerns. Entrepreneurship is the backbone of our economy, and this suit seems to attack it from all angles. Rather than targeting one of the most important tools for elevating small businesses, the FTC should focus on entities that continually harm our communities. Only through this adjusted attention can we ensure that the American economy remains a fertile ground for innovation and opportunity.
Javier Palomarez is the President and CEO of the United States Hispanic Business Council.