The Yale Law Journal

The Economist Cover Story and Briefing Allude to Vol. 126 Note on Amazon and Predatory Pricing

Cecilia (Yixi) Cheng
30 Mar 2017

The Economist recently published a briefing on Amazon, Are Investors Too Optimistic About Amazon?, to describe shareholders’ expectations of the company’s long-term growth. The briefing cites to Lina Khan’s Note from Volume 126, Amazon’s Antitrust Paradox, to showcase her arguments for antitrust intervention in response to elements of Amazon’s business strategy that pose anticompetitive concerns.

American antitrust authorities currently peg their measure of market power to consumer welfare, which is traditionally measured through effects on pricing and output. In her Note, Khan argues that the current framework is inadequate to capture the full extent of Amazon’s market dominance, as it does not properly account for the company’s integration across distinct business lines and undervalues the risk of predatory pricing— a scheme that the Supreme Court considered implausible in Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 589 (1986) and is thus rarely challenged today. In order to recognize anticompetitive concerns arising from Amazon’s business strategy, Khan argues that we should replace the consumer welfare framework with an approach that focuses on preserving the competitive process and pays more attention to market structure.

The Economist’s March 25 cover story on Amazon’s growth also echoes Khan’s arguments that Amazon’s focus on expansion makes predatory pricing more tempting, and it alludes to her proposal that the government may consider treating Amazon as an essential utility as it becomes part of the essential e-commerce infrastructure.

The renewed interest in Amazon’s market dominance comes as part of a greater discussion on the role of antitrust law. Khan’s Note has also recently been cited in New York Times’ Great Reads picks of the week and was noted for its “epic analysis” in the New York Observer.