The opposition largely centers on Amazon, already with a market cap of more than $1.6 trillion, getting even bigger. But it’s not up to Congress to give the greenlight to mergers, but the Justice Department and perhaps the Federal Trade Commission. On this score, there are doubts as to what grounds the government could challenge a transaction given existing antitrust law and the state of the marketplace.
“Another day. Another mega merger. Amazon’s proposed purchase of MGM reinforces what we already know — they are laser-focused on expanding and entrenching their monopoly power,” wrote Rep. David Cicilline (D-R.I.), who chairs the House antitrust subcommittee. “That’s bad for workers, consumers, and small businesses.”
His sentiment was shared by Rep. Ken Buck (R-CO), the ranking member of the subcommittee, who wrote, “I’m deeply concerned by Amazon’s acquisition of MGM Studios. Amazon’s revenue for the first quarter of 2021 increased by 44% to $108.5 billion — the company’s fastest growth in almost 10 years.”
He added, “It’s critical that mergers and acquisitions involving monopoly companies experiencing tremendous and exponential growth are met with a greater level of scrutiny.”
On the Senate side, Sen. Amy Klobuchar (D-MN), who chairs the antitrust subcommittee, said that “this is a major acquisition that has the potential to impact millions of consumers. The Department of Justice must conduct a thorough investigation to ensure that this deal won’t risk harming competition.”
Klobuchar recently published a book, Antitrust, that focuses on the growing tech monopolies, and has proposed a series of measures to strengthen antitrust laws and bolster enforcement. She co-sponsored a bill to increase fees that companies pay when filing for antitrust review, and the legislation recently cleared the Senate Judiciary Committee.
“This is also a reminder of why we need to fund our antitrust agencies so they can take on investigations of multi-billion dollar deals,” she said. “Our government cannot ensure major corporations are playing by the rules if enforcement agencies are chronically underfunded.”
Republicans on the antitrust subcommittee also chimed in. Sen. Mike Lee (R-UT) tweeted, “Bezos. Jeff Bezos,” a reference to MGM’s share of the rights to the James Bond franchise, while Sen. Josh Hawley (R-MO), who recently penned a book called The Tyranny of Big Tech, wrote, “This sale should not go through. Amazon already a monopoly platform that owns e-commerce, shipping, groceries & the cloud. They shouldn’t be permitted to buy anything else. Period.” Last month, Hawley introduced a proposal to prohibit big tech from making any acquisitions.
Amazon has been facing an increasing level of scrutiny over its current and recent business practices.
On Tuesday, D.C.’s attorney general, Karl Racine, filed a lawsuit against Amazon, claiming that its contracts with third-party sellers have harmed competition and led to higher prices. The company disputed the premise of the lawsuit. A House Judiciary Committee investigation of big tech, which included Amazon, and concluded that the company had “monopoly power over many small- and medium-sized businesses that do not have a viable alternative to Amazon for reaching online consumers.”
“The company’s control over and reach across its many business lines enable it to self-preference and disadvantage competitors in ways that undermine free and fair competition,” the report noted.
But there is skepticism that legislative opposition translates into an ability by the executive branch to block the transaction.
Larry Downes, senior industry and innovation fellow at Georgetown, wrote via mail that “the grumblings on the Hill are just that. Antitrust law hasn’t changed.”
The deal would be reviewed under the Department of Justice’s non-horizontal merger guidelines, Downes noted, “and while there are special circumstances under which transactions of this nature can be challenged, none of them appear to apply to this deal. MGM has a tiny share of overall box office, and streaming services are proliferating and represent a highly competitive market.”
He added that while the Justice Department may argue that Amazon will not have incentives to favor its own MGM content on Amazon Prime, MGM has long-term deals with other distributors that remain in place. Moreover, there also are other competing streaming services that content owners could turn to at this point. “And Prime Video needs more, not less, content to compete with the likes of Netflix, Hulu, HBO Max and others,” he wrote.
There also is the pragmatic matter of what happened the last time the government sought to stop a distributor from buying a high-profile Hollywood studio. It lost, and the AT&T-Time Warner deal moved forward, as much as executives are now trying to rewrite that script. In the case of Amazon-MGM, Downes said, the government would have an even weaker case.
“Under any theory, the government would have to demonstrate a likelihood of consumer harm in the form of higher prices or diminished options for non-Amazon content if the deal were allowed to go through,” Downes said. “That seems nearly impossible in this case.”
That has been a vexing problem for government regulators as tech giants have gotten even bigger. Existing antitrust law and precedent is rooted in the “consumer welfare standard,” or the impact that a merger would have on consumers, and there has been advocacy for changing the way that mergers are reviewed.
Blair Levin, policy advisor to New Street Research, points not just to larger mergers that have gotten the government greenlight, like Disney’s $71.3 billion acquisition of many of the Fox assets, but of Amazon’s acquisition of Whole Foods, which sailed through in 2017. Levin said that it is hard to see “the antitrust theory for where Amazon/MGM would diminish competition in a relevant product and geographic market.”
“But the deal might provide some lift to the political capital behind the Hawley amendment banning any acquisitions by big tech, without reference to antitrust jurisprudence,” Levin wrote in an email.
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