In June 2019, the FTC (Federal Trade Commission) announced that it was launching an investigation into the Amazon and Apple deal that caused many small resellers to be forced out of their markets.
The FTC is looking into the matter to determine whether the deal violated antitrust laws and how Amazon and Apple’s agreement harmed the small resellers.
This article will take a closer look at the FTC’s investigation and its possible implications.
The FTC is looking into the Amazon and Apple deal that crushed small resellers
The Federal Trade Commission (FTC) is investigating the deal between Amazon and Apple announced in April 2020, which allows Apple to offer its products on Amazon’s website, as well as the potential antitrust concerns raised by the agreement. To understand this investigation, it is vital to look at both companies and the implications of their agreement.
First and foremost, Amazon is one of the world’s most powerful e-commerce companies that has taken an aggressive stance to control a large chunk of the market through acquisitions of smaller competitors, such as Whole Foods. On the other hand, Apple has taken a more conservative approach with boosting sales over time through increased innovation in products and services. By striking a deal with Amazon, Apple would be able to reach new markets that it wouldn’t be able to without Amazon’s help.
The FTC’s investigation stems from questions raised by antitrust activists concerning how this deal would affect competition in both markets. For example, could this agreement lead to price discrimination and manipulation from either party? Would it create an oligopoly that stifles innovation? Could smaller businesses potentially be hurt by the arrangement? The consequences are yet unclear but will have a lasting impact on both firms no matter what stand the FTC makes.
Background
The Federal Trade Commission (FTC) is currently investigating Amazon and Apple over a deal that forced certain small resellers to raise their prices to compete with Amazon’s prices. The FTC is looking into the potential anti-competitive practices resulting from the deal, which has raised concerns among small resellers and consumer advocates.
In this article, we’ll look at the background of the investigation and what it means for the industry going forward.
Overview of the Amazon-Apple deal
In August 2019, the Federal Trade Commission (FTC) began investigating potential anticompetitive conduct related to Amazon’s preferred distribution and marketing agreement with Apple. The FTC’s investigation focused on how the agreement impacted Amazon’s ability to promote competing products and the effect of Apple’s blocking of Amazon’s devices.
Under the agreement, Apple and Amazon reportedly entered into a contract that granted Amazon exclusive access to purchasing Apple products directly from a third-party supplier, Dynamic Star. This gave Amazon preferential access to direct discounts of up to 55% off the retail price for certain Apple items. In exchange for this exclusive pricing discount, Amazon allegedly agreed not to promote rival products from Samsung and other phone makers.
The FTC was concerned that these terms limited competition in the market for premium mobile phones and tablets by restraining Amazon’s ability to promote competing products from companies such as Samsung who would otherwise have access to bigger discounts when competing with Apple on same marketplace.
In addition, the FTC alleged that Apple blocked consumers’ ability to use certain types of Amazon devices such as Fire TV because of compatibility issues with certain applications bundled within iOS-based device versions, further limiting consumer choice in their purchase decisions. As part of their investigation, they requested documents detailing how both companies determined their terms under the deal.
Impact of the deal on small resellers
The FTC’s investigation into Amazon and Apple’s deal highlighted one of the key areas of concern for the Commission – the potential impact on smaller resellers. That is, whether competition could be stifled if either company invested in the other ones’ hardware or software.
The investigation ultimately determined the potential for competitive effects on small retailers and other businesses, due to Amazon and Apple having significant power in respective markets. For example, suppose Amazon invested in Apple’s hardware. In that case, it may have harmed its competitors that only sell Apple products and other tech companies whose products operate similarly to Apple’s, potentially driving prices up or creating a disadvantage for rivals. Likewise, if Apple invested in Amazon’s software services, it could have put smaller companies producing similar services at a competitive disadvantage.
In addition to having direct impacts on competition due to their investments, both companies had incentives to take certain anti-competitive measures within their respective markets and directly impact outsiders – such as offering exclusive discounts and preferential treatment of their products over those produced by rivals. Moreover, this could result in an even greater concentration within markets – with fewer producers being able to compete with each other or argue against market manipulation from larger incumbents. Thus increasing competition law enforcement is necessary to ensure fair and equitable market conditions.
FTC’s Investigation
The Federal Trade Commission (FTC) recently announced that it will look into the Amazon and Apple deal that has caused significant disruption in the reseller market. This investigation comes after several small businesses and independent resellers lodged complaints to the FTC citing unfair trading practices.
This article will look at the FTC’s investigation and its possible outcome.
Overview of the FTC’s investigation
The United States Federal Trade Commission (FTC) is an independent agency of the U.S. government that works to protect competition and the interests of consumers. For example, the FTC has been investigating a 2019 deal between Amazon and Apple, resulting in the exclusive sale of Apple products on Amazon’s website.
In December 2019, Amazon and Apple announced a new lineup of deals that included exclusive arrangements for products such as iPhones, iPads and Macbooks to be sold through Amazon’s platform. This decision drew attention from regulators, who scrutinised whether it was intended to eliminate competition and roll back consumer options in the online market by potentially blocking smaller online retailers from selling these products or offering cheaper alternatives to customers.
The FTC opened an investigation into the two companies in January 2020, citing concerns about whether their agreements might reduce pricing competition from rival retailers selling Apple products online, which could decrease product selection for consumers. The FTC also held discussions with Amazon about its use of data on competitors and its role as both a retailer and marketplace for third-party sellers.
The investigation is ongoing as it explores all facets of the arrangement between Amazon and Apple for potential anti competitive behaviour. At this point, no action has been taken against either company by the FTC. Still, many people are speculating on how it might shape up over time given how heavily regulated these types of deals are becoming within competition law authorities internationally.
Potential outcomes of the investigation
The Federal Trade Commission’s (FTC) investigation into the Amazon and Apple deal is ongoing. As with all investigations, the outcome can range from a fine or enforcement action to both parties being cleared of wrongdoing.
If the FTC finds that the Amazon and Apple deal violated competition laws, they could pursue several potential outcomes. For example, the FTC may seek a settlement with both companies which could require them to take steps to mitigate anti-competitive effects (such as selling certain assets) and/or pay financial penalties. The FTC also has authority to seek an order that could prevent future similar conduct by requiring that Amazon and Apple stop exclusive dealing arrangements or prohibiting them from engaging in practices already identified as anticompetitive.
In addition, it’s possible that the FTC could take this opportunity to broaden its interpretation of antitrust law beyond what has been seen in recent cases and establish new standards for evaluating potentially harmful business deals. This could have far-reaching implications for businesses across all industries going forward.
Finally, if the FTC finds no clear violation has occurred, both companies will be cleared of any wrongdoing and life as usual can resume without further legal proceedings from the FTC’s side.
Impact of the Investigation
The FTC is investigating the Amazon and Apple deal that severely impacted small resellers. This investigation is an important step towards understanding the potential harm these monopolistic practices can cause in the market.
By assessing the investigation’s impact, we can understand the implications and how it could affect the industry’s future.
Potential impact on the Amazon-Apple deal
The Federal Trade Commission’s (FTC) investigation into the Amazon-Apple deal has raised questions about what implications the FTC’s decision could have on both companies. For example, the current terms of the contract stipulate that Apple will be the sole distributor of certain products on the Amazon website, and that Amazon must pay a commission to Apple for every product sold.
The potential impact to this agreement may vary depending on the outcome of the investigation. Both companies may modify or terminate their agreement should any violations be found by the FTC. If this does occur, it could considerably affect each company’s ability to compete in their respective markets.
From an antitrust perspective, it is likely that if any violation is found, there will be market impact. It may mean that smaller competitors of either Apple or Amazon are given more opportunity to compete. Other considerations such as market dominance and exclusive contracts with other suppliers could also be affected if the FTC decision finds any violations.
It is worth noting that whatever outcome results from this investigation not only has potential implications for these two companies but might also influence future contracts between technology giants and retailers, shaping new industry standards concerning antitrust laws in technology markets globally.
Potential impact on small resellers
The potential impact of the FTC’s investigation into the Amazon and Apple deal on small book resellers, who depend on Amazon’s distribution strength to stay afloat, appears to be significant. The investigation has raised questions whether the agreement between Apple and Amazon unfairly disadvantages small booksellers by limiting their ability to compete with each other and setting a standard commission rate which may be too low for them to remain profitable. To this end, several established companies have entered petitions with the FTC to prohibit any deal which might harm small sellers in the ebook industry.
Furthermore, independent retailers have continuously questioned Amazon’s pre-existing practices such as their stringent and potentially discriminatory pricing policies for books offered via their Kindle platform. As a result, small booksellers fear that if the FTC approves Apple and Amazon’s agreement, similar policies could spread throughout the rest of the digital book market, further eroding their place in an increasingly competitive retail environment. For example, placing restrictions on books sold via other platforms could drive up prices charged to buyers while artificially driving down overall sales revenue. In addition, contract violations between independent sellers and online vendors may become more commonplace as corporate giants strengthen monopolistic ties within their respective ecosystems.
Therefore, online retailers must practise transparency in their dealings with independent sellers while strictly adhering within legal boundaries concerning anti-competitive behaviour to safeguard fairness against unfair business practices which require smaller companies to compete at a disadvantageous level they may not be able to handle.