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Mnuchin Turns On Amazon As Retail Sector Continues To Slide

Amazon

It’s a bad time to be a dominant internet heavyweight, with the American government constantly breathing down your neck at every turn.  Tech and internet heavyweights have lately come under fire by President Donald Trump’s administration, with Amazon, Inc. (NASDAQ:AMZN) looking set to bear more than its fair share of his offensive. Trump has never bothered to hide his disdain of Amazon, with his inner circles claiming he is obsessed with taking down the giant online retailer.

And now he might have help from a not-too-surprising source. Treasury Secretary Steven Mnuchin has reiterated the president’s stance, saying on Wednesday that the Department of Justice is right about its intention to look into Amazon’s practices as part of antitrust review of big-tech:

“I think if you look at Amazon, although there are certain benefits to it, they’ve destroyed the retail industry across the United States so there’s no question they’ve limited competition,” Mnuchin has told CNBC.

(Click to enlarge)

Source: Twitter

Antitrust review of big tech

Mnuchin’s comments have come a day after the DoJ said it’s launching a sweeping probe into the business practices of companies that dominate internet search as per the Wall Street Journal. Obviously, FAANG companies Facebook, Inc. (NASDAQ:FB), Amazon, Inc. (NASDAQ:AMZN), Apple, Inc.(NASDAQ:AAPL), and Google’s parent company Alphabet, Inc.(NASDAQ:GOOGL,GOOG) top that list.

The new antitrust inquiry under could potentially ratchet up the already considerable regulatory pressures facing these top tech firms. Mind you that the review is expected to go above and beyond the routine antitrust checks by the Federal Trade Commission (FTC). It might surprise you to learn that the two agencies actually share antitrust enforcement authority and have in recent months figured out a game-plan on how to tackle the antitrust overhang facing the four companies. As you might imagine, the turf collaborations have raised quite a stir in the tech industry and, rightfully, rattled investors because the DoJ could amplify the risk if its findings on any company resonate with those by the FTC.

Related: The Telecom M&A Game Is Heating Up

Amazon’s response: “Small and medium-sized businesses are thriving with Amazon. Today, independent sellers make up more than 58% of physical gross merchandise sales on Amazon, and their sales have grown twice as fast as our own, totaling $160 billion in 2018. Amazon’s retail business competes in the worldwide market for retail sales and represents less than 1% of global retail and less than 4% of U.S. retail. And the vast majority of retail sales – 90% – still occur in brick-and-mortar stores according to the U.S. Census Bureau.”

Amazon reported revenue of $285.52 billion in 2018, which is actually 7.8 percent of total retail sales in the country for the period (excluding autos, gas and restaurant sales) but a whooping 47 percent of ecommerce sales. Whereas there’s no denying its sheer dominance, regulatory bodies and lawmakers will have their work cut out trying to explain how the company’s prices, reputed as being among the lowest in the industry, have been harmful to the consumer.

Meanwhile, the other three companies contend they have rightfully earned the right to sit at the pedestals of their respective industries by simply being more innovative than everybody else.

Google safe?

Claiming that the four simply got so big by ruthlessly eliminating competition is a sweeping generalization that’s highly unlikely to pass muster.

Facebook has already paid its dues after being fined a record $5 billion by the FTC a few days ago over privacy violations.

Apple’s App Store has come up against accusations of anti-competitive behavior regarding how the company runs the platform, including how apps are curated and reviewed as well as what business models are  made available to developers. To-date, nothing has ever come of it.

Google investors though can probably rest easy--if history is any indication. The biggest fine it has ever faced from antitrust bodies was $22 million levied seven years ago. 

A few days ago, there were reports that the company struck a multi-million-dollar fine over alleged violations of children’s data privacy on YouTube. The fact that the story did not receive nearly the same attention as FB’s says a lot. The company has, indeed, received a clean bill of health by Mnuchin and Trump over security allegations by Facebook co-founder and board member Peter Thiel.

You are left to wonder whether the entire exercise is not a mere smokescreen to take down Amazon as Trump has repeatedly avowed.

By Alex Kimani for SafeHaven.com

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