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FTC Is Scrutinizing Amazon’s $8.45 Billion Acquisition of MGM
From:
Kathleen Greenler Sexton --- Subscription Expert Kathleen Greenler Sexton --- Subscription Expert
For Immediate Release:
Dateline: Boston, MA
Wednesday, July 14, 2021

 

In May, Amazon announced its intent to purchase Metro Goldwyn Mayer (MGM) for $8.45 billion. The Federal Trade Commission reportedly opened an in-depth investigation into the multi-billion-dollar deal, according to The Information and sources familiar with the matter. This additional government scrutiny should not come as a surprise, however. Last month, The Verge reported that Sen. Elizabeth Warren (D-MA) asked the FTC to do a thorough investigation into the acquisition.

Sen. Warren letter to FTC

In a seven-page letter to new FTC chair Lina Chair, shared exclusively with The Verge, Sen. Warren said that this deal would help Amazon attract subscribers to its subscription streaming services.

“But because this service is tied to a wide range of additional Amazon products and services that affect broad sectors of our economy, this transaction requires meticulous antitrust scrutiny. I support the Federal Trade Commission’s review of this deal, which is consistent with your ongoing investigation into Amazon’s anticompetitive business practices,” Sen. Warren wrote.

Of specific concern is the potential for the deal to violate Section 7 of the Clayton Antitrust Act of 1914 which prohibits acquisitions that may reduce competition or create a monopoly in any line of business or in any activity that affects commerce.

“I support the FTC’s review of Amazon’s MGM acquisition, and I urge you to conduct a broad and meticulous review. Amazon is a large and powerful acquirer with expansive operations; an investigation into the ramifications of this deal should include both its direct impacts on streaming services and prices charged to consumers and its broader effects on small businesses, workers, and the economy as a whole. As the House Antitrust Subcommittee recently reminded us in its detailed report on competition in digital markets, our antitrust laws were crafted to “protect not just consumers, but also workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals. Our contemporary antitrust treatment of vertical transactions must encapsulate this all-encompassing competition approach, as required by the Clayton Act. Dutifully scrutinizing this transaction is necessary to protect workers, small businesses, competition, and innovation,” Sen. Warren concluded.

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Additional antitrust scrutiny

The attorney general for the District of Columbia filed an antitrust lawsuit against Amazon on Tuesday, alleging the ecommerce giant used its dominant market position to control pricing and product sales through anticompetitive business practices. At issue is Amazon’s online marketplace for third-party sellers and the company’s unfair business requirements of those sellers via the company’s Business Solutions Agreement.

In addition, Democrats are circulating draft legislation for antitrust rules that would limit Apple, Amazon, Facebook and Google’s ability to operate as monopolies, including completing mergers like the one in question, reported CNBC. The bills are all in draft form and could change significantly but they focus on ending monopolies, scrutinizing large mergers, and making it easier for consumers to take their data with them when moving to other platforms.

Amazon’s benefit if acquisition is completed

If the deal is approved, Amazon would own a catalog of more than 4,000 films and 17,000 TV shows. The company would also own half of the James Bond franchise. The other half would remain under the ownership of Bond producers Barbara Broccoli and Michael G. Wilson. Access to this type of content will dramatically increase the offerings that Prime Video can offer its members.

Insider Take

Antitrust issues have been on the FTC’s radar for years, but the last few years have drawn additional scrutiny against big tech companies like Apple, Amazon, Facebook and Google. With a new FTC chair on board who is passionate about antitrust issues, companies like Amazon will have to tread carefully and be prepared to defend their actions. A new era of antitrust legislation could have a huge impact on how these tech companies do business, though those changes are probably a few years off.

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