Amazon could be forced to divest its logistics assets

By: Ruchi Gupta
Ruchi Gupta
Ruchi takes fitness and maintaining a healthy lifestyle very seriously. During her spare time, she enjoys swimming, running, and… read more.
on Jun 22, 2021
  • Amazon could be forced to sell its lucrative logistics business as part of a new bill.
  • Democrat Pramila Jayapal is proposing the Ending Platform Monopolies Act
  • Sellers on Amazon's platform "had no choice" but to use its expensive logistics service.

Retail behemoth, Inc. (NASDAQ: AMZN) can be forced to divest its logistics subsidiary due to a newly proposed bill lobbied by Washington Democrat Pramila Jayapal, Bloomberg reported. According to at least one analyst, Amazon’s logistic business could have fetched a valuation of $230 billion by 2025, yet it now faces an uncertain future.

Is Amazon guilty of antitrust violations?

According to the bill proposed by Jayapal, Amazon could be forced to sell delivery hubs across the country due to potential violation of antitrust legislation. The bill was introduced on June 11 and the Democrat is finding support from across the political aisle.

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By definition, an antitrust violation takes place when a company flexes its muscles in one market to give itself a large advantage in another market where it doesn’t have as much influence. In Amazon’s case, it boasts an estimated 41% market share of all online spend yet it still relies on other shipping partners like FedEx Corporation (NYSE: FDX) to handle a portion of its delivery orders.

At the core of the bill, titled the Ending Platform Monopolies Act, is the fact that third-party sellers feel they “had no choice” but to pay for Amazon’s logistics service to sell their products online, Jayapal spokesman Chris Evans told Bloomberg. Evans added:

The bipartisan Ending Platform Monopolies Act requires dominant platforms including Amazon to divest lines of business — such as Fulfillment by Amazon — where the platform’s gatekeeper power allows it to favor its own services.

The bill may have some supporters now but it is unclear if it will prove to be enough to become law. Nevertheless, it serves as proof that at least some lawmakers are actively trying to limit Amazon’s market power and its large expansion into logistics.

What Amazon sellers are saying

Amazon’s business tactics have been a major cause of concern for American lawmakers following the former’s rapid rise in the logistics industry.

Amazon sells more than half of its products through independent merchants that pay Amazon a commission on each sale. Merchants can handle packing and shipping items on their own, but many say they use Amazon’s service and pay Amazon additional fees because that gives their products better placement on the site and boosts their sales.

One online merchant wrote a letter to federal lawmakers in 2019, noting Amazon forced him and others to use its pricey logistics services. Given the absense of any other option, lawmakers will need to carefuly consider if this consittues an antitrust violation.

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