FTC to Review Amazon's MGM Acquisition

Amazon-MGM Acquisition Faces FTC Review Under Lina Khan

The Federal Trade Commission, now under the leadership of Lina Khan – a known critic of Amazon – will be examining Amazon’s acquisition of MGM, as reported by The Wall Street Journal. While a complete blockage of the $8.45 billion merger appears improbable, the review could signal a shift in the agency’s strategies regarding large-scale corporate consolidation across diverse industries.

Strengthening Prime Video’s Content Library

Announced last month, the proposed acquisition would significantly expand Amazon’s content offerings. Integrating MGM’s extensive catalog of 4,000 films and 17,000 television shows would substantially bolster Prime Video, aiming to establish it as the primary destination for on-demand media, much like the Amazon storefront itself.

The Evolving Streaming Landscape

The streaming industry is in a constant state of flux as content rights are transferred and companies adapt their strategies. Netflix prioritizes original programming, and Amazon is following suit. Disney relies on its established franchises, while other platforms are actively acquiring diverse collections of shows and movies to capitalize on the long tail of the streaming market.

Concerns Regarding Platform Ownership of Content Producers

Regulators are questioning whether content companies like MGM should be owned by platforms such as Amazon. An independent production company can negotiate its own licensing agreements and compete directly with others. However, as a subsidiary of Amazon, MGM’s role could be diminished to an internal production unit, operating not on the quality of its content, but as an integral part of a larger, multi-faceted corporate structure.

Lina Khan’s Stance on Market Dominance

FTC Chair Lina Khan has consistently voiced concerns about this business model. Her influential paper, “Amazon’s Antitrust Paradox,” argued that Amazon leverages its dominance in one sector – like AWS in web hosting – to support less profitable ventures, such as its delivery service.

Challenging Existing Antitrust Doctrines

The argument suggests that if the delivery service would fail without AWS support, the company may be engaging in anti-competitive practices facilitated by its market power. Previously, such cross-vertical market power was often overlooked by antitrust regulations, provided consumer prices remained stable. However, Khan’s research challenged this doctrine, and now she has the authority to implement changes.

FTC and DOJ Roles in Tech Antitrust Investigations

Federal authorities routinely review substantial deals, and in this instance, the FTC is reportedly leading the investigation into the Amazon-MGM merger, potentially due to its existing antitrust inquiries involving Amazon. The Justice Department is concurrently investigating Google and Apple, while the FTC has repeatedly clashed with Facebook over antitrust concerns. (The FTC has declined to provide comment regarding ongoing investigations.)

Likelihood of Approval and Potential for New Doctrine

Despite concerns, it appears unlikely that the Amazon purchase of MGM will be blocked, given the competitive landscape and MGM’s financial situation. However, the review will proceed, offering insight into the FTC’s evolving approach to mergers of this type.

Potential for Increased Scrutiny and Rewinding Past Mergers

Even with a relatively lenient approval, the review could showcase new regulatory principles. Amazon’s potentially monopolistic position in unrelated markets is likely to receive greater attention than under previous FTC leadership. This could pave the way for more thorough and assertive reviews in the future, and Chair Khan has indicated a willingness to revisit previously approved mergers.

Key Players: Amazon, MGM, Lina Khan, FTC
Industries Involved: Streaming, Retail, Web Hosting
Potential Impact: Changes to antitrust regulations, increased scrutiny of tech mergers