By Morten Skroejer and Joshua Stein

The FTC continues its antitrust action against major technology companies, with the trial underway against Meta and the early phase of the case against Amazon also getting started. Both cases hinge on the claims that Meta and Amazon monopolize their respective markets. But as we have previously discussed, the definition of the relevant market is a crucial threshold issue. For example, Amazon is plainly not a monopoly as a consumer retailer (with a market share of about 10%) and also not a monopoly as an e-commerce platform (with a market share of about 40%), but the FTC contention is by being both, it dominates a unique market at the intersection of the two. Meta is only a monopoly if the FTC restricts the definition of “social media” sites to exclude YouTube, TikTok, X, and Telegram; conveniently, the FTC’s market definition does exactly that.

The FTC’s strategy has been to craft exceptionally narrow markets because their arguments about economic harm are weak. For example, if Amazon’s pricing practices were hurting consumer retailers, then the FTC would say that Amazon is part of the consumer retail market, disadvantaging competitors. If Amazon was using its position to raise prices for consumers, then the FTC would point to that behavior. The purpose of any FTC antitrust action should be to keep the markets fair and protect consumers and competitors from practices that cause harm. However, gerrymandering market definitions that don’t reflect actual consumer behavior works against that purpose.

In the Amazon case, the FTC cites to the factors laid out in the Supreme Court’s Brown Shoe decision to insist that the company is a monopoly. But they do so while ignoring that many of these factors (and, in fact, those that matter most for protecting consumers and competitors) don’t support their case. Under Brown Shoe, different prices and correlated price shifts reflect different markets, but Amazon’s prices reflect its competition with e-commerce and consumer retail; the Brown Shoe factors suggest Amazon operates in the same markets as consumer retail and e-commerce.

Amazon and Meta, like many large companies, compete in many different markets. The FTC’s approach to market definition in these cases is to treat operations across several markets as constituting a different, specialized market. For example, they claim that Amazon is an “online superstore,” which, if that market existed, would be one that Amazon dominates, rather than being a company that competes in both the ecommerce and consumer retail markets. Their claims against Meta are based on a gerrymandered definition of a market for “personal social networking” that consists of only four platforms – Facebook, Instagram, MeWe, and Snapchat. Why does this market exclude TikTok and X/Twitter, scrollable platforms with short-form video content that directly compete with Instagram? The FTC’s definition seems gerrymandered to maximize Meta’s market share, rather than show the state of the market.

This is a mistake in logic that results in a mistake in economics; the FTC treats “ecommerce and consumer retail” as a separate market, rather than seeing Amazon as a company that competes in two different markets of e-commerce and consumer retail. In the case of Amazon, there are several more markets, including streaming services, warehousing, and shipping, but they clearly don’t possess anything close to a monopoly in any of those markets either. Rather, Amazon uses its position across markets to create market advantages, but the FTC isn’t focused on those, because these advantages are (by even the FTC’s own analysis) part of fair market competition practices that ultimately benefit consumers.

The FTC maintains that its “mission is protecting the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research, and education.” But these cases depart from that mission by relying on market definitions that don’t correspond to economic reality. By contriving market definitions to serve the purposes of litigation, rather than economic and market realities, these cases detract and distract from the FTC’s core mission by failing to accurately identify even the markets in which these companies participate and compete.