In God We Antitrust

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I think they're the most evil company on the face. the planet of the normal retail giants they are by far the most evil by far This is Michael Weisel, and once upon a time, Amazon was his best friend, a dream sales partner that took his business worldwide. until Amazon turned on him. Am I allowed to swear, by the way? A lot of swearing coming. Mike's from Knowlton, Quebec. For years, he ran a general store where he sold his own homemade soaps.

But his big commercial breakthrough came in 2008. It was inspired by his daughters. They were nine and seven, deep in their crafting era, and making a mess. I said, what do you guys do? You know, Katie, I remember she was like seven. She said, oh, we're making lip balms. And I remember her like, you know, kids over exaggerate everything. She was taking the lip balm and like putting it like all over her face.

And I look at the ingredients, I say, oh, I wonder what are the ingredients? How do you make a lip balm? The first ingredient in this lip balm making kit was propylene glycol. which propylene glycol is basically one of the main ingredients in antifreeze. Yeah, so it's not a really wonderful thing. So me being a soap maker, I said, hey, how hard can it be to make a natural lip balm? Turns out, not that hard.

Mike found a recipe online and started making non-toxic, all-natural, DIY lip balm kits for kids. And they took off. He got them into toy stores across Canada and the US. And then, around 2010, a friend convinced him to start selling on Amazon. And it was so exciting because we were doing serious numbers on Amazon. It was awesome because they were helping all these kind of small brands get exposure. So...

Fast forward to 2018. Mike's company is doing well. He even moves production into a new building that has a sort of startup vibe. Really cool loft in Montreal in the old RCA building. That was really cool. And he hires staff to help him zhuzh up his product's Amazon listing. better pictures, better keywords, all the stuff you really need to get seen out there.

Then, one day, Mike's tinkering around Amazon, searching for his lip balm kits, wanting to see them from the buyer's perspective. He's scrolling down, and that's when he makes a discovery. I start seeing my products being sold by Amazon and saying, what the fuck is going on? Mike had found listings for his lip balm kits, only these weren't his listings, they were Amazon's. They had bought my products from a distributor and they were now competing with me on their platform.

Amazon was buying Mike's products from Mike's distributor and underselling him on Amazon with his own stuff. So I was selling my products at that point around $19.99 and they were starting to sell my products I think at $12.99. I think it's the most absurd thing in the world, like to compete with your own vendors. Like you have to get every piece of the fucking pie. It's just incredible greed. I've never seen greed like this in my life.

Amazon is the largest online retailer in the world. Today, by some estimates, as many as 56% of North Americans looking to buy something start their search on Amazon. You shop on Amazon. I shop on Amazon. We all shop on. I'm a fucking zone.

It may feel like the reason Amazon dominates is because they're good at what they do, but what they're really good at is crushing everyone else. underselling Mike with his own product, that wasn't necessarily illegal. Just shitty. But in 2017, a 28-year-old law student set out to prove that Amazon had secured a monopoly. And that is illegal. What's more... The US government had let it happen. I'm Cory Doctorow, and this is Understood. Who Broke the Internet? Episode 3, In God We Antitrust.

Please welcome to the program Federal Trade Commission Chair Lena Kahn. FTC chair Lena Kahn is known for her aggressive approach to curbing corporate power. In the world of big business, there is one woman who inspires great fear and awe. That woman is Lena Kahn. Lena Kahn. Lena Kahn. Lena Kahn. The Honorable Lena Kahn. Can you hear me? Yeah, I can hear you. You're coming through my computer, not my... Lena Conn is probably the closest thing an antitrust enforcer ever came to being a rock star.

There are t-shirts with her face on them with slogans like Lena Khan slays monopolies and Notorious FTC. But her story with Amazon starts back in 2017 when she was just a lowly Yale grad student working on a paper that she was hoping to get published. I was a law student and I had spent years doing research and interviews with the businesses that sell on Amazon and had come to conclude that

Amazon as a company had certain properties of what we traditionally understood to be a monopoly. That American tradition of monopolies can be traced way back.

Okay, ever notice that in the game of Monopoly, there's this recurring railroad motif? There's a historical reason for that. The original Monopolis were rail barons. During the late 19th century railroads had changed the face of society and of commerce. You could now ship things across the country.

Soon, everyone relied on railroads for just about everything. And this was a huge opportunity for farmers especially, because they could now get their livestock and produce into and out of rural America. But that technological advance had also consolidated significant power. And so oftentimes a single railroad...

could determine whether a farmer sank or swam or whether people could earn a livelihood. Because the railroads were so powerful, they could and did screw these farmers over in a million ways. Two farmers can end up paying vastly different prices from one another, or from one day to the next, and on vastly different terms, even though they were contracting with the same railroad company. Just because! And that arbitrary power that was so consolidated felt unfair and unjust to these farmers.

And so alongside many others, they ended up pushing for Congress to act. And a senator named John Sherman, he did.

John Sherman was a member of Congress, Republican Party, and he ended up being one of the main authors of what was known as the Sherman Act. This was a law passed in 1890. The first federal antitrust law in the United States. Antitrust is what Americans call their anti-monopoly laws. Those laws are grounded in the idea that businesses that get too powerful can crush competition.

that they can just screw their customers, workers, and suppliers, everyone who relies on them, without worrying about any of them getting poached by a rival who might treat them better. Because there are no rivals.

Monopoly power and its abuses are not just some abstract issue. This is about whether people can keep their businesses afloat, whether they can keep supporting their families or they have to kind of wake up in the middle of the night worrying that a monopolist is arbitrarily going to turn off the spigot just because it can. The Sherman Act aimed to curb that power by making it illegal to form or maintain a monopoly.

When Senator Sherman was stumping for this law on the floor of the Senate, he let fly with a hell of a quote. If we would not endure a king as a political power, we should not endure a king over the production, transportation, and sale of the necessaries of life. And so in the same way that in the United States we overthrew a monarch, there was a recognition that we didn't do that just to be ruled by a different form of sovereign power.

Antitrust laws were there for the little guy. And no company was allowed to get too big, too consolidated, or too powerful. No company was allowed to become too much like a king. And for most of the next century, right up until the 1980s, that was how antitrust worked.

That is, until Robert Bork came along. When I first started at Yale, I really thought the situation of the law was hopeless. that the intellectual content of antitrust was corrupt beyond redemption. and will be kept that way by political forces hostile to the free market. Robert Bork was also at Yale Law. Not that he and Lena crossed over there or anything. He died in 2012.

Bork started teaching at Yale in 1962. That same year, the Supreme Court invoked antitrust law, ruling that a shoe company couldn't buy a chain of shoe stores, lest they then kick all the other brands out of their In 1966, a California grocery store was blocked from buying another grocer in case that led to too much consolidation in the local market. In 1967, a frozen pie company wasn't allowed to sell frozen pies in Utah because that might undercut a local pie company that sold fresh pies.

And some people thought, okay, sure, there were a few cases where maybe the application of these laws was going too far, but the laws themselves were fundamentally good, and the way the Supreme Court was applying antitrust was fundamentally right. Bork did not agree. He, alongside a group of other academics, ended up critiquing the antitrust laws and said the way that these laws are enforced, the way that Congress wrote them, doesn't really make any sense.

And we really need to focus on a single value known as, you know, what he ended up calling consumer welfare. For Bork, consumer welfare essentially boiled down to one thing. Lower prices. Will this shoe store acquisition, this grocery merger, this sale of frozen pies make the price of shoes, groceries, or pies go down? If so, great. Let the acquisition, merger, or pie sales go through. And if it didn't lead to lower prices, no big deal. The market would self-correct. There was an assumption that

The end goal of being a monopoly is ultimately to raise prices. And if a monopoly ever were to do that, it would be instantly disciplined by the flood of new entrants that would come into the market and discipline that pricing power. Why enforce antitrust laws if competitors will just rush in on their own offering lower prices? Consumers will vote with their wallets for the best deal. was going to take care of itself effectively so that enforcers could be really hands-off.

Robert Bork wrote about these ideas in a book called The Antitrust Paradox, and it was a hit. His ideas caught on. What had been fringe ideas ended up being codified through courts, through the antitrust agencies under the Reagan administration. And so that ended up really catalyzing a major shift. that really impacted antitrust enforcement for decades.

so widely has its influence spread By the time of this 1987 lecture, a decade after his book was published, Robert Bork had completely changed the way that America and its major trading partners in the UK and Europe enforced their anti-monopoly laws. but matters are majorly improved and antitrust has been recaptured for a free market rather than an interventionist, statist philosophy. Lena Kahn was born in 1989, after The Antitrust Paradox was published, so she grew up in Robert Bork's world.

This is what she saw. Market after market become extraordinarily consolidated from airlines and telecoms. chat for hospitals. You've just seen fewer and fewer players come to dominate and there are all sorts of ways that affects people in their day-to-day lives from people paying higher prices to having lower wages to worse quality. By the time big tech was emerging, in the late 1990s, the original intent of the Sherman Act to shatter king-like corporate power had been consigned to history.

Congress and the Federal Trade Commission had gone hands-off when it came to enforcing antitrust law in the United States. It was Bork's world, and few companies were as well positioned to thrive in it as Amazon. It was over 30 years ago that Clifford Olsen first called me. Secret phone calls from Canada's most notorious serial killer. I knew I was killing the children, but I couldn't stop myself.

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In 1997, Jeff Bezos wrote a letter to Amazon shareholders. In it, he made an explicit promise. Shareholder value was his ultimate goal. He wrote, quote, This value will be a direct result of our ability to extend and solidify our current market leadership position. Over the next three decades, that's exactly what Amazon set out to do. Extend and solidify. In 2017, when Lena Kahn was writing about Amazon in her paper, one example of Amazon's relentless pursuit of dominance stuck out for her.

the story of diapers.com. So diapers.com was this innovative upstart. They recognized that there was a need in the market to make sure that parents of young kids could get diapers quickly. And so they started this online commerce business. Mark Laurie and Vinnie Barrara started Diapers.com in 2005. That first year, the company sold $2.5 million in diapers and formula.

It made sense. Diapers delivered right to your door? Families with young children loved it. And guess who else was paying attention? Amazon was tracking diapers.com quite closely and realized that this was a market that they wanted to be in and wanted to excel in. At first, Amazon tried to buy diapers.com out, but Diapers' parent company was like, no thanks. So Amazon tried another tactic.

They ended up engaging in a ruthless pricing war with diapers.com where they were undercutting the price of diapers To the extent that they were actually losing money on the diapers with the sole goal of driving diapers.com out of the market. Amazon started selling diapers significantly below cost. So low that reports from the Times said that Amazon was on track to lose $100 million in just three months in order to undercut diapers.com.

And they could. Because Amazon, of course, has so many different lines of business and so many different forms of revenue that it's not just dependent on how much it's making on diapers to stay afloat. It was all too much for diapers.com. They couldn't keep up. They got driven out of the market. Diapers' parent company was forced to sell.

Both Amazon and Walmart made bids. Walmart actually had the better offer, but by this point, diapers owners had grown so afraid of Amazon that they sold to Bezos for less than they would have gotten from Walmart. Okay, so surely this was anti-competitive behavior, right? Surely aggressively running a competitor out of business, followed by a hostile takeover would set off some antitrust red flag? Well, it was a big enough acquisition that it had to go in front of the Federal Trade Commission.

And the FTC, they waved it right on through. And then, then... Once Amazon had eliminated the competition, it ended up raising the prices of diapers above what it had been selling them at.

The affordability, the cheapness of Amazon's diapers, it was fake. From where Lena was sitting, Robert Bork's so-called consumer welfare measurement was a flaw. The consumer welfare standard has failed to promote consumer welfare. In market after market, we actually see people paying higher prices. So is Jeff Bezos now an autocrat of trade? Is he the king over the necessaries of life?

Well, look, you should talk to some of the businesses that have to sell on Amazon. And what was really eye-opening for me was just how much these businesses live in fear that one day they could wake up and they're... Seller page could have been delisted or they could have fallen in the search rankings from the first page to the seventh for some arbitrary reason. That's a black box.

They're calling to find out why they can't get an answer. And meanwhile, they're bleeding cells and are worried about going bankrupt. Which is, of course, exactly what happened to our kid's lip balm maker, to Mike Weisel. I'm thinking how the fuck am I going to support my family? I'm going to go out of business. I start to get into fucking panic mode. Mike doesn't know how he would have caught on to Amazon's scheme buying and underselling his own products if he hadn't gone scrolling that day.

I mean, obviously, he would have figured it out when Amazon sent him that next payout. My sales went to one quarter of what they were before, and my margin went basically to zero. Mike got his distributor to stop selling to Amazon, but Amazon wasn't done with him. They started to charge all these fees like for advertising. Huge amounts that just crept up. And the long shadow Amazon cast didn't merely fall upon Mike's Amazon list. It affected every online sale he made.

They will monitor prices on other websites like Target, Walmart. So unless you are selling for less than that, you will not even be seen. And the only way you'll see yours is if you drop your price. So what I had to do was lower my price. So all our profits got basically wiped out. The part that is perhaps the most shocking about all of this is that, yeah, even after everything that's happened to Mike, he's still selling on Amazon.

I'm trying to not sell on Amazon, but it's like a drug addiction because you get this steady, even though it's a shitty margin, you get a steady kind of income from it. when Amazon does something you don't like there's this instinct to boycott to stop selling or maybe stop buying But have you noticed how hard it is to actually do that? That if you go to buy something online, so many of the hits are from Amazon. That the cheapest, easiest option is almost always Amazon.

That is by design. That is the point. This is not your fault. Trust me, I buy from Amazon. There's stuff that I have to buy that it's so easy to buy. But it is bad for customers because it basically gives them less choice. We reached out to Amazon to ask them about Mike's situation. They didn't make anyone available to talk to us. So what does Mike want to see happen? To me, this is like just a simple monopolization. There doesn't even need to be new laws. And Mike is right.

Robert Bork's influence didn't actually change America's antitrust law. The Sherman Act still stands. Bork just changed how antitrust laws were interpreted and applied by generations of lawmakers.

Clive Thompson, the internet culture writer, saw up close what that meant, not just for Amazon, but for the internet at large.

The government had been completely asleep at the till on antitrust for the longest time. And I think the abandonment of antitrust has been pretty disastrous for... the internet that we use today and that's largely because it allowed all these internet companies all these social media companies all these providers of online tools to grow huge and then to thwart any serious competition by simply buying any competitor that came along.

One of Bork's articles of faith was that once monopolies started to throw their weight around, new companies would rush into the market to compete away their power. We hear so much about buzzy startups, maybe that feels like what's going on. But those startups almost never seriously challenge the big entrenched tech monopolies. Not because their products aren't good and not because their users don't love those products, but because dethroning big companies is no longer the point.

Today the point is to get bought by the big companies. You know, Facebook buys Instagram. They see it growing like mad. They see it becoming something exciting. They buy it. They see WhatsApp growing as a way to chat. They buy that. In 2012, when Facebook bought Instagram, Mark Zuckerberg sent an email that explicitly said that he was doing it just because he didn't want the competition.

But the FTC, they waved that deal through. Google did build its legendary search technology in-house, but it bought almost everything else. Android, G Suite, Maps, Satellite, Waze, YouTube.

And the more power they amassed, the less they had to care about what their actual users really wanted. They could now focus on... squeezing more money out of the overall ecosystem and that to me is a really strong part of what took this amazing promise of software as kind of like a liberating tool, as a wonderful tool for expression and turned it more into a tool for control.

I don't think anyone was even paying attention to how much power each of these companies was amassing. Except for Lena Kahn. of just frustration and anger candidly. including at the government for decades of inaction. So that's the thesis of the piece and what I ended up writing. In 2017, in her last year at Yale, Lena Kahn published her paper. And a cheeky reference to Bork's butt. She called it Amazon's antitrust paradox.

I used Amazon as a vehicle to tell a broader story about antitrust and how this consumer welfare paradigm had become the Achilles heel for firms, especially in digital markets. could sing the tune of consumer welfare to monopolize in ways that was entirely antithetical to what the law is about. And something very out of the ordinary happened with Lena's paper. Something that does not usually happen with law review articles. It went viral.

It was quite surprising, honestly. I mean, I'd been a law student toiling away on this, was just excited to be done, and that it had gotten published. So it was an honor and also just quite surprising to see that it you know, seem to really touch a nerve. Lawyers all over the world were reading Lena's paper. Not just lawyers. Normies all over the world were reading Lena's paper. I remember reading it. I was out on a book tour and I thought, God damn, I get it now.

And there was one particularly powerful person who must have read it, because Lena Kahn was about to get an offer that would change her life, and maybe, the world.

President Biden will nominate Lena Kahn to serve as a member of the Federal Trade Organization. The youngest person to ever chair the Federal Trade Commission, the Senate approved 32 year old Lena Kahn. President Biden's pick is a prominent critic of big tech, where tech companies might be a little nervous about this news. It has been a bit of a whirlwind. In 2021, when Lena started as the chair of the FTC, she made it her mission to get back to the basics of the Sherman Act.

No more corporations with the power of kings. From now on, the FTC was going to be about a hell of a lot more than just price go down. And there was a lot to clean up. The FTC ended up studying acquisitions by bid tech companies and found that there had been, you know, over 600 that had just flown below the radar and not a single one was challenged by antitrust enforcers. It was time to enforce the law. and Big Tech was about to feel the wrath of Lena Kahn.

Studying Amazon as an academic is very different from pursuing enforcement actions against Amazon as a law enforcer. But enforce the law she did. In the fall of 2023, the FTC filed a major antitrust lawsuit against Amazon. and accused the company of illegally using its market power. And that's how Lena became a star. Thanks, Andrew. Good to see you.

the ftc's lawsuit against amazon took on many of the complaints of sellers like mike like steadily hiking the fees sellers have to pay to access customers Sellers who now pay one out of every two dollars to Amazon, so this is effectively a 50% tax that businesses pay to Amazon to reach shoppers. It nailed Amazon for punishing sellers when they sell on a different platform.

And then there was this big one. Amazon has also deliberately degraded the quality of its platform yeah that's right and shitification strikes again So this lawsuit is fundamentally about protecting free and fair competition. And the US antitrust laws prohibit firms from using their monopoly power to punish or preclude or prevent competition.

And that's what our lawsuit lays out that Amazon has done. And that, in turn, inflates prices for consumers, not just on Amazon's own site, but actually across the Internet. And Lena was looking across the entire Internet. The FTC launched lawsuit after lawsuit, aimed at company after company. When you look through them, they're like a bingo card of things that suck about being online. Things like privacy violence.

We took on a whole set of data brokers that had been illegally surveilling people and then quietly selling their sensitive data. And a personal favorite of mine, subscription trap. We brought major lawsuits including against Adobe and against Amazon for trapping people in subscriptions and making it just absurdly difficult to cancel. I always say, there's a grease slide to get into a subscription, and a grease pole you gotta climb to get out of it. Well, Lena, she degreased the whole thing.

It felt very satisfying at the end of the day to be able to file something so that we could really vindicate the rights of the American people and the businesses and the consumers that have been harmed for years. Of course, Lena wasn't popular with everyone. Between 2021 and 2024, Rupert Murdoch's Wall Street Journal published over 100 editorials damning con. She was described as a crypto-Marxist, bent on nothing less than the total destruction of the American economy.

One editorial even said that she should be disqualified from pursuing a case against Amazon because she had studied the company too thoroughly, and her expertise in their business meant that she would be biased against them. But even though the Biden administration is most closely associated with the U.S. antitrust revival, there are plenty of conservatives who hate monopolists. Take J.D. Vance and Matt Gaetz. They say they love Lena Kahn. They even call themselves conservative.

So I think we do see a lot of bipartisan concern and a recognition going back to the original antitrust values that if we really believe in freedom, that has to involve. protecting ourselves from autocrats of trade, as well as creating safeguards in our political sphere. As we record this, a federal courthouse in DC is hosting two historic antitrust trials, a remedy trial, to figure out how Google will be punished for its monopoly over search.

and a historic antitrust case against Meta. If Meta loses, they could be forced to sell off Instagram and WhatsApp. Google has lost three U.S. antitrust trials in the past two years. Now Google is fighting to keep from being ordered to sell off Chrome, maybe Android. Apple, meanwhile, is facing criminal sanctions for allegedly lying to a federal judge about its monopolistic payment processing system which takes 30 cents out of nearly every dollar collected in an app.

Antitrust wonks have a name for this moment. Antitrust Woodstock. And Amazon? Again, Amazon didn't make anyone available to speak to us for this podcast. But publicly, the company has denied the FTC's accusations. Their council argues that Amazon's practices fuel innovation, bringing lower prices, faster delivery, and more choice for consumers, all while helping small businesses access new customers.

And what do you say to people who say that even if we win these court victories, that it's too late, that we're not going to unscramble these eggs, that monopoly is cooked, that we're just like in an era of oligarchy, and that's just going to be the way it is? Well, look, I'm somebody who doesn't subscribe to that type of inevitability, right? The markets that we have, the economy that we live in, that's not just the product of these inevitable market forces. It's really the result.

of policy choices and the legal regimes that we choose. Well, last November, the American people went to the ballot box and they made a choice. On January 31st, 2025, Lena Kahn resigned from the FTC. Soon after, the Trump administration fired the two remaining Democrats on the commission. Or at least, Trump claims he fired them, because the law is pretty clear. He can. The FTC's case against Amazon is slated to be tried next year, in 2026. A lot could happen between now and then.

I do think there's an open question as to whether These tech executives are going to be able to notch these sweetheart deals that get them out of this litigation. And I think as we see a lot of these companies and their top executives trying to cozy up with the new administration, I think we just all have to be vigilant. The Enshita scene is here.

As we careen into an era of climate chaos, rising authoritarianism, trade wars, and far too many real wars, we need an internet that works for us. We need a billionaire-proof internet. But how do we get it? That's on the next and final episode of Understood Who Broke the Internet.

I Donald John Trump do solemnly swear that I'm behind the throne money always locked a number of u.s. Lobby groups talking as if this was a done deal This was you know simply just get on with it and they have totally and utterly appropriated the internet. And those absolutists out there who are babyish are people who frankly don't get it. I took that not as a warning to stop what I was doing, but rather to double down. If we don't stand up for Kenyans, who will? How do we prevent ourselves?

going down the same road yet again and having something that's really cool turn into something that's really easy understood is written and produced by matt muse our showrunner ac row and me cory doctorow in this episode you heard clips from cbc and the daily show with john stewart the wall street journal senator bernie sanders

The Majority Report with Sam Seder, Congress.gov, The Capital Forum, Bloomberg Quick Take, Fox 59 News, and CNBC. Roshni Nair is our coordinating producer. Mixing and sound design by Julian Uzzi. Our story editor is Veronica Simmons. And our executive producer is Nick McCabe-Lokos. For more internet history from Understood, check out Season 2, hosted by my friend Sam Cole, author of How Sex Changed the Internet.

Understood, the Pornhub Empire traces how a company born in Montreal came to dominate the adult industry, until a global scandal shattered its reputation. For more CBC Podcasts, go to cbc.ca.