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Even as Amazon closes its proposed $8.45 billion purchase of MGM, the Federal Trade Commission could still sue to block the merger if it decides that the deal is representative of broader antitrust concerns about its online retail service.
That’s what Writers Guild of America West and the Strategic Organizing Center, a federation of labor unions representing nearly 4 million workers that includes the Communications Workers of America and the Teamsters, urged the FTC to do in the latest appeal for regulators to take action. In a letter to be sent to FTC chair Lina Khan on Wednesday, obtained by The Hollywood Reporter, the groups claim that the purchase violates antitrust law because it strengthens Amazon’s foothold in the streaming market by allowing it to acquire not only MGM’s content library but also its premium cable TV network and video streaming service, Epix.
WGA West director of research and public policy Laura Blum-Smith and SOC executive director Michael Zucker warn that Amazon will likely shut down Epix to eliminate a direct competitor to Amazon Prime, which will harm competition, filmmakers and audiences held captive by the ecommerce giant’s dominance.
Zucker tells THR: “They have this unique platform that no other competitor has in a captive audience of Prime subscribers from its online retail business. They will utilize that leverage in this space in a very powerful way that will be substantially more impactful than what any other player can do. MGM may be a smaller player, but it’s a very large strategic move and needs to be viewed that way and challenged.”
Unions have been at the forefront of campaigns pressuring lawmakers and regulators to address the mass consolidation of multiple industries by Amazon. SOC has been intensely focused on the ecommerce giant’s steady encroachment into diverse lines of business because of its treatment of warehouse workers. Joined by WGA West and 30 other public interest groups, SOC pushed for the FTC to block Amazon’s bid to buy MGM in previous letter to the agency sent last August. This was after WGA West said in June 2021 that the deal “illustrates the imminent need for greater scrutiny and reform.”
Epix, unlike Amazon and other streaming services that have turned to prioritizing in-house production, distributes content from the MGM library to a wide variety of distribution channels. MGM has licensed content to Netflix, HBO Max and Hulu in addition to producing original content for other streamers and TV networks. In contrast to the strategy taken by Amazon and other similarly situated distributors, Epix’s content is not locked up on the company’s own streaming service.
The letter claims that Amazon is likely to eliminate this diversified access to MGM movies and TV shows so it can exclusively offer them on its platform.
“Amazon’s acquisition of MGM will harm content creators, eliminating a buyer of writers’ content and an outlet for its reuse, while increasing the industry’s vertical integration and therefore making further consolidation among content producers more likely,” the letter states. “Fewer buyers of content means less creativity and choice, and consolidation diminishes writers’ leverage against their powerful employers.”
The groups argue that Amazon has wielded its robust cash reserves, earned through its dominant online retail business, to acquire nascent competitors in violation of antitrust law. This acquisition strategy, they continue, harms consumers by propping up Amazon’s bumbling streaming service.
“This is Amazon’s model in various industries,” Blum-Smith says. “Amazon positions itself as a gatekeeper — a barrier through which competitors must pass to access consumers.”
The letter emphasizes Amazon’s history of acquiring potential competitive threats. In the past two decades, Amazon has bought at least 100 companies, many of which were nascent competitors. It has remained competitive in numerous markets by neutralizing these threats early on.
Amazon in 2011 purchased LoveFilm, Europe’s leading movie subscription service at the time. According to the letter, consumers started to complain about Amazon’s stewardship of the company. Amazon in 2014 discontinued LoveFilm’s streaming service and absorbed its content into Prime Video. The company folded three years later.
The SOC and WGA West rely on the Clayton Act, which states that a merger cannot proceed if it substantially lessens competition. Under the law, certain mergers can be found to violate antitrust law if they allow a larger, well-established firm to acquire a nascent competitor. Such acquisitions have the effect of leading the larger company to scrap business practices that encourage competition, neutralizing the competitive pressure to innovate better products and services for consumers.
Amid intense scrutiny of dominant tech firms, protecting would-be competitors has taken on renewed importance as they have the potential to disrupt an incumbent’s market power.
“The Amazon-MGM merger involves just such a nascent competitor whose acquisition by Amazon would eliminate a pro-competitive and increasingly successful potential rival to Amazon’s streaming platform,” the letter reads.
While Amazon says it closed the acquisition, the statement means very little except the company beginning to operationally combine MGM with Amazon Studios. Federal antitrust regulators can still challenge the deal.
The FTC currently only has four commissioners, with two of them largely favoring Big Tech monopolies. Khan does not have the votes to sue Amazon, but she may soon.
Alvaro Bedoya, former director of the Center on Privacy and Technology at the Georgetown University Law Center, awaits Senate confirmation. He’s expected to get through and vote in favor of blocking the acquisition, if it’s put to a vote.
With pressure mounting to take action against Amazon, the FTC has the choice of challenging the company’s bid to buy MGM if it believes that the merger presents an opportunity to scrutinize the core issues with Amazon’s dominance through its online retail service. Some legal observers, however, say that the acquisition is the wrong avenue for the FTC to address broader, structural concerns with Amazon’s business and that the agency should challenge the ecommerce giant in a separate lawsuit.
“Simply having the biggest library by number of titles for streaming services is not enough alone to prove anti-competitive practices. The FTC will have to prove a tangible anti-competitive effect in the marketplace as well as harm to the consumer population,” says entertainment attorney Glen A. Rothstein. “This will be a tough mountain to climb.”
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