Antitrust

Next on the Chopping Block? The Legal War Over the ACC

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By: Patrick Paulsen

The world of college sports is constantly changing. With the rise of name, image, and likeness (“NIL”), direct payment of players, and licensing in video games, the world of college athletics is a hotbed of legal activity. In addition, massive TV rights deals have caused seismic shifts in college sports, including the demise of the Pac-12. Much is at stake and even more is in flux, so it is no surprise that a new battle is emerging over another major college sports conference: the Atlantic Coast Conference (“ACC”). 

The Latest Conference Shift in College Football

Two of the ACC’s member schools, Florida State University and Clemson University, have engaged in legal battles to potentially leave the conference. Although Florida State’s snubbing from last season’s College Football Playoff was likely the straw that broke the camel’s back, the true motivating factor, as with the demise of Pac-12, appears to be money. “ACC members make roughly $30 million less per year than schools in the Big-10 and SEC.” As with other conferences, the ACC is held together by its grant of rights, an agreement whereby its member schools transfer their media rights to the conference to negotiate media deals collectively on their behalf. 

The ACC’s grant of rights is at the root of this legal battle and is why this conference’s potential breakup differs considerably from the Pac-12 or Big-12 realignments. The ACC’s grant of rights functions to protect the conference from realignment by providing the conference with each school’s media rights through 2036. In addition, the ACC’s constitution imposes a hefty exit fee, around $130 million for Florida State. Compared to other conferences such as the Pac-12 (whose grant of rights expires in August) or the Big-12 (whose exit fee is approximately $50 million), these hurdles to exit are substantial. Florida State estimates their total exit cost at around  $572 million to leave the ACC, hence the current litigation. 

The ACC and Florida State Litigation

This legal saga began in earnest on December 21st, 2023 when the ACC preemptively sued Florida State, likely to maintain the action in North Carolina State Court rather than a Florida court. Florida State’s Board of Trustees sued the ACC the following day, before the news of the ACC’s suit became public. The amended complaint filed by the ACC seeks “a declaration that Florida State is equitably estopped from challenging the validity or enforceability of the grant of rights” along with injunctive relief requiring Florida State to uphold its obligations to the conference and their agreements. 

Florida State’s lawsuit argues several legal theories, notably that the grant of rights is unenforceable as an “unreasonable restraint of trade” under Florida Statute 542.18, that the exit fees are unenforceable penalties due to being unconscionable and contrary to public policy, and that the ACC materially breached its fiduciary duties and contracts with Florida State. Florida Statute 542.18 is an antitrust that has recently been utilized to the benefit of Florida based firms outside the realm of sports.

The jurisdiction of these suits is likely as important as the claims. These differing lawsuits filed in differing state courts create hard to resolve issues, such as the battle over trade-secrets, when the controversy is viewed in totum. 

These lawsuits have clear third-party impacts: ESPN filed a motion in the North Carolina litigation supporting the ACC, alleging that Florida State’s attorneys may have “committed a felony by knowingly disclosing ESPN’s trade secrets.” Florida State’s filings contained non-public details from the media agreements between the ACC and ESPN. Meanwhile, in Florida, the Attorney General sued the ACC for refusing to publicly disclose the same agreements, claiming that under Florida law, they constitute public records due to the involvement of a government entity (Florida State University). 

Clemson Joins the Fray

In addition to the two lawsuits battling Florida State, Clemson University brought suit against the ACC. In what has been called a “pincer attack,” the Clemson lawsuit attacks the ACC’s exposed flank by picking up legal theories which fill the gaps left by the Florida State claims. Clemson’s suit embodies two main legal theories. The first is that § 1.4.5 of the ACC’s Constitution, which imposes an exit fee “equal to three times the total operating budget” of the conference (approximately $140 million), is unenforceable as it constitutes a “financial penalty” that is “unconscionable” and “against public policy.” The second theory claims that the conveyance of media rights in the ACC’s grant of rights should be interpreted to encompass only the rights to athletic events which occurred during a member university’s tenure as a member. 

Clemson argues that the exit fee for the conference has “ballooned to a point that was unimaginable in 2012, and is unconscionable, unenforceable, and in violation of public policy . . . .” Clemson is arguing that the common interpretation of the grant of rights is incorrect, and that instead of a blanket grant of media rights, the grant of rights is limited to those rights which are “necessary for the Conference to perform the contractual obligations of the Conference expressly set forth in the ESPN Agreement.” Clemson claims that this phrase makes the grant narrower than commonly believed, by limiting their conveyance of rights only to events which occur while they are members of the ACC, and not for the length of the agreement, regardless of conference affiliation. 

If successful on these points, Clemson’s cost of leaving the ACC would drop from around $572 million to somewhere around the $30-50 million that other conferences require. With so much at stake, the future of the ACC is unclear; however, there are some clues to what may happens next.

Can a Solution Be Found?

With three different lawsuits in as many states, each concerning particular state law claims, the chances of suits being removed and consolidated to federal court are low for the immediate future. Because each party is hoping for a “home court advantage” in their respective jurisdictions, neither side is motivated to consolidate to a neutral forum. In addition, Florida State is invoking sovereign immunity to argue a North Carolina court does not have jurisdiction. This, and other maneuvers, such as appeals and various procedural motions, will likely keep the cases open in each jurisdiction until a final judgment is reached on a  given issue. A favorable ruling to a party would allow one side to argue, based on the “full faith and credit” clause of the Constitution, that other states must accept their ruling. Should each side find favorable rulings in their home state, all bets are off as to how the “full faith and credit” clause will be interpreted to untangle everything, and resolution by the U.S. Supreme Court enters the realm of possibility. 

Due to court cases likely taking years to play out, and with the August 15th deadline to withdraw from the conference for the 2025-26 season approaching, there is a high incentive to settle or mediate outside of the courts. However, the perfect solution may be hard to determine with hundreds of million dollars at stake. How motivated to leave the ACC are Florida State and/or Clemson? How much are schools such as Florida State willing to pay to escape the ACC? As early as last August, Florida State initiated discussions with JP Morgan regarding raising the necessary exit fees through private investment. Other ACC member schools, such as North Carolina, are rumored to have interest in leaving the conference. There may be as little predictability in a settlement as there would be with these cases proceeding to trial. 

Conclusion

The merits of these cases have yet to be evaluated in each jurisdiction, so the sports and legal worlds will have to wait. Should settlements fail, any court decision will change the landscape of the ACC and the fortunes of its member universities by hundreds of millions of dollars. The docket watching may prove to be as exciting as any ACC athletic event, as all interested parties await even more shock waves through the dynamic world of college athletics.

Whatever Happened to Trust Busting in Sports?

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By: Mayel Tapia-Fregoso

Professional sports leagues in the United States (US) have existed since the first professional baseball league emerged in 1858. Since then, Major League Baseball (MLB), the National Football League (NFL), among other leagues, have dominated US sports with little competition from other independent leagues. These sports leagues have, in large part, escaped the comprehensive antitrust regulatory scheme laid out in the Sherman Antitrust Act. Despite the law’s enforcement, sports leagues have nonetheless enjoyed soaring profits because of their monopolies over broadcasting, labor, licensing, and media rights. Recent lawsuits against Major League Baseball and the National Football League are the latest in a series of cases designed to curb these professional leagues’ power and reveal the effects sports league monopolies can have on consumers.

A Brief History of Antitrust Regulation 

In 1890, Congress passed the Sherman Antitrust Act (Sherman Act), the first federal law outlawing monopolistic business practices. Congress designed the Act to combat previously unregulated industries, such as oil. Such industries were dominated by a single company and restricted interstate commerce. The Act empowered private parties to bring lawsuits against monopolist companies to enforce antitrust laws and seek damages for violations of the Sherman Act. Today, the Sherman Act “promotes consumer welfare by enhancing economic efficiency in commerce.”

Before the First Radio, There Was . . . Sports!

Professional sports have been a core part of American culture for more than one hundred years. The National Association of Base Ball Players was founded in 1858, eventually becoming Major League Baseball in 1903. Other major sports leagues, like the National Football League formed in 1920, were founded in the following decades of the twentieth century. These entities are the primary leagues within their respective sports, and have little competition from other leagues. 

How Do Professional Leagues Fit into Antitrust Laws’ Regulatory Scheme? 

Antitrust laws are designed to regulate national sports leagues, however some leagues are structured more like economic monopolies rather than single entities. In most sports leagues, along with its assets like land, player rights, media rights, and intellectual property. These teams collude with one another to control the supply of a product to increase profits, limit competition, and dominate the market.

Leagues with antitrust exemptions and those that have evaded the Sherman Act’s reach have monopolized their respective industry (labor, media rights, region exclusivity, licensing etc.). For example, if an athlete wants to play professional baseball, an MLB team must draft or sign the player, obtaining the rights to that player. Professional baseball athletes have few other options to play professional baseball besides MLB and MLB-affiliated minor league baseball teams (MILB). MILB teams or “farm teams” are teams affiliated with specific MLB clubs whose rosters are composed of players whose rights are owned by an MLB team. MLB teams have agreements with MILB teams to develop players they have signed or drafted, some of whom eventually feed that MLB team’s roster. MILB leagues and teams exist to develop players’ talent and provide MLB teams with a steady supply of players. MILB teams do not compete with any MLB teams—they are often located in small media markets. Currently, there are nine independent leagues composed of teams not affiliated with MLB teams. However, many of these leagues, like the American Association of Professional Baseball, have specific partnerships with MLB and, coincidentally or otherwise, do not have teams in any city where an MLB team plays. 

Other leagues have faced more direct competition. Over the years, a few independent football leagues have challenged the NFL’s foothold in the market. In 1986, the United States Football League (USFL), facing bankruptcy, challenged and defeated the NFL in an antitrust lawsuit. Despite finding that the NFL prevented the USFL from securing a television contract, the jury found the USFL was not damaged “except to the extent of $1.” In 2019, Charlie Ebersol and Bill Polian founded the Alliance of American Football (AAF), which held its season during the NFL’s offseason months. Even with the backing of a billionaire investor, the AAF could not stay afloat and ultimately failed because the NFL refused to partner with the league. In March 2024, a new United Football League will try its luck taking on the NFL this Spring.

The lack of competition from independent leagues has contributed to monumental revenues for these sports leagues. The NBA earns an estimated $12 billion annually, behind MLB’s $14 billion and the NFL’s astounding $25 billion.

Recent Challenges to Sports Leagues’ Anti-Competitive Behaviors

Recently, groups of plaintiffs are wielding antitrust laws to challenge leagues’ anti-competitive behaviors. In 2023, a group of plaintiffs filed a class action lawsuit against the NFL seeking $6.1 billion in damages, alleging that the NFL clubs conspired to suppress out-of-market telecasts of football games with the NFL’s broadcast partners. NFL games are distributed to broadcasters, like Fox and CBS, through regional coverage to only a specific region; for example, each team’s home market can view the games without blackout restrictions. In the NFL, a blackout restriction is when a team’s televised game is only available for viewership in that team’s media market.  To watch their team play, out-of-market fans must subscribe to NFL & DirecTV’s streaming platform called “NFL Sunday Ticket.” However, Sunday Ticket forces subscribers to choose between paying for every out of market game or not watching at all. The plaintiffs allege that the NFL and DirecTV collusion to suppress out-of-market telecasts violate the Sherman Antitrust Act. Judge Philip S. Gutierrez approved the plaintiff’s class-action status to two groups of Sunday Ticket subscribers and denied finding summary judgment for the NFL. In his order, Judge Gutierrez stated that a reasonable jury could find that the NFL conspired with its broadcasting partner to suppress telecasts in violation of the Sherman Act. The case is now heading for trial.

This is one of many lawsuits that has challenged the business model of professional sports leagues. MLB avoided a challenge to its antitrust exemption by settling a lawsuit filed by Tri-City ValleyCats and other non-MLB affiliated minor league teams. The plaintiffs alleged that MLB clubs colluded to cut ties with certain independently owned MILB teams, like the Tri-City ValleyCats, and their MLB affiliation. The aggrieved MILB teams argued that the MLB clubs replaced them with other MILB teams owned by MLB owners. The United States Court of Appeals for the Second affirmed the lower court’s decision to dismiss the case, citing MLB’s antitrust exemption. MLB settled with the plaintiffs before the US Supreme Court had a chance to consider the case.

Professional sports have become a multi-billion-dollar industry because of sports leagues’ successful business practices, which arguably cross the line into anticompetitive behavior. The recent wave of antitrust lawsuits highlights the call by some for tighter regulation of professional sports leagues and the consequences leagues’ anticompetitive behavior can have on consumers.

Adventures in Antitrust: Evaluating the Probability of Regulatory Action Related to Adobe’s Acquisition of Figma

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Photo by Caio on Pexels.com

By: Cooper Cuene

Since early this year, both public and private markets have endured a considerable slowdown as interest rates rose and the economy slowed. Despite this turbulence, one super-sized acquisition has demonstrated that not all companies are deterred from making big moves in the current market. In September, Adobe announced a plan to acquire Figma, a fast-growing tech company known for its cloud-based collaborative graphic design software. At a staggering $20 billion, the deal is set to break the record for the largest acquisition of a private tech startup, making Figma’s founder a billionaire in the process. That is, of course, assuming the deal goes through. 

That assumption looms large. Because Figma is Adobe’s largest competitor in the market for cloud-based design software, news of the acquisition immediately triggered antitrust concerns. The unease was palpable throughout Figma’s user base, many of whom had been disappointed by Adobe’s mishandling of other design tools acquired in the past. However, while many observers have opined that FTC intervention is forthcoming, regulatory agencies are yet to take any meaningful action to block the acquisition. 

The legality of corporate acquisitions, such as this one, is governed by section 7 of the Clayton Act. The act forbids one company from acquiring another when the result would be the creation of a monopoly. The act’s language is expansive, stating that “[n]o person . . . shall acquire, directly or indirectly, the whole or any part of the stock or other share capital . . . where . . . the effect of such acquisition may be substantially to lessen competition, or tend to create a monopoly.” 15 USC §18. 

Naturally, such broad language has led to the development of expansive case law defining when the results of an acquisition will “lessen competition” or “tend to create a monopoly.” The Supreme Court has not ruled on the interpretation of these provisions since the 1960s. In the 1963 decision U.S. v. Philadelphia Nat. Bank, the Supreme Court ruled that any acquisition that results in a “significant increase” in market concentration would be viewed as “presumptively illegal.” 

Over the years, the circuit courts have refined these broad principles. In addition to the standards set forth by the Supreme Court, many circuits have adopted a forward-looking analysis of the merger’s effects. For example, the Seventh Circuit noted in its 1986 decision Hospital Corp. of America v. F.T.C. that all that is required to show the formation of a monopoly is that “the merger create[s] an appreciable danger of such [monopolistic] consequences in the future.” This principle has continued to be applied to more recent cases. For example, when the Ninth Circuit granted an injunction to stop the acquisition of a seafood processing company in the 2016 case Boardman v. Pacific Seafood Group, the court noted that “a prima facie case [under section 7] can be established simply by showing a high market share would result from the proposed merger.” 

Alternatively, we can consider the FTC’s own guidelines used to determine whether the agency will take action on a merger or acquisition. According to Section 1 of those guidelines, the “unifying theme” is the idea that mergers should not be permitted to “create, enhance, or entrench market power or to facilitate its exercise.” To this end, the guidelines state that important types of evidence to consider include: whether the firms are, or absent the merger are likely to become, head-to-head competitors; the sizes of the merging parties’ market shares; and direct historical comparisons to the potential merger. In addition to these considerations, the guidelines also consider the principle that the acquisition of one company by another should not serve to “diminish innovation.” 

Drawing from both the applicable case law and the guidance published by the regulatory agencies, it seems overwhelmingly likely that Adobe will face antitrust action in its attempted acquisition. Adobe and Figma are the two largest competitors with the market for collaborative graphic design tools, a market which is projected to near $17.7 billion globally by 2027. If the acquisition were to be completed, combining Figma and Adobe’s pre-existing suite of graphic design tools would lead Adobe to possess a market share of nearly 70%. 

The probability of FTC action is only increased by the fact that Figma and Adobe are direct head-to-head competitors. Figma’s website speaks for itself: it has an entire page dedicated to directly comparing its product to Adobe XD. By acquiring its largest competitor, Adobe could have the freedom to raise prices for all of its graphic design products. Speculation is already widespread that Figma’s free tier will be eliminated soon after a merger is completed. Finally, as mentioned previously, Adobe has a history of acquiring innovative graphic design upstarts before eventually allowing the products to stagnate and die. A direct historical comparison can be found in Adobe’s own acquisition of Macromedia and their well-loved design software, Firework, which stopped receiving development support soon after the acquisition completed. Between price hikes, direct competition, and Adobe’s acquisition track record, the likelihood of FTC action to block this deal is nearly certain. 

Judicial precedent, FTC guidelines, and the circumstances of the acquisition support the conclusion that the FTC will take action to block the Adobe and Figma merger. The timing of the FTC suit and its exact allegations remain to be seen, but in all likelihood, the only question remaining is not if, but when.  

Epic Games v. Apple on App Store Payment Systems in South Korea

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By: Inyoung Cheong

Why Did Epic Games’ CEO Claim to be South Korean?

As a South Korean, it felt surreal to see Oli London, a British YouTube influencer, claiming to be Korean following multiple plastic surgeries. Although Korean culture has been well-promoted by the band BTS (and more recently by the Netflix show, Squid Game), I never imagined that a non-Korean would ever want to be Korean. Soon after, more astonishing news came out. Tim Sweeney, the CEO of Epic Games, one of the most influential video game companies in the world, tweeted “I am a Korean!” Why is this high-profile figure so thrilled about my home country? 

How Epic Games Was Treated in the U.S.

Epic has been involved in a serious dispute with Apple since 2015 when Tim Sweeny questioned the necessity of digital marketplaces, like Apple’s App Store for iOS devices and Google Play, taking 30% of app-generated revenue. To avoid the 30% charge, Epic released an installer in mid-2020 for its massively popular video game, Fortnite “Season 4,” with a feature, codenamed “Project Liberty,” that offered a 20% discount for in-game money when users chose to directly purchase the game from Epic. Apple took down the app Fortnite for violating its App Store’s terms of service within hours, leaving iOS and macOS users unable to update their video game. Apple has claimed that in-app purchase policies “ensure that iOS apps meet Apple’s high standards for privacy, security, content, and quality.” However, app developers view this system as monopolistic and exploitative, one that allows companies like Google and Apple to make a quick profit without providing value to developers or consumers. 

Interview with Tim Cook on Sway, April 5 2021

In the United States, the U.S. District Court for Northern California did not fully agree with antitrust claims brought by Epic Games against Apple regarding this issue. While Judge Yvonne Gonzalez Rogers issued a permanent injunction in this case in September 2021 that requires Apple to allow app developers to communicate with users about alternative payment systems, Epic Games suffered a pyrrhic victory. Judge Rogers rejected the allegation that Apple’s App Store is a monopoly and ordered Epic Games to pay Apple 30% of all revenue collected through the system since it was implemented for breach of contract. This award amounts to a sum of more than $3.5 million. On Twitter, Tim Sweeney expressed his disappointment, saying “[t]oday’s ruling isn’t a win for developers or for consumers.” 

It’s important to also note that while the lawsuit was still ongoing, Apple lowered its commission from 30% to 15% for developers that make under one million U.S. dollars per year. 

The World’s First Law Directly Regulating In-App Purchase Systems 

In contrast to the United States District Court for the Northern District of California, South Korean lawmakers turned out to be more empathetic to app developers. In an exceptional move, South Korean lawmakers made the practice of forcing app purchases through particular virtual storefronts illegal. In August 2021, South Korea’s National Assembly enacted amendments to the country’s Telecommunications Business Act that commits the Korea Communications Commission (KCC) to preventing online platforms from requiring certain payment methods, unfairly delaying the review of mobile content, and unfairly deleting mobile content from the app market. In Apple’s case, an app-developer whose app was removed from Apple’s App Store can simply file a complaint with the KCC and seek an administrative penalty against the App Store instead of bringing a time-consuming lawsuit. Currently, it appears that South Korea is the only country on the planet to enforce this type of legislation, hence Time Sweeney’s jubilant cry, “I am a Korean!”

Debates Over the New Law in the South Korea’s National Assembly 

Predictably, both Google and Apple recently worked with local major law firms in appealing to the legislature to block passage of the bill. Global business organizations including the American Chamber of Commerce in Korea, NetChoice, Asian Trade Center, and Asia Internet Coalition also filed objections to the bill. All of these groups argued that compliance with in-app purchase policies contributes to creating safe, secure, and credible digital platforms that have enabled developers to sell their products abroad. 

Affected tech companies even turned to the U.S. government and accused the bill of being a non-tariff trade barrier in violation of a joint trade agreement, but the Biden administration did not take official action other than briefly mentioning the issue in the U.S. Trade Representative National Trade Estimate Report in March 2021. According to the New York Times, this inaction reflects the Biden administration’s critical attitude towards these tech giants’ incredible power over commerce.

In addition, legislative documents demonstrate disagreement between various Korean government agencies. The Korea Fair Trade Commission (Korea FTC) initially opposed this bill because “forcing payment systems” could be regulated by antitrust authorities as predatory conduct without introducing new telecommunication regulations. In the end however, Korea FTC reluctantly agreed to the KCC’s jurisdiction into this area after weathering President Moon and lawmakers’ relentless concerns and rebuke concerning the current disparity in app markets. 

Google and Apple Took Different Approaches 

Just after the enactment of the new law, Epic Games requested that Apple restore Fortnite to operational condition in South Korea, but Apple declined. Apple said, “we would welcome Epic’s return to the App Store if they agree to play by the same rules as everyone else.” The KCC then requested that Apple and Google submit compliance plans by October 2021. Both companies’ initial plans were, however, turned down by the KCC. 

Before submitting a new plan, Wilson L. White, Google’s public policy and government relations senior counsel, had a conference with a KCC chairman on November 4th. White committed to giving developers “the option to add an alternative in-app billing system alongside Google Play’s billing system for their users in Korea.” 

In contrast to Google’s move, Apple remains resistant. Apple is holding its ground, stating that its current policy is already compliant with the law, even though a KCC official made it clear that Apple’s position “goes against the law.” The South Korean local newspaper ETNEWS reported that Apple CEO Tim Cook ordered “we should not step back in South Korea.” It was also announced that Apple’s Korea unit chief Brandon Yoon resigned from his position. A South Korean lawmaker, Jo Seung-rae, opined that neither Apple nor Google are doing enough to comply with South Korea’s new law and called Apple’s claim that it complied with the law “nonsensical.”

Tim Sweeney’s Push and KCC’s Remaining Tasks 

Tim Sweeny gave a speech in South Korea on November, 15, 2021, saying “Apple is ignoring laws passed by Korea’s democracy. Apple must be stopped.” He also expressed his strong support for South Korea’s anti-monopoly push during a video conference with the Korea Communications Commission’s Chair, Han Sang-hyuk, on November 17. Chair Han said, “[f]or a platform ecosystem where everyone coexists, not only the government, but also platform companies, content producers, creators, and users need to participate in making changes.”

Last month, the KCC initiated notice-and-comment rulemaking procedures. The KCC notified the public about the implementation of an ordinance that allows the KCC to impose monetary penalties of up to two percent of a company’s revenues on companies that do not comply, although the precise definition of “revenues” has not been settled and it remains to be seen whether “revenues” applies to South Korea alone or the global market. While there are still shortcomings in the law and complexities to iron out, it is undeniable that this new Korean law has ignited meaningful policy discussions over mobile app market practices around the world.

Inyoung Cheong is a Ph.D. Candidate at the University of Washington School of Law and former Deputy Director of the Korea Communications Commission. 

Antitrust Implications of Amazon’s Purported New Delivery Service

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Amazon-Shopping-in-KenyaBy Gardner Reed

Amazon’s recent acquisition of Whole Foods has renewed the debate surrounding the proper role of antitrust regulation. The traditional approach to antitrust law aims to protect consumers by keeping prices down and quality up. The Whole Foods acquisition, along with the growing dominance of large tech firms such as Google, has helped popularize a new approach to antitrust: “hipster antitrust.” Hipster antitrust widens the objectives of traditional antitrust regulation, not only protecting consumers through fostering competition, but also using antitrust enforcement to attack problems such as economic inequality and environmental degradation. While the Federal Trade Commission promptly approved the Whole Foods acquisition, recent reports that Amazon is developing a delivery service to rival FedEX and UPS may raise a new round of competitive questions and continue the debate surrounding the proper role of antitrust regulation.

To begin, it is important to understand why Amazon’s acquisition of Whole Foods was not an antitrust violation. First, Amazon itself only sells a small amount of groceries and Whole Foods only accounts for two percent of the American grocery market. Second, the grocery market contains far larger and more entrenched competitors, such as Walmart with a twenty percent market share and Kroger with a seven percent share. Third, antitrust regulators, applying the traditional approach to antitrust, believe that fostering competition is the best way to promote low prices and high quality. Because this merger accounted for only a small share of the grocery market, consumers were left with plenty of competitive alternatives whether or not it led to lower prices or higher quality services.

However, recent reports indicate that Amazon is planning to launch a new delivery service similar to FedEX and UPS. According to Bloomberg, project “Seller Flex” began a trial run on the West Coast in 2017 with an expansion planned for 2018. The purpose of the system is to decrease the crowding in Amazon’s warehouses and increase the number of products available through two-day delivery. Under this new system, Amazon will directly oversee the pickup and delivery of packages from the warehouses of third-party merchants who market their items on Amazon.com. Traditionally, when delivering to end consumers, merchants had the choice to ship their products directly through Amazon or to use third-party carriers such as FedEX and UPS. Amazon may still elect to use FedEX and UPS to make deliveries, but merchants will no longer be able to make the decision on their own. Amazon expects that its increased control of the shipping process will allow it to save money through volume discounts, avoiding congestion, and increasing its flexibility.

By drawing comparisons with Amazon’s acquisition of Whole Foods it is possible to identify potential competitive concerns implicated by the new delivery system. The key difference is the amount of competitive power Amazon wields in each market. In the grocery market, Amazon is not an antitrust risk because it is a small player with only a two percent market share, which gives it essentially no ability to affect its competitors’ businesses or the market as a whole. In the e-commerce market, however, Amazon provides an essential platform and acts as a gateway for businesses to reach consumers across the United States. In the past, merchants could participate on Amazon’s platform, but retained the option to select their preference of delivery service. By requiring the use of its own delivery service, however, Amazon will be depriving its merchants of choice. Given Amazon’s power in the e-commerce market, merchants have limited alternatives to Amazon’s platform and thus may have no other realistic option outside of using Amazon’s in-house delivery service. This lack of competition in delivery methods could potentially raise end prices for consumers.

Ultimately, it is too early to predict the competitive effects of Amazon’s delivery service, but different schools of antitrust may reach different conclusions. Consistent with its track record, it is likely that Amazon will do everything in its power to lower prices and offer a better service by integrating delivery into its e-commerce platform. Under these circumstances, a traditional antitrust review would not likely find a problem. A review under “hipster antitrust”, however, may find a problem regardless of the cost or quality outcome. As part of a larger policy matter, such as protecting small businesses, Amazon’s acquisition of more power and the reduction of choice for its merchants may simply be unacceptable. Regardless of the outcome, Amazon’s continued expansion of its operations has all but guaranteed that it will remain a focus of antitrust discussions for the foreseeable future.