Imagine a world without Amazon (AMZN).
No online superstore with everything you need. No Prime Day sales. No free shipping.
Last week, the Federal Trade Commission (FTC) filed an antitrust lawsuit against Amazon, claiming that the company is illegally profiting from strategies that prevent competition.
If the government wins its case, it could force Amazon to break up into smaller companies.
But I think the FTC is on a wild goose chase.
Today, I’ll explain why and offer a better way to profit from Amazon than purchasing its stock.
Amazon Antitrust Lawsuit
Amazon is not a monopoly.
Though it is a popular site, Amazon isn’t the only choice when it comes to shopping online. Last year, Amazon had just 38% market share of online sales.
And in comparison, Standard Oil controlled more than 90% of oil production and refining before it was broken up. AT&T controlled over 80% of the telephone market before it was broken up.
Amazon is a big company. But it’s not so big that there’s no other choice.
So what is the FTC complaining about?
The lawsuit it filed claims that Amazon is using anticompetitive tactics.
One tactic the FTC doesn’t like is “price parity clauses.” When sellers offer lower prices on other sites, Amazon makes it more difficult to find those products in its search results.
The FTC claims this makes consumers pay higher prices. But does it really?
Sellers don’t have to list their products on Amazon. They can choose to set their prices on their own sites or on other marketplaces.
And if Amazon can’t offer the best price on a product, why should consumers care if they can find it on the site?
Another tactic the FTC is going after is Amazon forcing sellers to use its shipping and fulfillment services in order for their products to be eligible for Amazon Prime.
The FTC says this makes it more expensive for sellers to offer their products on other platforms and prevents competition from other shipping services like Fedex or UPS. And as a result, consumers end up paying higher prices.
But one of the key benefits of Prime is free 2-day shipping. Amazon can’t make that promise unless it controls the shipping process. So it only makes sense to restrict Prime to products that Amazon can guarantee will meet customer expectations.
More complaints the FTC mentions include: promoting Amazon-branded products, showing too many junk advertisements, and charging too many fees to sellers.
Amazon is a business, not a public utility. Why shouldn’t it promote its own products and show advertisements? Supermarkets sell store brands and display ads.
Customers love Amazon because of its convenience and low prices. If they don’t like Amazon products or get tired of ads, they will go to other sites.
Sellers use Amazon because of the large number of customers on the site. But if Amazon’s fees get too high, they can stop selling on the site and get better profits elsewhere.
Over the past few years, the FTC has been obsessed with cracking down on big tech companies. But it has just ended up with a couple of high-profile losses – it was unable to block Facebook’s acquisition of Within Unlimited and Microsoft’s purchase of Activision Blizzard.
In order to win its case against Amazon, the FTC will have to show that the company is harming consumers. That’s going to be tough to prove when customers are choosing Amazon because of its low prices.
A Better Way to Profit from Amazon
This lawsuit is going to take years to work its way through the courts. And in the meantime, Amazon is still going to be growing its profits. So if you believe that the company will survive, this selloff could be a good opportunity to invest.
But regardless of how big the discount is, there’s a better way to profit from Amazon…
You can invest in the mission critical infrastructure that the company uses every day to serve its customers.
Mission critical infrastructure that’s not just used by Amazon but all e-commerce companies with major market share.
So this system will still be used and needed even if the government forces Amazon to break up.
And best of all, it provides a reliable stream of growing income.
I call it my “Amazon Royalty” play.
And there are big gains to be had – when you invest in this mission critical infrastructure.
Click here, to watch me break it all down.
No matter what the courts decide, or Amazon’s stock price does, you can make a profit with this play.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily