Photographer: Michael Nagle/Bloomberg
Here’s What Trump Could Do to AmazonBy , , and
Trump could push for regulatory probes, contest cloud contract
White House doesn’t have current plans to move against Amazon
He could push for probes of consumer protection, privacy and antitrust issues. He could also step up his support for allowing states to collect sales tax on third-party purchases from Amazon, or seek to have the Postal Service charge more to deliver packages. And he could thwart Amazon’s aspirations to win a multibillion dollar Pentagon contract for cloud services.
Even with those powers, Trump’s ability to act has limits. Inquiries by the Justice Department or the Federal Trade Commission could take years and bear a high burden of proof. The FTC and other enforcement agencies guard their independence, as does the board of governors of the Postal Service. Changes to the tax law would require cooperation from Congress, which just passed a tax overhaul and may have limited appetite to reopen negotiations.
The feud pits the world’s most powerful man against one of the world’s biggest corporations -- a global titan with $684 billion in market capitalization and more than half a million employees. At stake is its reputation, revenue and, potentially, ability to continue to disrupt markets as it reshapes retailing.
Any move made by Trump that is perceived as revenge against Amazon founder Jeff Bezos for his ownership of The Washington Post would invite comparisons to President Richard Nixon, who, at the height of the Watergate scandal, threatened the Post’s broadcast licenses.
Amazon didn’t respond to a request for comment. While Amazon rose Thursday along with most U.S. stocks, the Trump attacks helped add to the shares’ headwinds on Tuesday
and Wednesday. An 8 percent drop marked Amazon’s biggest two-day decline in two years.
White House spokeswoman Lindsay Walters told reporters aboard Air Force One Thursday that there are no specific plans to move against the company. “The president has expressed his concerns with Amazon," she said.
Seek antitrust inquiry of Amazon’s dominance
If the administration opens an antitrust inquiry, enforcers would have to show the company has a monopoly in a market and that it abused its dominant position. But enforcers are intently focused on harm to consumers, and Amazon’s retailing platform is beloved by its customers for its breadth and convenience.
Still, the company is not without criticism. Lina Khan, director of legal policy at Open Markets Institute, a Washington think tank that advocates for tougher antitrust enforcement, says Amazon should be scrutinized. One area of concern is the way Amazon can exploit information it collects about third-party sellers to better compete against them. Amazon can use sales data it gets from these merchants to undercut them on price or start selling its own versions of their products, Khan said.
"It’s possible to believe two things: one, it’d be deeply troubling and improper for Trump’s personal animus toward Jeff Bezos to be the basis of an antitrust action, and two, Amazon’s structure and conduct raise anticompetitive concerns worthy of an antitrust investigation," she said.
Trump’s Justice Department already has shown unorthodox thinking on antitrust enforcement. Last year it sued AT&T Inc. to stop its acquisition of Time Warner Inc. -- which owns CNN, another frequent Trump target. The move surprised many antitrust lawyers because the two companies don’t compete directly.
Competing retailers have long expressed concern about Amazon’s potential to push them out of business but enforcers are skeptical when complaints come from rivals because they want to see vigorous competition in markets.
Make Amazon pay sales taxes like traditional retailers
Trump’s complaints about Amazon not paying sales tax echo those of states and local jurisdictions that have complained about a loss of tax revenue as sales shift from brick-and-mortar stores to Amazon.
Trump supports bipartisan bills in Congress that would allow states to mandate collection of sales taxes because U.S. policy should ensure that "those who are competing with Amazon are on a level playing field," White House spokesman Raj Shah said Thursday.
In 2017, Amazon, which also supports the bills, began collecting sales tax in states that levy them, but the company doesn’t charge shoppers sales tax when they buy from third-party vendors that sell on the site. Those sales make up about half the company’s volume.
States and local governments lose approximately $5 billion a year in taxes from Amazon marketplace commerce because merchants don’t collect them and shoppers don’t pay them after the fact, according to James Thomson, a former Amazon employee who is now a consultant for e-commerce merchants. The company doesn’t break out how much revenue comes from third-party sales.
The Trump administration has also urged the U.S. Supreme Court to let state and local governments collect billions of dollars in sales taxes from online retailers. The justices are scheduled to hear arguments next month centering on a South Dakota law that calls for collecting sales taxes from large internet retailers even if they don’t have brick-and-mortar stores in the state. A ruling is expected by late June.
Charge Amazon higher postage
Trump has said the Postal Service should be charging Amazon more for delivery.
“Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer?” Trump told his 45 million followers in January.
A sudden increase in postal service rates would cost Amazon about $2.6 billion a year, according to an April report by Citigroup. That report predicted United Parcel Service Inc. and FedEx Corp. would also raise rates in response to a postal service hike.
The Postal Regulatory Commission, which sets rates, has one vacant seat among its five commissioners, who are named by the president.
But the Postal Service would also be a loser. Despite Trump’s assertions, Amazon is a valuable customer. And the Postal Service’s losses have little to do with Amazon and more to do with its large health-care obligations and the dwindling use of first-class mail. USPS charges some of the world’s lowest stamp prices.
Brad Parscale, who is managing Trump’s 2020 presidential campaign, hinted that the administration may act to raise Amazon’s postal costs in a tweet late Thursday. “Once the markets figure out that a single @usps rule change will crush @amazon ’s bottom line we will see,” Parscale wrote.
Weigh in against Amazon in the Cloud Wars
Amazon, which has sought government contracts beyond the Postal Service, could also face opposition to its bid to become the sole supplier of the Defense Department’s multibillion dollar cloud services award, which is slated to be made in September and for which Amazon is seen as the front-runner.
The company’s 2013 cloud deal with the CIA for $600 million has put it in pole position to win the award, which could last up to 10 years and put the company ahead in the race for future contracts as the Pentagon pushes to modernize its technology.
The Pentagon’s announcement earlier in March that it would choose one vendor for the contract has prompted criticism from Microsoft Corp., International Business Machines Corp. and industry groups representing rivals such as Oracle Corp.
And lawmakers charged with funding the Pentagon have asked the department to justify the single-source award in language accompanying the recent spending bill.
Trump could issue an executive action that says the government can only contract with smaller firms for instance, although the president’s comments could bolster Amazon’s case if it decided to bring a court challenge, said John Hudak, a senior fellow in governance studies at the Brookings Institution.
"The president’s own rhetoric about Amazon probably hinders his ability to use executive action," Hudak said.
— With assistance by Lynnley Browning, and Toluse Olorunnipa