Amazon’s purchase of MGM must pass the scrutiny of the FTC, newly chaired by prominent Amazon critic Lina Khan, the Wall Street Journal has reported. While the $8.45M merger is not likely to be stopped, it may provide early indicators of how the agency is revising its approach to mega-corporations consolidating multiple industries with acquisitions like this one.
The proposed acquisition was announced last month, and the addition of MGM’s 4,000 films and 17,000 shows to the Amazon library would be a potent shot in the arm for Prime Video, which like the Amazon storefront itself is meant to be its customers’ default go-to for on-demand media.
As rights change hands and companies shift tactics, the landscape of streaming is ever-changing; while Netflix has focused on original content (and Amazon is not far behind) and Disney has its own stable of standbys, others have begun snapping up the disparate collections of shows and movies that make up the streaming industry’s lucrative long tail.
Yet there is a valid question among regulators of whether content companies like MGM should be owned by platforms like Amazon. As an independent producer of films and TV a company can secure its own licensing deals and operate in direct competition with similar businesses. As a subsidiary of Amazon, it would likely be in large part reduced to an in-house production company for the retail and web giant, not competing on the merits of its products but as part of a multi-industry empire.
FTC Chair Lina Khan — appointed just last week — has been among the foremost critics of the latter business model. Her now famous “Amazon’s Antitrust Paradox” paper asserted that Amazon uses dominance in one industry, like AWS in web hosting, to shore up other less successful arms, like its nascent delivery service. If the latter would fail without the support of the former, the argument (roughly) goes, the company is potentially engaging in anti-competitive behavior enabled by market power.
That the market power and the behavior are in different verticals excused it under the antitrust doctrine of the recent era (so long as consumers didn’t see price increases), but Khan aimed to challenge that doctrine with her paper — and now, as one of the most powerful regulators in the country, she has been given the chance to shape it firsthand.
Such large deals are always reviewed by federal authorities, and in this case the FTC is reportedly in charge, probably because it has already taken on the role of antitrust investigation into Amazon in other circumstances. It’s also handling Facebook (which it has tangled with repeatedly over the years), while the agency’s enforcement partners at the Justice Department took charge of looking into Google and Apple. (The FTC declined to comment, saying it does not confirm the existence of investigations.)
In this case it seems unlikely that the Amazon purchase of MGM will be blocked, seeing as there is certainly real competition in the space and MGM has not been able to make its own way — a sale is almost inevitable. But the review will take place nonetheless, and it will likely elucidate how the FTC has changed its approach to this type of merger.
It’s entirely possible that even in a light-touch approval of this deal there will be opportunity to see new doctrine in play; for example, Amazon’s arguably monopolistic position in ostensibly unrelated markets is likely to take a greater role than under previous FTC leadership. It may even set the stage for more comprehensive and aggressive reviews to come, or perhaps even rewinding previously approved mergers, something Chair Khan has said is a distinct possibility.