E-commerce giant Amazon is gearing up for a monumental legal fight as the Federal Trade Commission (FTC) spearheads an antitrust lawsuit along with 17 states attorneys general. While a breakup of the company is the most extreme potential outcome, it may paradoxically unlock shareholder value.
Amazon’s stock barely reacted to Tuesday’s lawsuit announcement, trading down less than 1% on Wednesday. This muted response suggests investors are taking a wait-and-see approach as the case proceeds through lengthy legal processes. According to D.A. Davidson analyst Tom Forte, even if the FTC succeeds in breaking up Amazon, the sum-of-parts could be worth more than the current valuation.
Under a breakup scenario, Forte estimates Amazon’s retail business, third-party marketplace, and cloud computing divisions could be worth up to $193 per share collectively, versus the current $126 share price. Other analysts argue that alternative antitrust remedies imposed on Amazon could prove even more detrimental than a clean structural split.
The FTC complaint alleges Amazon has systematically stifled competition across its retail and cloud computing segments. Specifically, it charges Amazon with artificially inflating prices by preventing sellers from offering products at lower costs elsewhere. The company is also accused of imposing restrictive policies on third-party merchants that depend on its marketplace platform.
FTC Chair Lina Khan pointedly declined to confirm if the agency will explicitly seek a breakup of Amazon. However, the lawsuit language refers to potential “structural relief,” signaling this is very much on the table. Amazon firmly rejected the lawsuit claims, arguing the FTC’s position is unfounded in both fact and law.
While the final outcome remains highly uncertain, public sentiment appears to be strongly in favor of robust antitrust enforcement. A recent nationwide survey by The Harris Poll found nearly 50% of U.S. adults want the FTC to take a more aggressive stance against monopolistic business practices. Another four out of five believe large corporations wield excessive influence and control.
Even if Amazon emerges victorious from the current lawsuit, popular support for curtailing Big Tech market dominance could fuel further legal challenges down the road. The FTC is under growing pressure from politicians and the public to rectify perceived failings in past antitrust oversight.
This present lawsuit represents the culmination of the FTC’s lengthy investigation into Amazon’s competitive conduct across its core business segments. While talk of breaking up major technology firms was once considered fringe and extreme, it is now firmly within the mainstream debate.
The stakes could not be higher for Amazon’s future trajectory in retail, cloud computing and beyond. However, the final outcome will likely take years to play out fully. Antitrust lawsuits of this scope and complexity typically involve drawn-out appeals and counter-appeals before final resolution.
For Amazon shareholders, the path forward is filled with uncertainties and risks. But a negotiated breakup could prove far less painful than death by a thousand regulatory cuts. Amazon’s sprawling business empire has become embroiled in today’s “Techlash” against perceived Big Tech abuses.
The FTC’s lawsuit signals open season on Amazon’s competitive practices by regulators and politicians. Even if the company fends off the current legal challenge, it seems guaranteed to remain in the crosshairs of antitrust scrutiny.
As a result, Amazon may need to tread exceedingly carefully in how it deals with third-party sellers and other business partners. Any whiff of anti-competitive behavior could inspire further regulatory and legal action.
In some ways, Amazon appears a victim of its own success as regulators attempt to curb the immense power concentrated in a small handful of tech giants. Breaking up the company could benefit shareholders by unlocking trapped value in Amazon’s retail, marketplace and cloud units.
But litigation and regulatory pressures will weigh on Amazon stock over the coming months and years. This historic FTC lawsuit is merely the opening salvo in what promises to be an extended battle to reshape and downsize tech industry titans.
