An upcoming antitrust lawsuit by the Federal Trade Commission (FTC) against Amazon.com Inc (NASDAQ:AMZN) will not likely bring about an outcome that materially alters the structure of the business, analysts at Wedbush believe.
According to recent media reports from publications including Bloomberg, the Wall Street Journal, and Politico, the FTC is preparing to file a lawsuit against the e-commerce giant as early as this month which will focus on several aspects of the Amazon marketplace.
Areas of expected scrutiny include Amazon’s third-party seller services, notably logistics and advertising, and allegations that the company prevents sellers from setting lower prices for their goods on other platforms, the analysts noted.
They also pointed out that the FTC is reportedly concerned with Amazon’s methods of encouraging the adoption of seller service, including the practice of providing preferred product placement for sellers using Amazon’s fulfilment service.
“The FTC is also said to be considering Amazon Prime as part of the lawsuit given concerns that the program’s bundled service approach may have illegally helped Amazon secure its market power,” they wrote.
Per the media reports, the FTC may suggest structural remedies that could result in a breakup of Amazon, but the Wedbush analysts believe this is unlikely because the historical application of antitrust legislation over the past half-century has largely favored businesses that improve consumer welfare.
“We think the FTC faces a challenging road ahead given the benefits Amazon brings to consumer welfare in the form of competitive pricing, selection, and industry-leading delivery services,” they wrote.
“Further, despite Amazon’s success, the U.S. retail market remains highly competitive both offline and online, with large retailers replicating Amazon’s marketplace business model in addition to digital enablers like Shopify that have powered hundreds of billions in gross merchandise value outside of Amazon’s ecosystem.”
As such, the analysts awarded the stock an “Outperform” rating and a $180 price target.
Amazon shares traded hands at US$139.54 on Monday afternoon.
“We would be buyers of Amazon shares on any weakness related to the headlines of an FTC case,” the analysts concluded.
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