MGM purchase to be a tough one for Amazon as US regulators keep close watch

By Sayujya S, Desk Reporter
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US-based eCommerce mammoth Amazon’s move to buy the MGM movie and TV studio will provide fuel for the company’s critics in the US who complain it is already too big and powerful, even though experts say the deal poses only a few antitrust concerns.

A little more than an hour after the deal was announced, America’s Republican Senator Josh Hawley blasted Amazon as a “monopoly platform” on Twitter, adding, “This sale should not go through,” and that the company shouldn’t be allowed to buy anything.

Meanwhile, Democratic Senator Amy Klobuchar, who chairs the Senate’s antitrust panel, called for “a thorough investigation to ensure that this deal won’t risk harming competition.” The announcement also came just one day after the government’s attorney general filed a lawsuit against, alleging the online retailer broke antitrust law with unfair pricing strategies.

Joining forces

The $8.45 billion merger would combine the world’s biggest online retailer with a film and TV studio that has a majestic past but has struggled to keep up with rivals including Disney.

MGM, which owns the James Bond franchise and made “The Handmaid’s Tale,” also made classic films like the “Rocky” series and “Princess Bride.” But look at the top ten grossing films of 2018 and 2019 and MGM is absent and so is Amazon.

Amazon’s Prime Video, which is bundled with subscriptions to Amazon’s service that promises quick deliveries of purchases, also faces well-financed rivals including Netflix, Walt Disney Co’s Disney+, HBO Max and Apple’s Apple TV+. The companies are increasing investments in international markets, aiming to capture the pandemic-led expansion of binge-watching shows online.

Under scrutiny

Given the state of competition in the two markets, antitrust agencies which scrutinize mergers for anticompetitive behavior would likely struggle to convince a court that the deal will mean higher prices or less innovation.

Amazon declined to comment on this story but in an October 2020 blog post noted that “large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong.”

Amazon has come under criticism for buying competitors, like online shoe seller Zappos in 2009 and in 2010, and that criticism is likely to continue.

Antitrust experts have been studying Amazon’s purchase of the Whole Foods supermarket chain in 2017 for clues about how the MGM deal might be handled. That merger was quickly approved by US competition regulators even though Amazon was at that time much criticized for allegedly using its market power to dominate different retail sectors.

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