Amazon primed for merger battle

The proposed $13.7 billion merger of Amazon and Whole Foods is primed to set off a massive lobbying effort in Washington.

Amazon has been moving into new markets and seeking ways to deliver products faster to customers, including a drone fleet for local deliveries, making the Whole Foods deal just the latest example of its growing ambitions.

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Some industry analysts say the deal should face a relatively smooth path to federal approval because Whole Foods only represents a 1.2 percent share of the $800 billion grocery market, while Amazon only has a 0.2 percent share.

Under antitrust law, regulators examine whether a deal would eliminate competition and whether consumers, through price changes and other factors, would be harmed. Amazon, which serves as both a traditional retail outlet and a platform for other sellers, has metrics more complex than just any other store. 

But there may be several other factors that come into play for the review of the Amazon-Whole Foods deal.

“This big deal is a big deal in both an antitrust way and in a more colloquial Joe BidenJoe BidenMoore, Strange advance in Alabama GOP primary Alabama GOP Senate primary: live results White House clarifies: We condemn all violence MORE way,” said Jonathan Becker, the head of the judiciary practice at lobbying firm Invariant, referencing the former vice president’s comments that the passage of the Affordable Care Act in 2010 was a “big f---ing deal.”

“There’s real pent-up demand to go after the online platforms for their market dominance, and real fear among the supermarkets and other industries that could be impacted by Amazon,” Becker said, noting that there had been a perception that the Obama administration was too cozy with tech companies like Google. “This could be the tip of the spear of that effort.”

Amazon has steadily increased its lobbying since announcing its drone delivery service, Amazon Prime Air, in 2013. 

The company went from spending $2.5 million per year on lobbying in 2012 to surpassing that amount in a single quarter now. 

During the first three months of 2017, Amazon shelled out $2.9 million to advocate before the federal government.

The company has 13 firms on retainer, including Squire Patton Boggs, Monument Policy Group, Brownstein Hyatt Farber Schreck and Ballard Partners, a firm with lobbyists close to President Trump.

Only one year ago, Trump, while on the campaign trail, said Amazon founder and CEO Jeff Bezos has “a huge antitrust problem because he’s controlling so much.” Bezos is also the owner of The Washington Post, a publication Trump has clashed with in the past.

Many say the Amazon-Whole Foods deal is uncharted territory, likely requiring regulators to set new precedent.

“This will be a really interesting case for both congressional oversight and for the new Republican regulators at the Justice Department and the Federal Trade Commission [FTC],” said Becker, who also formerly served as chief of staff to Sen. Amy KlobucharAmy Jean KlobucharTrump quietly putting his stamp on the courts CNN's Zeleny: Leaderless Democrats 'in complete disrepair and disarray' Lacking White House plan, Senate focuses on infrastructure MORE (D-Minn.), the top Democrat on the Senate subcommittee that handles antitrust issues.

While the Senate will likely confirm the head of the Justice Department’s Antitrust Division — former lobbyist Makan Delrahim of Brownstein Hyatt  — soon, Trump has not nominated anyone to lead the FTC. It’s not yet clear which regulator would take up the deal for review. Brownstein signed Amazon in January. Delrahim did not work on the contract, according to disclosures.

One Democratic lawmaker, Rep. Ro Khanna (Calif.), has already begun criticizing the deal, saying it could drive wages down and make it harder for smaller companies to compete.

But several antitrust experts and academics have said there do not appear to be antitrust hurdles associated with the proposal.

“There has to be some kind of injury to competition,” Herbert Hovenkamp, a professor at the University of Pennsylvania Law School, told CNBC. “I don’t really see an antitrust concern.”

The proposal is likely to cause anxiety in many other industries — including for traditional grocers — seeking to keep up with the explosion of online shopping.

Amazon already has AmazonFresh and Prime Pantry, but moving further into grocery delivery could have an impact on services like InstaCart.

“This is going to be a different animal,” said one lobbyist with experience handling mergers who asked for anonymity in order to speak freely.

“In some ways, it’s going to be hard to argue against it because it’s hard to make an anti-competitive argument on this deal alone, but I think the bigger argument that people will make is that Amazon is such a disruptive force for any market it enters, that they change the paradigm for everyone in the space,” the lobbyist added. “That scares people.”

For customers wanting to purchase a certain product, Amazon makes buttons, called Dash Buttons, that a person can have in their home to press and automatically have that product delivered. Personal voice assistant Alexa also makes ordering anything from batteries to produce, among other things, as easy as merely asking for it.

And as homes become more equipped with “smart” appliances connected to the internet, Amazon has the ability to tap into a massive trove of consumer data — which could raise privacy concerns, another lawyer said.

While top regulatory lawyers ultimately have the final sale on any deal that goes through, looking through documents and legal precedent, Becker said that lobbying campaigns could actually make a difference.

“Antitrust law is inherently sort of political, the statutes are broad … and there’s a lot of leeway,” he said. “Two different regulators can look at the same facts and come to very different conclusions.

“Around the margins, [lobbying] could really impact the mood,” he said.

Some say the Amazon deal is likely a harbinger of how online shopping is likely to reshape the economy in the years ahead.

“This is a new area for the regulators to dive into,” said David Thomas at Mehlman Castagnetti Rosen & Thomas, who previously worked as the FTC’s internal lobbyist. “These are pretty big players, so I think there will be a pretty big effort here in town.

“To me, it’s a sign of things to come. There are real changes that are going on in the economy here, and it’s just an extension of that,” he said. “I suspect we will see more mergers like this to come — tech and retail and others — because clearly that seems to be the way that American consumers like to engage with their companies now: online.”