Amazon-Whole Foods merger is the start of a new era for the FTC

The Federal Trade Commission (FTC) announced recently that it would allow Amazon’s acquisition of Whole Foods, exciting consumers with the prospect of lower prices and quicker grocery deliveries. Even so, some, such as Sen. Amy Klobuchar (D-Minn.), have raised concerns that FTC did not “fully review” the merger (apparently surprised that a government agency could complete a review in under three months).

However, FTC’s decision is a positive development, indicating that the agency may be moving away from its legacy as a “national nanny.”

{mosads}In the past, Amazon’s purchase of Whole Foods may well have triggered exhaustive (and misguided) investigations. Under the Obama administration, FTC displayed a tendency to consider innovation a threat to competition as we saw in 2010 with Google’s acquisition of mobile advertising company AdMob. Despite healthy competition from competitors Apple and Microsoft, FTC still launched an investigation.

Though it eventually backed down, the FTC intervention put billions of dollars of investment and business development at risk.

FTC continued its campaign against Google in 2011 by questioning the methodology behind its search results. Responding to complaints from competitors, as opposed to actual consumers, FTC began to examine whether Google “unfairly” privileged some results over others through its algorithm.

But experts were deeply skeptical of the unprecedented level of government intervention that a “solution” would have required. National Taxpayers Union released a letter signed by 101 economists urging policymakers to express concern about the agency’s actions. Furthermore, a poll commissioned by NTU found that nearly four in five people opposed government regulation of web search results.

These represent just a couple examples of the unnecessary actions FTC took against successful companies, and Google was hardly the only victim. With this history in mind, it is easy to understand why FTC greenlighting the Amazon-Whole Foods acquisition was not a sure thing. Innovative tech companies moving into new business lines in ways that offer the potential for consumer savings have traditionally been a subject for concern at FTC, not excitement.

But this isn’t your father’s antitrust review. The old model of two companies in the same industry merging is rapidly changing. More common are matters like Amazon’s acquisition of Whole Foods: a successful company trying to use its innovations to disrupt adjacent markets, to the benefit of consumers. In fact, Amazon has already moved to lower Whole Foods’ notoriously high prices on a number of consumer staples in an attempt to make a splash.

This is an indication that Amazon’s purchase is likely to have dramatically more impact on the grocery and food delivery market than on traditional “internet retail,” which is what most would think of when hearing the company’s name. In fact, the move actually offers the prospect of significant new competition in a relatively stagnant grocery sector and a meal-kit industry currently dominated by high-priced options.

To be sure, not every innovative acquisition or merger is successful. At the turn of the new millennium, opinion pages were filled with breathless praise for the AOL-Time Warner merger, itself an intriguing combination of two businesses in adjacent markets. That move famously turned out to be a flop of epic proportions.

What’s important is not that every such move is wildly successful — it’s that businesses are allowed to experiment and innovate, so long as there is no clear threat to consumers. The lack of certainty that every business risk will pay off is not a reason for FTC to block opportunities for companies to try providing new, more efficient, and better products to consumers.

Only time will tell if Amazon’s bid to upend the world of food was a masterstroke or a mistake. But the FTC, under the guidance of acting chair Maureen Ohlhausen, has already succeeded by showing that its primary concern will be consumers, and not the rigid, outdated notions that guided previous agency efforts.

Andrew Wilford is an associate policy analyst at National Taxpayers Union Foundation. Follow him on Twitter @PolicyWilford.