AWS antitrust? How Amazon’s cloud unit would defend against an expanded FTC inquiry

Andy Jassy at AWS re:Invent this week in Las Vegas. (GeekWire Photo / Todd Bishop)

LAS VEGAS — Kicking off the Amazon Web Services re:Invent conference earlier this week, AWS CEO Andy Jassy offered an expansive view of the market the cloud giant is pursuing.

“The market segment that we address at AWS is the global IT market,” he said.

In other words, AWS not just targeting the existing world of cloud platforms and services. It’s thinking about the much larger enterprise technology field, an estimated $3.7 trillion market  — 97 percent of which is still concentrated in traditional on-premises computing, not in the cloud, let alone in Amazon Web Services.

At the time Jassy made the comments, it seemed like a statement of ambition, and it certainly was that. However, it takes on additional significance in light of a Bloomberg News report Wednesday afternoon that the Federal Trade Commission has expanded its antitrust scrutiny into the company beyond e-commerce to include Amazon Web Services.

Defining the relevant market is a key step in any such inquiry, to determine the power of the company in question. Looking purely at an area such as cloud Infrastructure as a Service, for example, would put Amazon’s market share at more than 47 percent, according to Gartner research.

Jassy’s view of the market is on the other extreme. Whether or not he had antitrust in mind when he included it in his keynote, it would clearly be a key component of any AWS antitrust defense.

In its report, Bloomberg notes that AWS has generated 60 percent of Amazon’s overall operating profits over the past 12 months, and cites competition with third-party software companies who use AWS as a potential area of interest for federal regulators.

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“One issue the FTC could look at is whether Amazon has an incentive to discriminate against those software companies, which sell their products to clients of AWS, while at the same time competing with Amazon,” Bloomberg reports. “The fear is that Amazon could punish the companies that work with other cloud providers and favor those that it works with exclusively.”

The report notes the parallels to questions about how Amazon’s e-commerce unit competes with third-party retail vendors who use its Amazon Marketplace online platform.

There are also parallels to in the way AWS is framing its market. While Amazon has about 37 percent market share in U.S. e-commerce, executives describe the market instead as overall retail, including brick-and-mortar stores, in which case Amazon has 4 percent market share in the U.S. and 1 percent globally, as Amazon global corporate affairs chief Jay Carney said at the GeekWire Summit.

The FTC’s inquiry into Amazon is part of a broader look at big tech companies by U.S. regulators and legislators. Bloomberg cautions that the scrutiny of AWS won’t necessarily result in any regulatory action.

Amazon hasn’t commented publicly on the report.

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