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Amazon ( AMZN ) has telegraphed to investors and the world that the deals are key to its future, but those transactions raise antitrust concerns — and investors are taking notice, Jefferies analyst Brent Till told Yahoo Finance Live (video above).
Amazon has made headlines in recent months for its big-ticket moves. The company quickly acquired both subscription healthcare provider OneMedical ( ONEM ) and Roomba-maker iRobot for $3.9 billion and $1.7 billion, respectively. However, investors are concerned that Amazon’s deals, including its purchase of vacuum maker iRobot, are set to face a Federal Trade Commission (FTC) challenge.
“It’s the No. 1 question that’s asked,” Till said. Don’t think they’ll have a problem there, though [antitrust scrutiny] It prohibits Amazon from making other software purchases and e-commerce purchases.
Amazon has made some great deals over the past decade or so. In the year In 2017, the company bought high-end grocer Whole Foods for a jaw-dropping $13.4 billion. Shortly thereafter, Amazon plunked down another billion to acquire online pharmacy Pillpak. And not just recently – in 2009, even in the midst of the recession, Amazon closed a deal to buy online retailer Zappos for $1.2 billion. Earlier this year, Amazon closed its $8.6 billion acquisition of MGM.
However, major deals aren’t the only deals on the table for Amazon and other mega-cap tech companies. Innovation from companies like Amazon and Alphabet-owned Google ( GOOG , GOOGL ) means they’re no longer encouraged to focus solely on big deals.
“There’s a lot of innovation in technology right now with Amazon and Google and others, so I don’t think they necessarily have to go out and do big deals,” he said. They make small deals.
Amazon and the FTC walk a fine line
It’s still a question of what’s too little for Amazon, and which of these deals could ultimately push lawmakers over the edge. For example, Amazon’s purchase of iRobot came under renewed scrutiny last week, when Senator Elizabeth Warren and a group of lawmakers called on the FTC to reject the deal.
Amazon’s deals have not yet led to federal action, but FTC Chairwoman Lena Kahn is a vocal critic of Amazon, and her ascension has been linked to a series of articles examining what the company’s breakup would entail. In particular, the company has been subject to antitrust action at the state level. California recently sued Amazon for anti-competitive bans on third-party sellers.
“It’s a question, it’s an overlap, it’s certainly the No. 1 question in every investor conversation, every meeting we go into,” he said. Being able to do M&A”.
Till has a point. Although entering into additional agreements is a risk, it is also a protection. The data calls it Amazon’s “whack-a-mole” marketing strategy. The FTC can’t logistically challenge every purchase, so like Amazon, the regulator must pick its battles. While Amazon needs to be careful moving forward, so is the government, Thiel said.
“They have to be careful… [Amazon’s] Doing what’s right for their employees, their shareholders and the ecosystem… Amazon is a big employer, so the government needs to be careful how much they regulate them because they’re an incredible, incredibly vibrant resource for the economy they support. Many in their daily lives. So, there’s a fine balance that we have to walk and I think Amazon is doing that.
Now, the pressure on Amazon isn’t just about deals. The company’s work practices have drawn attention and scrutiny over the past year, fueled by independent Amazon labor union growth and a massive warehouse union push from New York to Alabama.
Ali Garfinkle is a senior technology reporter at Yahoo Finance. Follow her on Twitter @agarfinks.
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