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Amazon's Zappos buy seen clearing antitrust review
Thu Jul 23, 2009 5:33pm EDT
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By Diane Bartz
WASHINGTON (Reuters) - Amazon.com's purchase of shoe seller Zappos.com, known for attentive customer service, will likely race through an antitrust review unscuffed, antitrust experts said on Thursday.
While Amazon.com is buying a rival to its disappointing Endless.com site, the nearly $1 billion deal will likely be approved since neither Amazon nor Zappos is a major shoe distributor, despite their online fame, experts said.
Further, the business of selling shoes is easy to enter.
"What the government is concerned about is whether the merger will increase prices," said Kendall Millard, an antitrust expert with Barnes and Thornburg LLP. "The online market is such that it's difficult to see that there would be significant barriers to entry."
A former senior attorney with the Federal Trade Commission predicted the agency was unlikely to challenge the deal based on the merging firms' ability to raise prices, since these firms face many other competitors.
"If you just look at online shoes, there's a lot of players out there," said James Fishkin, now at law firm Dechert LLP, mentioning Shoes.com, Onlineshoes.com, DSW.com, Nordstrom.com, Payless.com, Piperlime.com and others.
"These aren't small guys. These are real players out there who are selling shoes online," said Fishkin.
The FTC and Justice Department divide the work of antitrust enforcement.
Nor was the government likely to separate online shoe companies into a separate category from brick-and-mortar stores in assessing the deal, experts said.
"At some point the growth of online sales is going to require judicial interpretation as to whether (online sales) is a relevant product market -- separate from brick & mortar retail, but we're not there yet," said Chul Pak, an antitrust lawyer with Wilson Sonsini Goodrich and Rosati. "And shoes isn't a particularly good test case."
Pak also said he thought it was "highly unlikely" that antitrust regulators would challenge the deal.
"A market of 'online shoe sales' seems too much in its infancy to raise antitrust problems in the near future," he said.
Zappos, which sold about $1 billion in merchandise last year, is known for its customer service, free shipping and free returns. The company said Amazon will allow it to continue running its business as it always has.
Amazon, which began as an online bookseller, has greatly expanded its range of offerings while also allowing third-party sellers to showcase their own items on its site.
The Zappos website says the company, founded in 1999, has more than 1,300 employees and stocks more than 3 million shoes, handbags, clothing items and accessories from more than 1,136 brands. Continued...
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