When Amazon announced back in March that its transaction to acquire the MGM studio for $8.45 billion was completed after the Federal Trade Commission elected not to challenged the transaction, the government agency issued an ominous-sounding statement: “We reiterate that the Commission does not approve transactions and may challenge a deal at any time if it determines that it violates the law.”
Now that statement is starting to seem less like an idle threat. The FTC has revamped its antitrust probe of Amazon and begun “asking questions” about the MGM deal, according to a Bloomberg report published Tuesday.
What seemed like a done deal just a short while ago is starting to look less like a sure thing, which means the e-commerce giant could be on the verge of another round of conflict with FTC chief Lina Khan, a notorious longtime critic of Amazon who was expected to be an aggressive antitrust opponent to the company.
This renewed scrutiny may not be entirely surprising since Khan secured the confirmation of a fifth commissioner that would give the FTC a left-leaning majority. Once the selection of Alvaro Bedoya was approved earlier this month to break the 2-2 tie, it set the stage for a clash that could include stymieing Amazon’s MGM acquisition.
It would be a remarkable turn of events considering Amazon has been busy in recent months integrating its newest asset. One month after the company hosted a town hall in March to announce an interim leadership structure, two of those leaders, Michael De Luca and Pam Abdy, decamped and have since resurfaced as potentially joining Warner Bros. Discovery. Also, in April, Amazon disclosed a $3.4 billion valuation for the MGM library.
That said, it’s still unclear how Amazon plans to use that library given the overlap in production capabilities with Amazon Studios. While the company has signaled that no layoffs would occur, it’s hard to believe MGM will simply operate separately from the in-house studio.
With a $6.5 billion price tag along with nearly $2 billion in debt, this was not a small purchase even for a colossus like Amazon. MGM is second only to Whole Foods in acquisition size for the company — which paid $14.6 billion for the grocer in 2017 — and is far larger than anything else on Jeff Bezos’ long shopping list. No other Big Tech firm did more M&A (see chart below) between 2019 and 2021, according to Dealogic.
MGM would seem too small to trip antitrust alarms; it’s not as if Amazon is swallowing a huge conglomerate. But acquiring MGM was never considered a slam dunk because Amazon has a massive regulatory target on its back due to its sheer size and questionable tactics on other fronts.
It was always a matter of time before Khan made an example of one Amazon asset or another in order to prove her antitrust bona fides. Now that she has sufficient political capital to cement her reputation, it may mean MGM could actually become a headache for Amazon.