Amazon's Whole Foods Deal Sparks Antitrust Scrutiny

Amazon.com’s expansion plans, including its agreement to buy Whole Foods Market Inc. for $13.7 billion, are raising hackles in Washington — and Wall Street is taking notice. A U.S. lawmaker has called for hearings on the proposed deal to consider its ramifications for shoppers and workers. Hedge-fund manager Doug Kass has taken a short position on the fast-growing online retailer, saying government antitrust concerns will erode its value. In June, Goldman Sachs issued a note questioning whether tech stocks are overpriced and if investors have overlooked the risks associated with potential government regulatory issues. Experts and analysts have largely dismissed antitrust threats for Amazon because the company doesn’t have large market concentration in any one product category and has a track record of helping keep prices low for shoppers.

Total Retail's Take: The growing reach of Amazon across the retail industry, now potentially extending into grocery with the acquisition of Whole Foods’ 400-plus stores (not to mention its soon-to-be entrance into the meal kit delivery market), has put the once online-only retailer in a precarious situation: does it continue to seek growth opportunities through acquisitions, and deal with the increased government scrutiny that comes with them, or does it choose to leverage its existing infrastructure and technology (and vast resources) to grow organically? The answer seems to be both. Amazon's acquisition of Whole Foods is expected to be approved later this year — most analysts aren’t worried about the deal being derailed by antitrust probes, partly because Whole Foods had just 1.6 percent of the U.S. grocery market — and the retailer continues to build out its own network of brick-and-mortar stores. Oh, and in case you forgot, it's still pretty good at selling things online, as last week's Prime Day shows.

(For more on the growing impact of Amazon on the retail industry, and what retailers are doing to better compete with the online leader, check out Total Retail's latest research report, The Amazon Effect.)