by Jim Rickards, Daily Reckoning:
Regardless of the merits or demerits of the Amazon business model, prosecutors could bring a case against “bigness” per se as an example to the rest of Corporate America and to demonstrate that the antitrust laws are an effective government tool.
And it all begins with a letter.
Antitrust suits do not start with full-blown litigation on day one. They begin with a letter of inquiry. This notifies the target company that the Justice Department is looking into possible antitrust violations and asks for the company’s cooperation in providing needed books and records.
Most companies find it in their best interests to cooperate with such requests. They hope to convince the government that “there’s no there there.”
Companies that don’t cooperate will soon receive subpoenas potentially backed up by court orders that will force cooperation. That’s one more reason to cooperate — the government will get what it wants one way or another, so it’s better to cooperate in order to earn some goodwill.
An actual case can take years to investigate and years more to litigate and appeal. But the stock market won’t wait for the process to play out. The letter of inquiry alone will be enough to trigger a sell-off.
Amazon is a public company and, under applicable securities laws, will have to disclose the letter of inquiry as soon as they receive it. Markets are on a hair trigger. They have a “shoot first, ask questions later” mentality.
More likely, the Justice Department will leak the contents of the letter before Amazon even has time to open the mail.
Once that happens, the sell-off will begin. It could even happen in the middle of the night if there is a late-in-the-day leak from the Justice Department, followed by overnight selling in Tokyo, Singapore, Hong Kong and London.
By the time you wake up in the morning, Amazon could already be down $100 per share or more.
Given the likelihood of the event and the uncertainty of the timing, you need to position yourself now to capitalize on this once-in-a-century antitrust case.
It would be nice to believe that the law is applied in an impartial and politically neutral way. Unfortunately, that is not the case. Even when statutes are written objectively, they are often applied based on prevailing political views. As my law professors always reminded me, “Judges read the newspapers!”
Most Americans are familiar with the current age of progressive politics, which includes figures such as Bernie Sanders and Elizabeth Warren. But this is the second progressive age in U.S. political history.
The first progressive era was from about 1890–1920 and arose partly in reaction to monopoly corporate power in oil, steel, railroads and other key industries. It was in this period that the most important antitrust laws were enacted.
The principal antitrust laws in the U.S. are the Sherman Act (1890), which outlaws any “contract… or conspiracy in restraint of trade,” and the Clayton Act (1914), which prohibits acquisitions that “tend to create a monopoly.”