Name: The regime that enabled Amazon's monopoly power is falling apart | Matt Stoller
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The regime that enabled Amazon's monopoly power is falling apart | Matt Stoller

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This article is more than 1 year oldThis article is more than 1 year oldIt is long past time for policymakers to fight corporate concentration. Fortunately, there is good reason to think they will soon do soLast modified on Fri 5 Feb 2021 15.23 ESTIt’s not clear what this announcement means, whether Bezos wants to genuinely give up power or whether he wants to continue making decisions while having someone else testify before Congress or in potential antitrust proceedings. But in truth, it doesn’t matter, because why exists in its current form, for good or ill, is a function not of one talented man, but of a legal regime that enables and encourages monopoly power. And that regime is falling apart.The scale of Amazon’s empire is breathtaking. This week, the corporation announced that third-party businesses in the US sold 1bn products through Amazon’s marketplace. It is no longer just an online retailer, but is effectively an economy in itself, adding on to its cloud computing, retail and logistics arms everything from podcasting to low-orbit, satellite-delivered broadband to home security to microchip development to prescription drug distribution to trucking to military contracting. The corporation also mirrors the inequality in the American economy, with the world’s richest man presiding over more than a million workers, The corporation grew in the 1990s and 2000s when new digital technologies were rewiring the American economy, so a lot of people associate Amazon with technology and innovation. But this is not correct; Amazon happened to capture control over a whole set of emerging technologies it did not create, at a time when anti-monopoly laws had been weakened to allow such control. Fundamentally, Amazon is a political institution designed to consolidate wealth and power.Amazon’s origin story reflects the reality that the corporation is a creature of policy and politics. Bezos located Amazon in Seattle to take advantage of a sales tax loophole that gave his bookseller a competitive advantage over brick-and-mortar rivals. At the time online sellers didn’t have to pay sales taxes except in the state where they were located, and Washington was a relatively small state. Many of its initial customers eagerly sought this tax break.Amazon grew at a time when conservative economists had undermined antitrust law, by focusing antitrust enforcers and judges not on market power, but on efficiency as measured by lower short-term consumer price. Bezos saw that there was an opportunity to build a monopoly using the tools available on the nascent internet, as long as he offered low prices. And he knew that this pro-monopoly legal framework meant that he would have to exclude his competitors, or they would exclude him. As he explained to an early employee, “When you are small, someone else that is bigger can always come along and take away what you have.”Fundamentally, Amazon is a political institution designed to consolidate wealth and powerBezos could build Amazon the way he did because traditional business tactics that had been illegal, like pricing goods below cost to drive rivals out of business, had become commonplace and legalized by a judiciary that accepted these arguments. When Bezos faced a competitor, Diapers.com, he reportedly had Amazon spend hundreds of millions of dollars a month to undersell his rival, and then offered to buy them out on the cheap. Faced with unlimited capital willing to bear losses, they had no choice but to sell out. Rules against this kind of pricing strategy had been undermined by meek enforcers and a conservative judiciary that had rewritten the law to let Amazon flourish.Bezos understood this dynamic clearly. Early employees recall that his “underlying goals were not to build an online bookstore or an online retailer, but rather a ‘utility’ that would become essential to commerce”. Amazon is now a middleman in multiple sectors of the economy, setting the terms and conditions by which Americans conduct online commerce. “They aren’t gaming the system,” one literary agent told the Wall Street Journal in 2019. “They own the system.”Amazon, across its many lines of business, uses tactics to bludgeon and dominate entire industry segments. It forces merchants who sell through its marketplace to use its logistics service. It preferences its own products on platforms it controls, whether that’s Amazon Marketplace, Amazon Web Services, or its voice assistant line of business, Alexa. It uses its broad scale to set pricing by those who use its services. As the chief executive of PopSockets testified at a congressional hearing, “the Amazon retail team frequently lowered their selling price of our product and then ‘expected’ and ‘needed’ us to help pay for the lost margin”.The corporation also exploits and undermines workers and communities. The HQ2 fiasco, where Amazon had hundreds of mayors jump through hoops and beg in the hopes that the corporation would locate a facility in their city, is simply one example of how Amazon gets public subsidies for its operations. It has run ugly public relations campaigns against employees who ask for safety equipment, and it is such an important buyer of labor that it often lowers wages when it comes into a community to set up warehousing. And right now, Amazon is running an anti-union campaign in Alabama to stop its workers from exercising their collective bargaining rights.There are an endless number of loopholes that Amazon is attempting to exploit, to leverage its gatekeeping power from one market into another, or to exploit workers, communities or suppliers. But every one of these is underpinned by a regulatory framework that allows it, whether that’s antitrust law, labor law or laws empowering the corporation to force employees and merchants to sign arbitration agreements denying them access to courts.The legal framework that allowed the creation of Amazon also enabled corporate concentration in every other sector in the economy, from big sectors like airlines, search and social networks to pharmaceuticals, to niche sectors like mail sorting software, mobile home production, private prison phone systems and web domain registration. As Jeff Bezos steps back, or does whatever it is he is doing, we should also recognize that this framework is falling apart. Amazon’s sister monopolies, Facebook and Google, are facing existential antitrust suits in which the government is asking for them to be broken up. Amazon itself is being investigated by the Connecticut attorney general.Most importantly, Congress is getting involved. The House antitrust subcommittee did a 16-month investigation on big tech firms and recommended strengthening antitrust law to prevent the accumulation of monopoly power and conflicts of interest in important businesses like Amazon. And the politics have turned. One need look no further than Bezos’s hometown congresswoman, Pramila Jayapal, who praised Bezos for his creativity, but also made it clear that the law is going to change. She said that Amazon must be “held to account unacceptable treatment of workers including delivery drivers and warehouse employees” and that Congress must “aggressively challenge dominant tech platforms such as Amazon and others and rein in anti-competitive behavior and monopolistic practices”.There are a lot of wonderful capacities that Amazon has been able to capture through its raw muscle, so figuring out how to restore competition, openness and labor rights in markets in which the corporation operation will be a delicate operation. But it is long past time for policymakers to act. And fortunately, there is good reason to think they will soon do so.

This article is more than 1 year oldThis article is more than 1 year oldIt is long past time for policymakers to fight corporate concentration. Fortunately, there is good reason to think they will soon do soLast modified on Fri 5 Feb 2021 15.23 ESTIt’s not clear what this announcement means, whether Bezos wants to genuinely give up power or whether he wants to continue making decisions while having someone else testify before Congress or in potential antitrust proceedings. But in truth, it doesn’t matter, because why exists in its current form, for good or ill, is a function not of one...

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Matt Stoller

TheGuardian.com, formerly known as Guardian.co.uk and Guardian Unlimited, is a British news and media website owned by the Guardian Media Group. It contains nearly all of the content of the newspapers The Guardian and The Observer, as well as a substantial body of web-only work produced by its own staff, including a rolling news service.

The regime that enabled Amazon's monopoly power is falling apart | Matt Stoller

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