From The New York Times:
Amazon on Friday announced plans to acquire Whole Foods, the high-end grocer. If approved by antitrust enforcers, the $13.7 billion deal would give Amazon control of more than 400 stores, an extensive supply chain and a new source of consumer data.
Amazon will argue to federal authorities, most likely the Federal Trade Commission, that the deal should be blessed because the combined entity’s share of the American grocery market will be less than 5 percent.
But antitrust officials would be naïve to view this deal as simply about groceries. Buying Whole Foods will enable Amazon to leverage and amplify the extraordinary power it enjoys in online markets and delivery, making an even greater share of commerce part of its fief.
The company has established its level of dominance because of the failings of our current antitrust laws. To understand why, you first need to understand the scope of Amazon’s power. It has captured 43 percent of all internet retail sales in the United States, with half of all online shopping searches starting on Amazon. In 2016, it had over $63 billion in revenue from online sales in the United States — or more than the next 10 top online retailers combined. It controls 74 percent of e-book sales, is the largest seller of clothes online and is set to soon become the biggest apparel retailer in the country.
. . . .
Think of Amazon as a 21st-century version of the 19th-century railroads that connected consumers and producers. Because of their gatekeeper role, railroads had power to discriminate, both among users and in favor of their own wares. These middlemen could tax the farmers and oil producers who depended on their rails — or deny them a ride and sink their livelihoods.
. . . .
In several key ways, Amazon uses its power as the railroads did. By integrating across business lines, Amazon now competes with the companies that rely on its platform. This decision to not only host and transport goods but to also directly make and sell them gives rise to a conflict of interest, positioning Amazon to give preferential treatment to itself.
The vast troves of information it collects enable it to self-deal with great finesse. News accounts tell how Amazon exploits data collected on the businesses using its platform to go head-to-head with them.
And like the railroads of yore, Amazon dictates terms and prices to those dependent on its rails. During negotiations with the publisher Hachette over e-book pricing, Amazon showed its might by effectively disabling sales of thousands of Hachette’s books overnight.
. . . .
Antitrust laws, which were passed by Congress to prevent these kinds of concentrations of private power, have been largely reduced to a technical tool to keep prices low. The change in thinking traces back to the Chicago School revolution of the 1970s, which ushered in decades of mergers and consolidation.
Embodying this “consumer welfare” regime, Amazon has largely avoided government scrutiny by devoting its business strategy and rhetoric to reducing prices. The company has marched toward monopoly by exploiting the defects of contemporary antitrust law.
Preventing Amazon from concentrating even more control will require that antitrust enforcers block the company’s bid for Whole Foods. But lawmakers and officials should go even further, embracing the original goals of antitrust law and adopting a competition policy fit for the digital age. Unless we recover our antimonopoly tradition, Amazon will centralize exceptional control.
Link to the rest at The New York Times
Somehow, PG has problems with the logistics of “embracing the original goals of antitrust law” while “adopting a competition policy fit for the digital age.”
Consider the dates the principal antitrust statutes came into being: the Interstate Commerce Act – 1887, the Sherman Act – 1890, the Clayton Act – 1914, the Federal Trade Commission Act – 1914, and a newcomer, the Robinson–Patman Act – 1936.
These laws were passed primarily to deal with market abuses by railroads and oil companies. The classic problem this legislation was designed to solve was a farmer in Iowa who, in the absence of any network of reasonable roads, had only one railroad available to ship corn to market. If the railroad raised shipping rates, the farmer had to pay those prices or not sell the corn.
So, Amazon is exactly like a railroad because, when you open your web browser, the only place where you can buy anything online is Amazon. Walmart is completely inaccessible. So is Google Shopping. And Apple? Forget about it. It’s absolutely impossible to buy anything from them. Ebay, Rakuten, JD.com? Not a chance. The internet train tracks don’t run there. How about Alibaba, whose 2016 profits were 55% greater than the combined profits of Wal-Mart, Amazon and eBay. They can’t sell anything because Amazon.
The author of the OP is a “legal fellow” (is that sexist?) at “the Open Markets Program at New America.” From a quick visit to their website, the fellows appear to dedicate themselves to Amazon bashing.
And this “New America” organization?
New America was founded in 1999 to nurture a new generation of public intellectuals—scholars, policy experts, and journalists who could address major social, economic, and political challenges in ways that would engage the public at large—and to provide a set of blueprints for American renewal in an era of globalization and digitization. The initial challenge, which continues today, was to find the minds and foster the debates needed to guide American renewal in an era of profound, exhilarating, but often threatening change.
Further, “New America is a 501(c)(3) non-profit organization and all donations are tax deductible”, which means that, unlike Amazon, New American pays no income taxes and is excused from paying lots of other taxes as well.
But nurturing a new generation of public intellectuals doesn’t come cheap.
New American receives most of its funding from other organizations that also don’t pay any taxes. The minority of listed donors who do pay taxes includes Google, Walmart (plus the Walton Family Foundation), Netflix, Comcast, DISH Network Microsoft (plus the Bill and Melinda Gates Foundation) and Facebook.
If you identified any competitors of Amazon among New America’s donors, you would be correct.
By mere coincidence, neither Amazon nor Jeff Bezos are listed as donors. Perhaps if Jeff wrote a check, New America would discover that Amazon’s business practices fit perfectly into “a competition policy fit for the digital age.”