From The Yale Law Journal:
Abstract: Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny.
This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.
This Note maps out facets of Amazon’s dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon’s structure and conduct, and underscores deficiencies in current doctrine. The Note closes by considering two potential regimes for addressing Amazon’s power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties.
Link to the rest at The Yale Law Journal and thanks to RM for the tip.
Found a boo-boo, one flatly contradicted by its own citation.
Came across this bit, and did a mental “Say, what?”
The firm’s highly public dispute with Hachette in 2014—in which Amazon delisted the publisher’s books from its website during business negotiations—similarly generated extensive press scrutiny and dialogue.
Passage cites this article: Amazon’s Monopsony Is Not O.K. Except, even ol’ Paul K. admits…
Amazon had been demanding a larger cut of the price of Hachette books it sells; when Hachette balked, Amazon began disrupting the publisher’s sales. Hachette books weren’t banned outright from Amazon’s site, but Amazon began delaying their delivery, raising their prices, and/or steering customers to other publishers.
Been many years since I’ve done anything remotely close to citing a footnote, but I presume you’re still supposed to make sure they support the case you’re making?
I’m too lazy to go back through all that mess, but I could have sworn it was Hachette delaying book shipments to try to force Amazon to do things their way. Amazon’s response was to remove the pre-order buttons (because without a contract they might never get those books from Hachette), and either warning of shipping delays or removing the buy buttons when they had none of those books to sell (Forcing Hachette to either deliver the books in a timely matter or lose possible sales.)
Maybe this was put together by the first-year students without being looked at by anyone else. (Or maybe this shows how far Yale has slipped into the ‘false news’ world. 😉 )
Was bored and my muse is in hiding …
http://www.thepassivevoice.com/2014/05/is-hachette-playing-dirty-tricks-in-their-contract-dispute-with-amazon/
Is Hachette delaying orders so they could blame Amazon.
http://www.thepassivevoice.com/2014/05/amazon-v-hachette-dont-believe-the-spin/
Mentions the pre-order buttons.
http://www.thepassivevoice.com/2014/05/amazon-encourages-affected-shoppers-to-buy-hachette-books-from-competitors-anticipating-long-negotiation/
Has a bit on Amazon suggesting you buy Hachette titles elsewhere/third party.
And I didn’t bother looking for it, but of course it’s unfair of Amazon to charge the prices Hachette sets on their pbooks (which Hachette demands they do on their ebooks!)
ETA
Seems only linking TPV doesn’t get you out of ‘awaiting moderation’ … 😉
Pre-order buttons cost extra. If you don’t pay for them, you don’t get them.
But they won’t sell you one if they don’t trust that you can/will be able to deliver.
Actually, what it was was that Amazon wasn’t choosing to stock as much inventory from Hachette, but only ordering a few copies at a time. That meant whenever it sold out of the copies, it was a longer wait for people who ordered it until Hachette’s slower warehousing system could ship more inventory to Amazon.
This is one where we’d need access to both companies’ records during and before the dispute to show who was actually gaming whom. Before the contract came up for renewal, Amazon was able to stock what they needed for Hachette’s book sales, what the records would show us is whether Amazon started making smaller/later orders — or if Hachette was no longer delivering as they had been before.
And we know one of Amazon’s strong suits is knowing how to do ‘on demand’ stocking and pricing.
ETA
Personally, I was hoping Amazon didn’t pull any punches and would say, “We have no contract with them, we will sell no books from them. Hachette who?”
Would have been over in a day.
I’m sure Amazon was making smaller orders. Why should they make big orders when they have no contract allowing them to sell the books? They could have purchased a lot of books and then lost the permission to sell them (and therefor gotten stuck with unsellable inventory)
That doesn’t make it Amazon’s fault. From a strictly legal point of view, the probably should not have been selling any of the books.
Pre-Orders are a similar thing, why should Amazon promise to deliver books in the future that it had no way of knowing it could deliver them.
I think a mountain is being made out of a molehill here. The worst the Yale article is really guilty of in this instance is imprecise language. No, they didn’t “delist” the Hachette books. But Amazon has done so many different things over the years to depress sales of books by different publishers that it can be hard to keep track. They’ve delisted some books, removed the buy-it-now buttons from others, played games with search results order for yet others, and reduced their on-hand inventory of more others. And it’s hard to condense “reduced their on-hand inventory so that customer orders were bottlenecked by Hachette’s own slow order-fulfillment system” into a pithy four-word phrase.
Perhaps the article should simply have said “made it harder to buy the publisher’s books during business negotiations” and avoided the entire issue.
Heh. “… imprecise language.”
“Perhaps the article should simply have said “made it harder to buy the publisher’s books during business negotiations” and avoided the entire issue.”
“made it harder to buy the publisher’s books during [the time it was under no contract to sell that publishers books in the first place]”
If they had wanted to burn that bridge completely down, Hachette could have sued Amazon for selling their books without the rights to — and thereby cut their own throats.
The worst the Yale article is really guilty of in this instance is imprecise language.
Precision in language is very important when one advocates for anti-trust by citing a firm’s actions.
It is in the Yale Law Journal (YLJ), so there is zero chance that it was done by a 1L (first year law student).
The error Patrick W. found shows YLJ’s fact checking is incompetent, and that calls into question everything else about the journal. If they missed that, what else did they miss?
“The error Patrick W. found shows YLJ’s fact checking is incompetent, and that calls into question everything else about the journal. If they missed that, what else did they miss?”
Or trying to ignore?
If the facts are against you, bang on the law. If the law is against you, bang on the facts. If both are against you, bang on the table.
Or if you’re the YLJ you bang your heads on the wall it seems.
If you’re YLS you lobby politicians to change the laws.
” … choosing to price below-cost …”
Citation needed as they say. As in ‘if’ they could show it I’m quite sure they’d be shouting it from the rooftops.
“This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy.”
Funny, ‘the current framework in antitrust’ had no problems getting after China for dumping solar panels below cost on us.
It’s actually a little funny that Amazon and our new wet-behind-the-ears president have the same problem of idiots judging them for what they ‘might’ do rather than what they have done.
If a firm sells everything below cost, there is co cash flow left to invest in the business.
As noted above, it’s Yale. They don’t understand the concept of capital investment. They don’t want to understand the concept of capital investment. It has that evil word “capital” in it, after all.
That particular branch of the spectrum is about all control. Preferably state control.
In a pinch, control-by-mob will do, though.
The idea of applying common carrier obligations and duties to address Amazon’s power is interesting. One factor in Amazon growing to the size and consequent power they have now is they acted as a common carrier, far more than their competitors. Much like Apple shot to dominance in music with the iTunes store. Kindle Direct, Amazon Marketplace, same free shipping terms to everywhere. You got something to sell? We can handle that for you. You want something shipped to your house? We can do that.
Requiring Amazon to abide by the obligations of a common carrier isn’t punitive when they already do so. The desire to chain Amazon seems routed in a belief that now Amazon has grown huge following Strategy A, made lots of money following Strategy A, and continue to make bank following Strategy A, they will suddenly switch to Strategy B just to be evil. But even more fundamentally than antitrust concerns, the law recognizes you cannot punish someone because they might in future be tempted to behave improperly.
Treating Amazon as a common carrier is the same as treating them as a public utility. Shouldn’t that then qualify them to operate tax-free? 😉
Yale. Law. School.
Not much else needed.
Amazon keeps breaking our management/business models of operation without actually breaking any laws, we consider this unfair on Amazon’s part.
Sour grapes.
It’s funny, isn’t it? It’s a terrible tragedy that our copyright laws written to deal with physical property and slow communication aren’t being modernized to keep pace with the changing nature of digital media and the Internet.
Yet, it’s just fine that our antitrust laws written to deal with physical property and slow communication aren’t being modernized to keep pace with the changing nature of digital media and the Internet.
I love all the ‘anti-competitive’ claims they keep making. ‘Anybody’ else could do/could have done the same — but ‘only’ if they are willing to do the work and then pour their earnings back into the company. Jeff convinced his stockholders to let him do it, but far too many investors act like day-traders, only interested in how much profit they can grab before bailing.
What does copyright have to do with Amazon?
Well, it’s copyright law that forbids people from cracking DRM, for one thing. But mainly, it demonstrates the way people only get up in arms about modernizing laws that do things they personally don’t like.
People only gripe about things that offend them.
That’s generally understood, no?
Well, it’s copyright law that forbids people from cracking DRM, for one thing.
What dos that have to do with Amazon and the current framework in anti-trust?
Felix — so that’s an argument ad collegium?
(Not that I disagree, as a Yale BA ’75).
Argument ad snarkium.
@ Felix
Yale. Law. School.
Not much else needed.
LOL. Lawyers are trained to dissemble, excoriate, prevaricate, ambiguate, lie, and generally BS to the max — even beyond the bounds of real-world logic. This article looks like a law school homework assignment to demonstrate a student’s proficiency in these techniques.
(Of course there are lawyer exceptions, PG being a prime example!)
And this particular school has in recent times has been an exemplar in the nascent field of shielding students from real world facts and opinions that falsify establishment orthodoxy theses. 😉
Cheap shots. And I had to look up ‘cognize’ to make sure I’d gotten it correctly from context.
If it were anyone else but Amazon, there’d be commendation for satisfying consumers, having not necessarily the best prices, but the most reliable price+delivery system, and for reinvesting profits into the business.
They preach this stuff at business school – but most students don’t follow the advice. Because customers are too erratic to know what they want; they must be told.
Go ahead; badmouth; drive the share price down so I can buy more.
The entire article is long and a little dry, but still well worth reading, and I think Ms. Khan makes some valid points. Not to say that she’s necessarily right, but I think the argument should be considered on its merits, not dismissed from the summary.
The problem with these screeds, as well as the ones from when it was Bill Gates who was the devil du jour, is that they conflate hyoer-competitiveness with anti-competitiveness.
These people seem to think there should be a cap to success.
“To give somebody else a chance.”
These people seem to think there should be a cap to success.
It’s a throw back to the core progressive ideas.