Amazon is Becoming More Powerful Than You Realize, Karl Bode, Medium, Jan 10, 2019
Amazon trades on convenience: Prime shipping means avoiding lines at the store; your Echo tells you in seconds how many cups are in 3.5 quarts. The company has combined retail and technology in an irresistible package, weaving its services throughout millions of lives. The efforts have turned Amazon into the most valuable public company in the world and one of the most powerful.
Some experts warn that our reliance on Amazon is blinding us to the darker aspects of the company’s ambition. Unless we seriously rethink our understanding of monopoly power and the government’s role in protecting us from it, we may pay a steep price in the years to come. Many of the company’s workers already contend with dismal conditions to fulfill Amazon’s promise to customers: whatever you want, delivered almost immediately.
There are countless signs that Amazon may morph into something no consumer wants. By then, it may be too late to do anything about it.
Amazon began as a modest online bookseller back in 1994, but it was clear from the start that founder Jeff Bezos had greater ambitions. The CEO’s quest for an “everything store,” along with early domain choices like Relentless.com (which redirects to Amazon to this day), only showcased the founder’s aggressive vision.
In the decades since, Amazon has expanded into new markets, including grocery, TV production, video streaming, cloud storage, in-home digital assistants, book publishing, fashion design, and even smart doorbells. Half of every dollar spent in online retail now goes into Amazon’s pocket.
“Amazon’s ambition goes far beyond dominating markets,” says Stacy Mitchell, an economics researcher and co-director of the Institute for Local Self-Reliance. “Its intention is to control the basic infrastructure that commerce runs on.”
Thus far it’s been smooth sailing for the company, in part because Americans adore Amazon. The company tops most customer satisfaction studies and is frequently portrayed by the tech press in the United States as the embodiment of innovation, efficiency, and ingenuity.
But red flags persist. Headlines now routinely document the company’s abysmal labor practices: Reports have described how Amazon’s warehouse workers pee in bottles to avoid getting flagged by automated productivity systems, and its factory robots have injured people on multiple occasions by puncturing bear spray canisters. The company’s hometown of Seattle struggles with the housing and homelessness issues arising from explosive growth and poor urban planning. Meanwhile, Amazon’s auditions for “HQ2” not only inflamed a longstanding debate over taxpayer subsidization of trillion-dollar companies, but also highlighted an almost comical level of regional government fealty to the retail giant.
“Amazon is moving us toward a future in which the buying and selling of goods occurs not in an open public market, but on a private platform controlled by Amazon.”
And that’s just offline. A storm is also brewing in the cloud, as many of the biggest internet companies — think Netflix and Comcast — rely on Amazon Web Services to operate.
“If Amazon’s expansion goes unchecked, in the future, firms may also need to use its shipping services to get their packages to customers’ doorsteps, its web services to host and manage their data, its financial services to process transactions,” Mitchell says.
Her work explains how letting Amazon dominate retail’s underlying infrastructure is concentrating power in a way that, in the next few decades, could endanger competition, drive down wages, harm rural and less affluent communities, erode some of the last bastions of unionized labor (UPS and the U.S. Postal Service, for example), and even undermine democratic choice itself.
“Amazon is moving us toward a future in which the buying and selling of goods occurs not in an open public market, but on a private platform controlled by Amazon,” Mitchell warns.
Take Amazon’s Marketplace for third-party vendors, for example. It was supposed to aid the small businesses the retail giant had sidelined and supplanted. Recent research has shown how it instead quietly undermines those sellers by using their data to determine which products to develop.
John Bergmayer has spent years working at Public Knowledge, a consumer group focused on protecting consumer rights in an era of frequently unchecked corporate power.
Bergmayer told Medium that by 2069, the monopsonist dilemma Amazon creates will feel like Walmart on steroids. A single retailer can squeeze suppliers, either driving them out of business or reducing their quality, not only harming competition but also creating more centralized points of failure.
“Imagine if everyone becomes super dependent on a highly centralized delivery system for food and there’s some problem,” Bergmayer says. “The trade-off to efficiency seems like it could be a lack of resiliency and more fragility.”
Clashes between regulators and Amazon will be inevitable in the decades to come, but experts warn that Amazon’s power has grown inversely to the government’s ability to actually do anything about it.
By 2069, the monopsonist dilemma Amazon creates will feel like Walmart on steroids.
“For the last 40 years or so — 1980s onward — the antitrust law has turned a blind eye to the anti-competitive possibilities inherent in vertical mergers and other forms of vertical integration,” Tim Wu, a professor at Columbia Law School and an antitrust expert, told Medium.
Wu had been helping me make sense of another giant the U.S. government seems incapable of policing: AT&T. After being broken up in 1984, Ma Bell has slowly but surely reassembled itself and now poses an entirely different threat as it looks to control both essential media content and the broadband networks that content travels over.
Even the most problematic deals have been ignored by U.S. antitrust enforcers. Wu pointed to Ticketmaster’s 2010 acquisition of Live Nation, which resulted in a stark decline in competition and a corresponding hike in ticket prices.
American history is pockmarked by countless instances where the obvious perils of consolidation were ignored by those tasked with protecting us from them. Amazon is the culmination of our multigenerational refusal to learn anything from those experiences.
It’s difficult to regulate products that consumers are happy with. Amazon is convenient and relatively inexpensive, and historically, U.S. antitrust enforcement has focused on consumer welfare and prices.
Only recently have we begun to seriously challenge these assumptions.
Lina Kahn, for example, turned heads at Yale Law School in 2017 for simply arguing that low prices and the public’s adoration of dirt-cheap next-day shipping may not be a solid bellwether for whether a company’s mammoth size has become problematic. A more intelligent way of measuring corporate power will be essential in the coming years, she argued.
“Applying this idea involves, for example, assessing whether a company’s structure creates certain anticompetitive conflicts of interest; whether it can cross-leverage market advantages across distinct lines of business; and whether the structure of the market incentivizes and permits predatory conduct,” Kahn wrote in her landmark paper.
While Kahn’s insight netted her a recent advisory appointment at the FTC, her approach has been dismissed as “hipster antitrust” by establishment thinkers, many of whom have financial links to the giants in question.
Unchecked cross-sector corporate power of the sort Amazon holds “not only undermines our economic well-being, but it’s a direct threat to democracy,” Mitchell says. “Economic power concentrated to this degree has historically gone hand in hand with authoritarianism.”
As corporations grow more powerful than the government, they begin to literally write the laws, in turn prioritizing sweetheart subsidies over essential functions like local education or infrastructure improvement.
While Wu, Mitchell, and Bergmayer all predict some troubling repercussions from Amazon’s growing power, all three believe that this impact can be managed by evolving antitrust standards with an eye on the real scope of monopoly power.
“I think it’s inevitable that we’re going to see antitrust action to check Amazon’s power,” Mitchell says. “And we need to seize this moment to advance that idea. There’s no reason we can’t have a vibrant e-commerce future that’s open, competitive, and democratic — one that distributes power, income, and opportunity widely.”
