The Prime Effect: What Is Amazon?
It’s not just a retailer. The first installment in our series on Amazon, what it is and what power it has.
Stacy Mitchell, co-director of the Institute for Local Self-Reliance, a research and advocacy organization focused on combatting corporate control to build equitable communities. Author of several reports and articles about Amazon’s power, including “Amazon’s Stranglehold” and “Antitrust and the Decline of America’s Independent businesses.” (@stacyfmitchell)
David Boies, chairman and managing partner of Boies Schiller Flexner. Lead U.S. federal government’s prosecution in United States v. Microsoft Corp. He’s also known for representing Al Gore in Bush v. Gore, California’s Proposition 8 case, and defending controversial clients like Harvey Weinstein and Theranos.
What is Amazon?
Brad Stone: “Amazon … is almost a conglomerate, but unlike a Berkshire Hathaway or a General Electric, all the components are interlocked. There are very subtle connections between them. I would say it’s a technology company with all these businesses that are tied together, self-reinforcing, focused very obsessively on catering to customers. And using the same kind of operating principles and internal processes, some very idiosyncratic. And overseen by this very ambitious, very curious, inventive Internet pioneer named Jeff Bezos.”
Is Amazon a monopoly?
Stacy Mitchell: “Amazon has monopoly power over e-commerce, it is the dominant place for our online shopping traffic. More than two-thirds of all Americans, when they start their shopping instead of going to a search engine, which they did a number of years ago, and typing in what they want. Now, the majority of Americans start right on Amazon.
“Amazon has essentially become the infrastructure for how we buy and sell goods online. It’s become the infrastructure for the cloud. It’s become the infrastructure for the new world of voice-operated devices and connection to the Internet. And that’s really what has gotten the attention of policymakers, members of Congress. And the concerns about Amazon in terms of antitrust is that it’s the infrastructure that other companies need in order to reach the market. And Amazon not only supplies that infrastructure, it actually competes with those same companies. And that’s the core concern.”
On how to define monopoly power
Stacy Mitchell: “One way to understand monopoly power is to think about, you know, what it is that other companies have to face in the marketplace. You know, I think a definition of monopoly power is really when you have the ability and the position to be able to dictate terms, to dictate how other companies behave. And in the case of online commerce, Amazon really has that monopoly power.
“You know, if you make or sell anything and you want to reach customers online, when you’ve got two-thirds of customers starting their search on Amazon, you have two choices. You can either not sell there, and you are limited to trying to find the third of people who are still on search engines, or you have to sell on Amazon.
“And if you sell on Amazon, suddenly you’re subject to having to pay their fees, to live by their rules, to allowing them to see your data and information and use it against you. I mean, a good example of this is the company, PopSockets. They’re a maker of iPhone accessories. And they’ve testified before Congress about Amazon’s market power. And, you know, from their vantage point, you can’t not sell on Amazon. It’s just not a possibility. The way Amazon dominates the market, they’re a gatekeeper and you got to go through that gate.
“But then that means you’re subject to all of these things. PopSockets found that there were tons of counterfeits of its product on Amazon and said to Congress, Amazon told us we can clean up those counterfeits, we can get rid of them, but we need you to spend $2 million on advertising and marketing on our site, according to PopSockets. So that’s what monopoly power is. It’s really the ability to bully other companies and get them to do your bidding. And we have seen that over and over and over again with Amazon.”
Give me a few more of the facts that might make Amazon a worthy target for antitrust regulators.
Stacy Mitchell: “This is a company that has come to dominate online shopping and from that vantage point is systematically using that market power to dominate everything else around it. So we see Amazon using its power over third party sellers to build a massive logistics operation. Amazon is now shipping so many packages, not only its own, but those of other companies that it’s beginning to rival UPS and the Postal Service. We see Amazon using its power to surveil all of those companies that need to sell on its marketplace in order to reach customers online, surveilling them, hoovering up their data and using that to make its own products that it then sets up to compete directly against theirs.
“We see Amazon moving into a whole new world of how we connect to the Internet through voice, and sort of smart homes and smart offices. Amazon has — through acquisitions and through its power to really dominate the sale of Internet-connected devices, like home speakers and then all the things that are being connected, dishwashers, televisions and so on — … become the dominant voice provider with over 70% of the market.
“So this, again, is very much similar to that thing we faced with Microsoft, where power in one area, Amazon wants to be at the center of everything. And I think that that’s deeply concerning. I think the case that you build around that is both a case that can come through the courts, but it is also something that we may see Congress take up directly. And indeed, Congress has done this in the past where they have recognized that when a company provides essential infrastructure, that that is inherently problematic if it’s competing with the companies that rely on that infrastructure. And so we may actually see that breakup come through legislation from Congress.”
What might be coming later this year from the government vis-à-vis Amazon?
Stacy Mitchell: “Look at what’s happening to Washington, D.C. itself. I mean, Amazon is locating its second headquarters there, after this nationwide contest that people may remember, ultimately in … some would say, a foregone conclusion, chose to locate in the greater D.C. area. I mean, they are bringing 25,000 employees to Washington, D.C. It’s a kind of presence in a kind of soft power that I think is … hard to overstate. I think Jeff Bezos doesn’t see anybody on the horizon who is a potential competitor to Amazon.
“I think the only thing that he sees that could threaten his company’s continuing domination is the potential of a democratic government to actually intervene in that power. And I think that’s why their second headquarters is going to be in D.C. I think that’s why he bought the largest private mansion in the city. Before COVID, held his first lavish event here with quite a list of leading political figures on both the left and the right, leading journalists as well at that event. So Jeff Bezos is very much focused on Washington, D.C.
“In terms of what we’re going to see from elected officials, in the House, the antitrust subcommittee last fall completed a 15 month investigation into the four big tech firms, including Amazon, and released its report. That report found that Amazon has monopoly power and called for a number of changes to antitrust policy. Also called for legislation that would break up the dominant tech firms along business lines and apply what’s known as nondiscrimination rules, essentially saying you are infrastructure. Therefore, you have to treat all commerce equitably. The same thing we did with the railroads, and other forms of infrastructure in the past. So I suspect that we’re going to see legislation in the coming months to do exactly that.”
From The Reading List
About Amazon: “2020 Letter to Shareholders” — “In Amazon’s 1997 letter to shareholders, our first, I talked about our hope to create an ‘enduring franchise,’ one that would reinvent what it means to serve customers by unlocking the internet’s power.”
Seattle Times: “Amazon gears up to defend itself against escalating antitrust scrutiny” — “Amazon is gearing up to defend itself against a mushrooming battle over the company’s alleged anticompetitive business practices, in arenas spanning Congress, federal agencies and state government.”
WIRED: “U.S. v. Microsoft: Timeline” — “A little hazy on events? For those who snuck out in the middle, or have simply forgotten about things during the hiatus, here’s a cheat sheet of key moments in the antitrust trial of U.S. v. Microsoft.”
Politico: “Poll: majority of Americans concerned about Big Tech’s economic, political power” — “About 65 percent of likely U.S. voters think the economic power held by tech companies like Amazon, Google, Facebook is a problem for the U.S. economy, according to a survey on antitrust and the tech industry to be released Thursday.”
The Nation: “Amazon Doesn’t Just Want to Dominate the Market—It Wants to Become the Market” — “Chris Lampen-Crowell started to feel the undertow four years ago. Gazelle Sports, the running-shoe and apparel business he founded in downtown Kalamazoo, Michigan, in 1985, had grown steadily for decades, adding locations in Grand Rapids and Detroit and swelling to some 170 employees.”
Washington Post: “Five myths about antitrust law” — “After years of relative quiet, antitrust law and policy are back in the public eye. The Trump administration has targeted large technology-based firms for antitrust scrutiny. When she was running for president, Sen. Elizabeth Warren (D-Mass.)”
This article was originally published on WBUR.org.
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