Amazon Passes “Go” One Too Many Times
Chances are pretty high I’d flip the table and storm out of the room if I played a game of Monopoly with Amazon CEO Jeff Bezos.
The dude makes moves. Say what you want about how they may or may not have botched Prime Day, but Amazon dominates the e-commerce retail market. The issue is, perhaps, that their dominion stretches a bit too far.
There are some out there who believe Amazon is in violation of antitrust laws, but not for putting consumers in a chokehold – the normal association of said claim. Instead, Amazon is accused of destroying competition within the e-commerce space with unbeatably low prices.
But is Mr. Bezos truly an unlawful kingpin? Or is he just the Lionel Messi of online retail—playing by the rules but too damn good to stop?
The Rules of the Game
First things first, let’s have a brief rundown of what antitrust laws are all about. They’ve been around since the turn of the 20th century and are in place to protect the idea of competition among players in a given industry.
The three main pillars of the laws are:
-Prevent the formation of cartels
-Restrict mergers or acquisitions of smaller companies that would disrupt competition
Antitrust laws have been used in the past to bring down giants like Standard Oil and AT&T in the ‘80s.
We live in a capitalist society that’s fueled by the principles of strong private business and healthy competition. Competition would imply that there are several players in every field who battle it out to gain a solid customer base and achieve the largest measure of success.
Monopolies, however, pose an interesting threat to that balance, as it’s in a company’s best interest to do everything it can to be the undisputed champion in their respective class.
Sometimes this results in one company taking complete control over the market share of their industry, and so while they are a strong private business (yay!), they’ve effectively extinguished the competition (boooo).
Amazon Brings the Ruckus
So, to bring it back to our good friends over at Amazon, why are people hatin’?
Last October, New Republic writer Franklin Foer authored a piece titled “Amazon Must Be Stopped”. In it, Foer bashes the company, saying it “has left a trail of destruction—competitors undercut, suppliers squeezed—some of it necessary, and some of it highly worrisome.” He slaps it with the label of “monopoly,” claiming that it uses its status and wealth to undercut opponents on price, and then buys them all up once they’ve burned out.
There’s a difference, however, between a monopoly and a nasty competitor. A fine line may divide them, but frustrating competitors and totally occupying an economic space are very different things.
From an e-commerce standpoint Amazon may very well be the biggest player, making up a little over 15 percent of total sales in the $263 billion market according to the National Retail Federation. But that leaves the other 85 percent to be split up between everyone else in the space.
From a brick-and-mortar perspective, Amazon ranks ninth overall—in sales—in the top 100 retailers, behind companies like Wal-Mart, The Home Depot and Target. Again, that’s not market dominance.
One Little Kink
Amazon does have some monopolistic vibes over one specific industry: publishing distribution.
According to research conducted by the Codex Group in March of last year, Amazon’s market share of e-books was at 67 percent, and for the sale of print books online it was 64 percent. Considering actual bookstores account for less than a quarter of book sales these days, it’s fair to say that that is dominance.
But every Goliath has its David.
Enter: Hachette Book Group. Last year the publisher got into quite the heated debate over its contract with the online retailer. Things got ugly and reached the point where Amazon was pricing books published by Hachette much higher than those of any other publisher on the site, extending the delivery time from 2-3 days to 2-3 weeks for all Hachette print books and, in some cases, didn’t even offer the publisher’s books in electronic format.
While that case was settled after a lengthy legal battle, the scars still remain and Amazon is finding itself under fire. Now, a coalition of defenders of the literary world—The Authors Guild, the American Booksellers Association, the Association of Authors’ Representatives and Authors United—have united to bring down their new nemesis, who they claim is in clear violation of antitrust policy.
The Customer is Always Right
Amazon is all about the consumers. That’s probably the biggest reason it will never be under the same scrutiny that traditional monopolies have faced. When a company is making access to products increasingly easier and at lower costs, it makes it difficult for the government to say, “That’s bad. You should stop.”
In the case of publishing distribution, however, Amazon may have made a major slip up. Whereas in retail they stifle the competition but save themselves by bringing huge benefits to customers, here they don’t have that crutch to fall back on.
Amazon has made the potentially fatal error of interfering with the free flow of ideas between readers. In an attempt to assert their reign over the publishing sphere, it has abandoned its promise of being a customer-focused company. And when the innocent consumer is negatively affected due to your business’s conduct, you better be prepared for a showdown.
Some things are better left untouched and maybe that’s the case here. Maybe there’s nothing wrong with having a company like Amazon control the e-book market. Maybe it’s simply evidence of a genius business model. Or maybe an industry that generates positive externalities, like the publishing industry’s influence on education, deserves stronger protections.
I’ve got some beef with the notion that Amazon is in the same league as something like Bell Labs. While I may question some of the company’s business decisions on a moral level, I think it toes the line between savage and brilliance to perfection.
But regardless of my opinions I do know one thing for sure, as long as Jeff Bezos continues to sell five-pound bags of gummy bears for twenty bucks, he need not fear being condemned as the CEO of a monopoly writ large.