Sep 21, 2018
The European Union's Competition Commissioner Margrethe Vestager may be onto the location of the soft spot on Amazon's armor, where a well-placed antitrust arrow could be used to bring the digital behemoth down to size.
The region's antitrust enforcer announced on Wednesday that she is launching an inquiry into Amazon's relationships with its third-party resellers, zeroing in on the data that Amazon collects from those resellers and whether that data is exploited with the ultimate goal of putting those resellers out of business--or at least out of business that Amazon wants exclusively for itself.
"Amazon is a prime symbol of the concentration of economic power across a range of sectors that has in the past two decades led to suppressed wage growth for a majority of workers in America and the narrowing of paths that used to exist to the middle class."
It is the kind of inquiry that people like Stacy Mitchell, the director of the Institute for Local Self-Reliance, has been pushing for. In an interview this week for The Next System Podcast, a project of the Democracy Collaborative, Mitchell explained that Amazon is to the 21st century what railroads were to the late 19th century. Amazon's third-party reseller program underscores the parallel.
"What happened then was you had a few industrialists who got control of the railroads," said Mitchell, whose organization focuses on promoting the growth of local economies and grassroots democratic governance. "They often had interests in other businesses and they would use their control of the railroads to privilege their other businesses. They would knock their competitors out and say, 'Oh, sorry. You can't ride my rails or you have to pay more money if you want to,' and they would privilege their own goods' access to markets."
The response was antitrust laws that said to the railroads "you can't have this cross interest in other industries and you have to be common carriers. You have to treat all commerce equally," Mitchell said. "So I think we need to look at Amazon's platform in that context. And I think in order to have that sort of public interest, common-carrier kind of regulation of the platform, we have to cleave off Amazon as a retailer manufacturer. That has to be a completely separate company. So we have to break up Amazon."
Amazon has far outstripped its role as a digital big-box retailer. It is a digital mall that happens to also be the mall's biggest tenant. It both sells merchandise and is the landlord of the space other stores use to sell their merchandise. It collects rent from these merchants based on their sales. It also gains knowledge about the customers who use these stores and what they buy. As both mall tenant and mall landlord, it has the power to decide when to aggressively compete against a third-party reseller, taking the whole business for itself rather than just a cut.
That power is magnified by the increasing control that Amazon has over the information people receive about products and sellers as shoppers use that site instead of search engines.
"To talk about Amazon as a retailer really misses the true nature of this company," Mitchell said. "What Amazon's ambition is, is to really be the underlying infrastructure of the economy. It's ambition is not so much to dominate markets, but to become the market."
Amazon is a prime symbol of the concentration of economic power across a range of sectors that has in the past two decades led to suppressed wage growth for a majority of workers in America and the narrowing of paths that used to exist to the middle class.
"We think we're this country of entrepreneurs. But, in fact, we're creating new businesses at about one-third the rate that we were in the 1980s; it's really quite dramatic," Mitchell said.
For many people, Amazon has earned its place in the market by offering convenience and competitive prices. But the cost of Amazon's business practices--as it extends its tentacles into such areas as government contracting, where it threatens to block a key avenue many small- and medium-sized businesses use to grow--is proving to be way too high for the economy as a whole. That cost includes our loss of democratic control.
The United States should be asking the same questions the European Union regulators are beginning to ask. Amazon CEO Jeff Bezos is a modern-day railroad baron. Ohio Sen. John Sherman, the man from whom the Sherman Antitrust Act gets its name, had this response to the railroad barons of the 1880s: "If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life."
It's time to agitate for the next John Sherman to step up.
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