Wonderful post. Also: Big stores are better for workers too ; on average they pay more wages, have more flexible hours, commit fewer immigration-abuse and under-the-table shadow deals; and have more generous sickness and disability rights policies. Obviously we should unionize at these stores. But Walmart is better than Joe Tyrant’s local hardware store fiefdom.
Hey Matt, isn't the issue with Amazon monopsony power (not monopoly)? You detail a lot of ways for durable goods manufacturers to get around Amazon, but wouldn't there be a problem for publishers if Amazon sells ~50% of print books and is an even larger purchaser of ebooks? Couldn't you get a situation where Amazon can basically demands any terms with publishers that it wants?
When is an upstart competitor deemed “too” successful? Amazon came out of nowhere to challenge established companies that had dominated retail and media for decades or in some cases over a century,
I would love to hear the podcast of a conversation where you and Matt Stoller sit down and talk about these issues for a couple hours, and hash out where you agree and disagree, and what exactly drives the disagreements. Maybe you could get him on The Weeds?
> Even in e-books where Amazon really does have a comically dominant market share, I hardly think it’s right to say they have a monopoly.
Agree with everything up to this point, it is fair and accurate to say that at ~90% market share you have a monopoly position. Having a monopoly is not illegal, but once you have it you can’t engage in the same activities as you otherwise would, that’s the foundation of anti-trust.
I don’t think we should allow businesses to slice up or combine abstract market definitions for the purpose or avoiding anti-trust scrutiny, if you have 90% of ebooks you have a monopoly in ebooks but maybe not “all book sales.” Nor is the test of a monopoly position whether or not a consumer can theoretically buy from another source, in fact the entire purpose if anti-trust is to define behaviors a business engages in once it has a monopoly position that make theoretical alternatives so impractical that it constitutes an unfair advantage. Remember that the Microsoft case was not about removing their monopoly position, it was about breaking up the company so that the monopoly they would presumably continue to have couldn’t be leveraged unfairly in other markets (browsers, office, etc).
The Netscape anti-trust lawsuit against Microsoft for Internet Explorer is a good guide here. Microsoft had 90%+ market share of consumer operating systems (but not ALL operating systems) and once it had that certain activities became anti-trust concerns. It’s good for Operating Systems to ship with a free Web Browser, and it’s also good for Web Browsers to innovate and do new things that other browsers don’t do.
But in a monopoly position, shipping a free browser that you can’t un-integrate with the OS means that your monopoly position in consumer operating systems becomes a monopoly position in Web Browsers overnight. That browser including proprietary plugins that only that browser has and no other browser is even allowed to license presents a clear anti-competitive practice that destroys competition and is a good place for regulators to step in.
Similarly, Kindle has proprietary DRM technology. Their competitors have their own proprietary DRM, and nothing about building and shipping DRM is, by itself, an anti-trust concern. But once a single DRM vendor has 90% market share, and they leverage that proprietary lock into a creating devices that now enjoy exclusive rights to 90% of the digital assets in a market, they are translating their “earned” monopoly position in selling ebooks into an “unearned” monopoly in ebook readers. It’s just not relevant that “ebooks are only x% of book sales” because ebook readers can only read ebooks and that market effectively has no competition because the monopoly position of Amazon was leveraged from one market to capture another. The fact that you can read ebooks on iPads and other general purpose devices doesn’t really matter to the producers and consumers of ebook readers, they are at the mercy of a monopoly even if that monopoly is contained to ebooks. Since there is no telling how large a market can grow, especially if it is currently constrained by a monopoly, you can’t hand wave these concerns away by comparing the size of ebook readers to similar general purpose devices like tablets, maybe the market would be 10x the size it is now and 20% of the price to consumers (kindle is wildly overpriced) were it not for the fact it was captured by the ebook seller’s monopoly position.
But to make my point clear, Amazon making an ebook reader is not an anti-trust concern by itself just because they have a monopoly in ebooks, they could “win on the merits” but they didn’t and they still don’t, they win by default because you can’t build a profitable business licensing their DRM or forgoing 90% of the ebooks out there. An activity everyone in the market engages in (shipping proprietary DRM) becomes an anti-trust concern once you leverage it through you existing monopoly position.
Being big is not illegal. Being a monopoly in not illegal. Abusing monopoly power is what is illegal. It isn't about what you are; it is about what you do.
_______________________________________________
"Windows competes with Apple’s Mac OS."
Mostly with Chrome OS. Mac OS is #3:
"... in 2020, Chrome OS became the second-most popular OS, and Apple fell to third."
One thing that is underappreciated by today's critics is the extent to which courts and government antitrust agencies become tools of anti-competitive rent seeking when antitrust standards are expanded. The old cases like Utah Pie, Pueblo Bowl-o-Mat vs Brunswick, and Matsushita are classic examples of incumbent competitors attacking new entrants, often on spurious claims that the new guy is cheating by offering a lower price or better experience. Consumers are harmed when those plaintiffs/complainants succeed. This is why Bork called it "the Antitrust paradox" -- antitrust law can often as not be used to hurt competition (and consumers). Bork, to be clear, was also wrong about a lot of antitrust, but he was right on that fundamental observation.
Gotta say that the importance of AWS in Amazon's money machine is VASTLY overstated. Amazon runs 5 businesses: Its own retail, its retail platform, AWS, Prime, and Advertising. It lost more than $40 billion on its own retail in 2020, but the other 4 segments were all very profitable- Marketplace being the most important, with more than twice the profits of AWS (which accounts for about 20% of the total profits generated by the profitable segment).
Why does this matter? Because Amazon isn't competing in the same universe as its competitors (who vary by segments of course). It has a complex web of cross-subsidies that allow it to enter new markets at far below cost, and to pick off competitors within existing segments in the same way. That's helped build control of online retail markets by capturing effectively all the customer s(Prime), all the sellers (and hence the biggest catalog), and the best distribution network (guess where those years of "missing" Amazon profits went).
Should we care? After all, Amazon delivers for consumers big time, as Matt pointed out. The problem really is that Amazon is exposing the collateral damage caused by the ruthless and highly effective search for efficiency. Should we care that it tramples sellers? That it causes higher rates of injuries in warehouses, or forces rivers to pee in bottles to keep on schedule?
We decided long ago that certain practices are not acceptable (eg child labor, unpaid overtime, dangerous conditions, adulterated products) even if they are economically efficient. We need to force Amazon to work within new guardrails that reflect our unwillingness to simple accept its control over its working environment with the minimal oversight hat now exists.
Existing antirust law is effectively useless for this purpose. Arguing whether Amazon is a monopoly or not is beside the point. We need to address how Amazon behaves form a which wider perspective.
Big is bad because it reduces dynamism. An economy dominated by large firms will see fewer adventurous ideas. Also, from an aesthetic perspective, seeing the same forty companies in every American city is dreary.
I feel like international competition and maybe economic rivalry with other big countries should factor into this big/anti-big debate somehow. It might be that some of these factors look differently in other countries; maybe Amazon is the only game in town in Costa Rica, for example, so it really does have a monopoly there, but it's up to CR if they want to do anything about that. And anything that would hurt Amazon's domestic profits could indirectly hurt their international competitiveness.
Amazon has a monopoly on book publishing. Rod Dreher: "Amazon's decision not to sell books “that frame LGBTQI+ identity as mental illness” [which Ryan T. Anderson’s book doesn’t do, but never mind] means that in effect, no books like that will be published going forward, because no publisher can take the risk of coming out with a book that Amazon won’t sell."
I would look for most substantive evidence of that being true than Rod Dreher, who is not an economist or expert on the publishing industry, but has a conservative cultural agenda
I think that piece calls out a bunch of important problematic powers that Amazon has, but it doesn't substantiate the claim that publishers will refuse to publish books that they can't sell on Amazon.
More to the point, we live in the golden age of self-publishing books for cranks. If you want to claim in detail that you've figured out WHAT THE QUEERS ARE DOING TO THE SOIL, STUART, there are _multiple_ companies that will take your 90,000 word PDF and a thousand dollars and ship you back a few hundred copies of a very respectable-looking hardcover that you can hawk on facebook or newsmax or wherever floats your boat.
When one company controls greater than 50% of the market, and then declares that it won't carry certain products, of course that is going to heavily impact the decision of a product producer whether to go forward or not. To claim otherwise is just burying your head in the sand.
So what's the solution, in your mind? Should Amazon be compelled to offer these products? Should the book distribution business be state run? Or maybe Congress creates some kind of tort claim that treats this as discrimination against religious beliefs?
What other markets do you see as problematic in this way? If Comcast has 80% of the market in a metropolitan area, should it be free to not carry Fox News?
Importantly, Amazon still sells books published by publishers that publish other books that Amazon refuses to sell. It just refuses that one book, not the entire publisher.
The problem in this article is that when Amazon *does* sell your books, they then insist that you follow their pricing restrictions elsewhere, but not their content restrictions.
The point is whether books that would be "too controversial" for amazon get published AT ALL, because the publisher loses >50% of the market for THAT BOOK.
I don't have a WSJ subscription, so I can't look at the first link, but the second provides no substantive evidence that publishers won't publish books that Amazon can't sell. In fact, the second literally asks the question, "How many publishers will simply decline to publish books they’re afraid will be barred from Amazon?" and doesn't attempt to answer it. We want evidence about the answer to that question, not further people raising the question. (No one is disputing that Amazon has the content policy they do, which is all I see those articles as suggesting.)
To be honest I expected a lot more comments about the dark satanic mill aspect of Amazon's warehouse operations. Which usually seem to emanate from people who have literally never worked in a warehouse or any other job involving manual labor. All of which are regulated by OSHA requirements just like everybody else. Workman's compensation rates for accidental injuries are set based on rates of injury for specific industries (base rate) as well as punitive increases for accident rates above the average. These are intended to act as a powerful inducement to correct deficiencies. Things like breaks or limits on lifting requirements are all set in black letter law. Warehouses are not considered to be particularly dangerous places to work by any standard.
Which incidentally brings me to another wonderful advantage Amazon and similar retailers enjoy over bricks and mortar establishments. Anyone who has ever run one of those knows that you have to have a lot of public liability insurance if the public is allowed to step foot on the property. And that isn't cheap. There are other advantages. I doubt pilferage or shoplifting can be a problem for Amazon. Municipal taxation rates are a lot lower for warehouses generally speaking.
Excellent analysis of the weak monopoly criticism. And "bigness" by itself may or may not be bad. But I think this line of argument may obscure the real reason for concern: quasi- or actual oligopolistic behavior and the quashing of creativity and innovation. Yes, indeed, the really big tech companies "compete" with each other, e.g., on cloud services, but do they really? Competition includes coming up with great new ideas, ones that may be disruptive and threaten the structure of an industry, and seeing how it plays out in the market. I'm not convinced any of these companies are seeking out such innovation or would allow it to exist, especially if the innovation was coming from an upstart company outside of their oligopolistic group.
Think about the Big 3 auto companies in the 1970s especially. GM, Ford, and Chrysler were all highly competitive, and none was close to a monopoly. They were all also stodgy and deteriorating in terms of quality, consumer value, style and on and on. But since they were comfortable "competing" on the most marginal terms, none was willing to try to break out, or probably knew how to do so even if they wanted.
And then came the Japanese with their critical breakthroughs in how to design, build, and market cars. And here's where bigness really does matter, because this is when the Big 3 unified to push off that threat as long as they could by bringing in the US government early in the Reagan administration to quash that threat to their viability. Thankfully, that didn't last forever, especially when the Japanese companies figured out how to locate factories in the (southern) United States. But it cost US consumers dearly in the meantime.
TL;DR: the story is a lot more complicated than we often think.
One thing (that may be a secondary consideration) is the leverage a company of this size has on governments. The competition to secure AmazonHQ2 and the host of tax incentives heaped upon them was more than a little gross. While the municipal/state level offers the biggest power disparity, it translates at the national level too. I would suspect the corrupt outcomes from lobbying by a few giants would be worse than those from a trade group representing a consortium of smaller companies.
Big business may have such phenomenal efficiencies and wage benefits that this doesn't matter, but I do wonder if having a more diffuse market structure wouldn't allow for better outcomes -- assuming competent regulators.
I see that more as a government problem. If local governments simply said we're not playing this game (and I think this should extend to some of these professional sports stadium deals) ... wouldn't that solve the problem?
The problem here is the asymmetry of the market. When you've got one buyer (Amazon) and a thousand sellers (cities that could host a headquarters), the sellers have to compete and offer the lowest possible margin and give the best deal to the buyer. If the cities had all managed to negotiate as a unified front (say, by delegating their tax-incentive power to the federal government) then they could have refused to play. But as long as they remain disunified, it only takes a few defectors to ensure that the buyer always gets the giveaway. (This is the point of a labor union, to give the thousand sellers of labor equal negotiating power to the one buyer at the factory.)
“…the sellers have to compete and offer the lowest possible margin and give the best deal to the buyer.”
“Margin” is this analogy is tax revenue, no? Why does the best deal to the buyer necessarily mean the lowest margin? Why cannot a city, as businesses do, offer innovation and earn their “margin”?
They obviously *could* offer "innovation" (I assume you mean "successful site location" here?). But the point is that if they can *also* offer tax breaks, then unless some city has a very large advantage on the merits, there will be a major giveaway.
Why use Josh Hawley as an example of politicians calling Amazon a monopoly? When there are other politicians who have been doing it longer, are more fervent, and have created political personas around this issue? Because those other politicians are on the left?
I appreciate the distinction you make between "bigness" and "monopoly" - always important to clarify language these days.
But what if "bigness" also include something else? Pepco does more or less one thing - provides power to its customers, and its size works towards the goal of doing that cost effectively.
Verizon does a couple of related things - mobile phone service and broadband. Again, as a utility, size works towards efficiency.
What exactly does Amazon's bigness do for Amazon? Ring doesn't increase the efficiency of Kindle sales, although it may assist in security of delivered packages. What does Alexa do for Amazon? Do all these branches of commerce increase Amazon's efficiency by collecting user data?
Is popular concern about Amazon's bigness more a poorly articulated concern about the power and potential abuse of power that comes with the ability to collect personal data from a database that is not only large but derived from widely diverse services? I believe it is, and I think this places the problem outside the issue of competition and economics.
Wonderful post. Also: Big stores are better for workers too ; on average they pay more wages, have more flexible hours, commit fewer immigration-abuse and under-the-table shadow deals; and have more generous sickness and disability rights policies. Obviously we should unionize at these stores. But Walmart is better than Joe Tyrant’s local hardware store fiefdom.
Hey Matt, isn't the issue with Amazon monopsony power (not monopoly)? You detail a lot of ways for durable goods manufacturers to get around Amazon, but wouldn't there be a problem for publishers if Amazon sells ~50% of print books and is an even larger purchaser of ebooks? Couldn't you get a situation where Amazon can basically demands any terms with publishers that it wants?
When is an upstart competitor deemed “too” successful? Amazon came out of nowhere to challenge established companies that had dominated retail and media for decades or in some cases over a century,
I would love to hear the podcast of a conversation where you and Matt Stoller sit down and talk about these issues for a couple hours, and hash out where you agree and disagree, and what exactly drives the disagreements. Maybe you could get him on The Weeds?
> Even in e-books where Amazon really does have a comically dominant market share, I hardly think it’s right to say they have a monopoly.
Agree with everything up to this point, it is fair and accurate to say that at ~90% market share you have a monopoly position. Having a monopoly is not illegal, but once you have it you can’t engage in the same activities as you otherwise would, that’s the foundation of anti-trust.
I don’t think we should allow businesses to slice up or combine abstract market definitions for the purpose or avoiding anti-trust scrutiny, if you have 90% of ebooks you have a monopoly in ebooks but maybe not “all book sales.” Nor is the test of a monopoly position whether or not a consumer can theoretically buy from another source, in fact the entire purpose if anti-trust is to define behaviors a business engages in once it has a monopoly position that make theoretical alternatives so impractical that it constitutes an unfair advantage. Remember that the Microsoft case was not about removing their monopoly position, it was about breaking up the company so that the monopoly they would presumably continue to have couldn’t be leveraged unfairly in other markets (browsers, office, etc).
The Netscape anti-trust lawsuit against Microsoft for Internet Explorer is a good guide here. Microsoft had 90%+ market share of consumer operating systems (but not ALL operating systems) and once it had that certain activities became anti-trust concerns. It’s good for Operating Systems to ship with a free Web Browser, and it’s also good for Web Browsers to innovate and do new things that other browsers don’t do.
But in a monopoly position, shipping a free browser that you can’t un-integrate with the OS means that your monopoly position in consumer operating systems becomes a monopoly position in Web Browsers overnight. That browser including proprietary plugins that only that browser has and no other browser is even allowed to license presents a clear anti-competitive practice that destroys competition and is a good place for regulators to step in.
Similarly, Kindle has proprietary DRM technology. Their competitors have their own proprietary DRM, and nothing about building and shipping DRM is, by itself, an anti-trust concern. But once a single DRM vendor has 90% market share, and they leverage that proprietary lock into a creating devices that now enjoy exclusive rights to 90% of the digital assets in a market, they are translating their “earned” monopoly position in selling ebooks into an “unearned” monopoly in ebook readers. It’s just not relevant that “ebooks are only x% of book sales” because ebook readers can only read ebooks and that market effectively has no competition because the monopoly position of Amazon was leveraged from one market to capture another. The fact that you can read ebooks on iPads and other general purpose devices doesn’t really matter to the producers and consumers of ebook readers, they are at the mercy of a monopoly even if that monopoly is contained to ebooks. Since there is no telling how large a market can grow, especially if it is currently constrained by a monopoly, you can’t hand wave these concerns away by comparing the size of ebook readers to similar general purpose devices like tablets, maybe the market would be 10x the size it is now and 20% of the price to consumers (kindle is wildly overpriced) were it not for the fact it was captured by the ebook seller’s monopoly position.
But to make my point clear, Amazon making an ebook reader is not an anti-trust concern by itself just because they have a monopoly in ebooks, they could “win on the merits” but they didn’t and they still don’t, they win by default because you can’t build a profitable business licensing their DRM or forgoing 90% of the ebooks out there. An activity everyone in the market engages in (shipping proprietary DRM) becomes an anti-trust concern once you leverage it through you existing monopoly position.
Being big is not illegal. Being a monopoly in not illegal. Abusing monopoly power is what is illegal. It isn't about what you are; it is about what you do.
_______________________________________________
"Windows competes with Apple’s Mac OS."
Mostly with Chrome OS. Mac OS is #3:
"... in 2020, Chrome OS became the second-most popular OS, and Apple fell to third."
https://arstechnica.com/gadgets/2021/02/the-worlds-second-most-popular-desktop-operating-system-isnt-macos-anymore/
One thing that is underappreciated by today's critics is the extent to which courts and government antitrust agencies become tools of anti-competitive rent seeking when antitrust standards are expanded. The old cases like Utah Pie, Pueblo Bowl-o-Mat vs Brunswick, and Matsushita are classic examples of incumbent competitors attacking new entrants, often on spurious claims that the new guy is cheating by offering a lower price or better experience. Consumers are harmed when those plaintiffs/complainants succeed. This is why Bork called it "the Antitrust paradox" -- antitrust law can often as not be used to hurt competition (and consumers). Bork, to be clear, was also wrong about a lot of antitrust, but he was right on that fundamental observation.
Gotta say that the importance of AWS in Amazon's money machine is VASTLY overstated. Amazon runs 5 businesses: Its own retail, its retail platform, AWS, Prime, and Advertising. It lost more than $40 billion on its own retail in 2020, but the other 4 segments were all very profitable- Marketplace being the most important, with more than twice the profits of AWS (which accounts for about 20% of the total profits generated by the profitable segment).
Why does this matter? Because Amazon isn't competing in the same universe as its competitors (who vary by segments of course). It has a complex web of cross-subsidies that allow it to enter new markets at far below cost, and to pick off competitors within existing segments in the same way. That's helped build control of online retail markets by capturing effectively all the customer s(Prime), all the sellers (and hence the biggest catalog), and the best distribution network (guess where those years of "missing" Amazon profits went).
Should we care? After all, Amazon delivers for consumers big time, as Matt pointed out. The problem really is that Amazon is exposing the collateral damage caused by the ruthless and highly effective search for efficiency. Should we care that it tramples sellers? That it causes higher rates of injuries in warehouses, or forces rivers to pee in bottles to keep on schedule?
We decided long ago that certain practices are not acceptable (eg child labor, unpaid overtime, dangerous conditions, adulterated products) even if they are economically efficient. We need to force Amazon to work within new guardrails that reflect our unwillingness to simple accept its control over its working environment with the minimal oversight hat now exists.
Existing antirust law is effectively useless for this purpose. Arguing whether Amazon is a monopoly or not is beside the point. We need to address how Amazon behaves form a which wider perspective.
Big is bad because it reduces dynamism. An economy dominated by large firms will see fewer adventurous ideas. Also, from an aesthetic perspective, seeing the same forty companies in every American city is dreary.
I feel like international competition and maybe economic rivalry with other big countries should factor into this big/anti-big debate somehow. It might be that some of these factors look differently in other countries; maybe Amazon is the only game in town in Costa Rica, for example, so it really does have a monopoly there, but it's up to CR if they want to do anything about that. And anything that would hurt Amazon's domestic profits could indirectly hurt their international competitiveness.
Amazon has a monopoly on book publishing. Rod Dreher: "Amazon's decision not to sell books “that frame LGBTQI+ identity as mental illness” [which Ryan T. Anderson’s book doesn’t do, but never mind] means that in effect, no books like that will be published going forward, because no publisher can take the risk of coming out with a book that Amazon won’t sell."
I would look for most substantive evidence of that being true than Rod Dreher, who is not an economist or expert on the publishing industry, but has a conservative cultural agenda
https://www.wsj.com/articles/amazon-wont-sell-books-framing-lgbtq-identities-as-mental-illnesses-11615511380
https://www.usatoday.com/story/opinion/voices/2021/03/19/amazon-pulls-controversial-book-transgender-ryan-anderson-column/4635062001/
https://publishingperspectives.com/2020/08/us-publishers-authors-booksellers-call-out-amazons-concentrated-power-in-the-book-market/
I think that piece calls out a bunch of important problematic powers that Amazon has, but it doesn't substantiate the claim that publishers will refuse to publish books that they can't sell on Amazon.
More to the point, we live in the golden age of self-publishing books for cranks. If you want to claim in detail that you've figured out WHAT THE QUEERS ARE DOING TO THE SOIL, STUART, there are _multiple_ companies that will take your 90,000 word PDF and a thousand dollars and ship you back a few hundred copies of a very respectable-looking hardcover that you can hawk on facebook or newsmax or wherever floats your boat.
When one company controls greater than 50% of the market, and then declares that it won't carry certain products, of course that is going to heavily impact the decision of a product producer whether to go forward or not. To claim otherwise is just burying your head in the sand.
So what's the solution, in your mind? Should Amazon be compelled to offer these products? Should the book distribution business be state run? Or maybe Congress creates some kind of tort claim that treats this as discrimination against religious beliefs?
What other markets do you see as problematic in this way? If Comcast has 80% of the market in a metropolitan area, should it be free to not carry Fox News?
Importantly, Amazon still sells books published by publishers that publish other books that Amazon refuses to sell. It just refuses that one book, not the entire publisher.
The problem in this article is that when Amazon *does* sell your books, they then insist that you follow their pricing restrictions elsewhere, but not their content restrictions.
The point is whether books that would be "too controversial" for amazon get published AT ALL, because the publisher loses >50% of the market for THAT BOOK.
I don't have a WSJ subscription, so I can't look at the first link, but the second provides no substantive evidence that publishers won't publish books that Amazon can't sell. In fact, the second literally asks the question, "How many publishers will simply decline to publish books they’re afraid will be barred from Amazon?" and doesn't attempt to answer it. We want evidence about the answer to that question, not further people raising the question. (No one is disputing that Amazon has the content policy they do, which is all I see those articles as suggesting.)
see above
Ryan Anderson literally says, "My book is still sold by other retailers..."
To be honest I expected a lot more comments about the dark satanic mill aspect of Amazon's warehouse operations. Which usually seem to emanate from people who have literally never worked in a warehouse or any other job involving manual labor. All of which are regulated by OSHA requirements just like everybody else. Workman's compensation rates for accidental injuries are set based on rates of injury for specific industries (base rate) as well as punitive increases for accident rates above the average. These are intended to act as a powerful inducement to correct deficiencies. Things like breaks or limits on lifting requirements are all set in black letter law. Warehouses are not considered to be particularly dangerous places to work by any standard.
Which incidentally brings me to another wonderful advantage Amazon and similar retailers enjoy over bricks and mortar establishments. Anyone who has ever run one of those knows that you have to have a lot of public liability insurance if the public is allowed to step foot on the property. And that isn't cheap. There are other advantages. I doubt pilferage or shoplifting can be a problem for Amazon. Municipal taxation rates are a lot lower for warehouses generally speaking.
Excellent analysis of the weak monopoly criticism. And "bigness" by itself may or may not be bad. But I think this line of argument may obscure the real reason for concern: quasi- or actual oligopolistic behavior and the quashing of creativity and innovation. Yes, indeed, the really big tech companies "compete" with each other, e.g., on cloud services, but do they really? Competition includes coming up with great new ideas, ones that may be disruptive and threaten the structure of an industry, and seeing how it plays out in the market. I'm not convinced any of these companies are seeking out such innovation or would allow it to exist, especially if the innovation was coming from an upstart company outside of their oligopolistic group.
Think about the Big 3 auto companies in the 1970s especially. GM, Ford, and Chrysler were all highly competitive, and none was close to a monopoly. They were all also stodgy and deteriorating in terms of quality, consumer value, style and on and on. But since they were comfortable "competing" on the most marginal terms, none was willing to try to break out, or probably knew how to do so even if they wanted.
And then came the Japanese with their critical breakthroughs in how to design, build, and market cars. And here's where bigness really does matter, because this is when the Big 3 unified to push off that threat as long as they could by bringing in the US government early in the Reagan administration to quash that threat to their viability. Thankfully, that didn't last forever, especially when the Japanese companies figured out how to locate factories in the (southern) United States. But it cost US consumers dearly in the meantime.
TL;DR: the story is a lot more complicated than we often think.
One thing (that may be a secondary consideration) is the leverage a company of this size has on governments. The competition to secure AmazonHQ2 and the host of tax incentives heaped upon them was more than a little gross. While the municipal/state level offers the biggest power disparity, it translates at the national level too. I would suspect the corrupt outcomes from lobbying by a few giants would be worse than those from a trade group representing a consortium of smaller companies.
Big business may have such phenomenal efficiencies and wage benefits that this doesn't matter, but I do wonder if having a more diffuse market structure wouldn't allow for better outcomes -- assuming competent regulators.
I see that more as a government problem. If local governments simply said we're not playing this game (and I think this should extend to some of these professional sports stadium deals) ... wouldn't that solve the problem?
The problem here is the asymmetry of the market. When you've got one buyer (Amazon) and a thousand sellers (cities that could host a headquarters), the sellers have to compete and offer the lowest possible margin and give the best deal to the buyer. If the cities had all managed to negotiate as a unified front (say, by delegating their tax-incentive power to the federal government) then they could have refused to play. But as long as they remain disunified, it only takes a few defectors to ensure that the buyer always gets the giveaway. (This is the point of a labor union, to give the thousand sellers of labor equal negotiating power to the one buyer at the factory.)
“…the sellers have to compete and offer the lowest possible margin and give the best deal to the buyer.”
“Margin” is this analogy is tax revenue, no? Why does the best deal to the buyer necessarily mean the lowest margin? Why cannot a city, as businesses do, offer innovation and earn their “margin”?
They obviously *could* offer "innovation" (I assume you mean "successful site location" here?). But the point is that if they can *also* offer tax breaks, then unless some city has a very large advantage on the merits, there will be a major giveaway.
“I assume you mean "successful site location" here?”
No, I meant innovation.
Why use Josh Hawley as an example of politicians calling Amazon a monopoly? When there are other politicians who have been doing it longer, are more fervent, and have created political personas around this issue? Because those other politicians are on the left?
Yeah, I think I remember one of the Senators from Massachusetts once accusing Big Tech of being monopolistic (even if there's five of them).
I appreciate the distinction you make between "bigness" and "monopoly" - always important to clarify language these days.
But what if "bigness" also include something else? Pepco does more or less one thing - provides power to its customers, and its size works towards the goal of doing that cost effectively.
Verizon does a couple of related things - mobile phone service and broadband. Again, as a utility, size works towards efficiency.
What exactly does Amazon's bigness do for Amazon? Ring doesn't increase the efficiency of Kindle sales, although it may assist in security of delivered packages. What does Alexa do for Amazon? Do all these branches of commerce increase Amazon's efficiency by collecting user data?
Is popular concern about Amazon's bigness more a poorly articulated concern about the power and potential abuse of power that comes with the ability to collect personal data from a database that is not only large but derived from widely diverse services? I believe it is, and I think this places the problem outside the issue of competition and economics.