I am not a lawyer, but I think your point is both narrowly correct and also beside the point. The standard of concern is not whether something is or is not “a monopoly”. It’s whether someone becomes so large in a given market that they can (and do) engage in anti-competitive behavior. So in Microsoft’s case, the issue wasn’t having 90% market share in PC OS, it was leveraging that position to force PC makers to advantage Office and Explorer to the detriment of Netscape, Lotus, Corel etc who they saw as threats. People are using the term “monopoly” as a shorthand for “big enough to effectively engage in anticompetitive behavior absent oversight” which I think is fair. That said it is incumbent on the would-be regulators to describe exactly what behavior is inappropriate and a lot of what people criticize about Amazon I would agree with Matt is just fair business.
Very sensible, but it does not deal with two other aspects of bigness/monopoly: buying up of potential competitors before they can compete (Facebook-Instagram) and buying of a competitive firm by an actual monopoly (Verizon-content provider).
There is a case against bigness even when it isn’t monopolistic and even when fragmentation is somewhat less efficient.
I started a one attorney law firm for a number of reasons, one of which is I really didn’t like having a boss. A lot of people don’t like having bosses. A major driver of the gig/telework economy is that many employees would rather keep their bosses at arms length than have an authority figure in their face all day. This is salutary. Until 150 years ago, being an employee was seen as inconsistent with being a gentleman because having all of one’s income depend upon one authority figure is inconsistent with independence.
The best case for smallness is that it lets more people achieve independence. No single client of mine accounted for more than 6% of my revenue last year. If one client were 1/3 of my revenue, I would be much less independent. MY has a similar degree of independence as long as the substack execs don’t turn on him.
I’m not sure how effectively policy can promote the independence I described. Maybe the owners of car dealerships have independence, but they each have dozens of employees, and it’s not clear that selling cars for Provincial Pubah is better than selling office space for a multi billion dollar REIT. Fractured car retailing might make 3% of those in that industry “independent.”. Dentists have a degree of independence, but only at the expense of their hygienists, who are legally compelled to work for a dentist if they want to clean teeth.
Anti-bigness rhetoric, including ill considered accusations of monopoly, likely flows from a mix of the maverick spirit and envy of corporate elites. Many pine for independence without knowing how to jigger the economy to achieve it themselves. Not sure I have an answer here, beyond a robust safety net. And that’s not really an answer because entrepreneurs and professionals want a lot more than any safety net would give them. Status competition is hard.
Wow! Finally, a piece with which I must vigorously disagree. This specific area is one where your lack of specialist knowledge has tripped you up. A comment is no substitute for a graduate course in antitrust law and economies, so I'll limit myself to two points.
Monopoly understood as a single supplier of a good or service is very rare. In fact, the Sherman Act did not outlaw monopoly, it outlawed monopolizing. In other words, it was directed towards conduct which reduced competition. When a firm looms large in a marketplace it's ability to intimidate competitors and interfere with competition becomes larger, too. Hence, the Clinton Administration's antitrust suit against Microsoft. Their behavior in the web browser market was aimed at preventing the emergence of a threat to Microsoft's dominance in operating systems.
Also, size matters! From a purely antitrust perspective, "deep pockets" provide the resources for anti-competitive conduct. The fact that Jeff Bezos could give each member of Congress or their election opponent $100,000,000 and scarcely diminish his wealth must loom large in the thoughts of any governmental figure dealing with him.
The tension described in this post is a long-standing, understood tension within antitrust law. Antitrust case books in law school discuss it. So Matt is here taking a (very legitimate) side in a long-running debate within antitrust. Characterizing it as just a definitional matter of what Antitrust “is” is not fully informed.
Agree with this, and especially the last point that it needs to be evaluated case-by-case on an industry-specific basis.
Healthcare is an example where I think we need more bigness - specifically, more vertical integration of providers and payors.
Normal market forces don't work in healthcare at the procedure level - patients lack the expertise to really evaluate whether they should buy the healthcare services providers say they need, and providers lack incentive to be cost efficient because insurers pick up the tab. And because insurers are pass-through entities that need to compete with other insurers to keep providers in their network, they can't impose too many cost controls on providers. A way to solve that is by letting insurers buy providers and roll them up into larger at-risk vertically integrated healthcare delivery systems that compete on the basis of a single price - the per member premium - and overall service level to customers. So bigger, not smaller, in that industry. But I also found Stollers critique of bigness persuasive in a lot of other areas.
I assume Lina Khan's work will be addressed in a future post -- my impression is that her re-framing of monopoly and monopsony power has re-shaped the the current scholarly conversation about Amazon, hence her nomination to Biden's FTC. From the abstract to "Amazon's Antitrust Paradox", which is linked here https://scholar.google.com/citations?user=W9yXICgAAAAJ&hl=en :
"This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors."
What about the labor issues? A major part of the "anti-bigness" argument is that big corporations have been awful for American workers (and global workers, for that matter). Or do you plan to deal with that in a subsequent post?
>>>To get favorable listings on Amazon, an FBA seller can’t list a cheaper-than-Amazon price with some other merchant (including their own site).<<<
This strikes me as being an utterly reasonable policy. “We’re happy to give you access to our customers, but we want to ensure they get the best price possible.”
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.
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?
Also is there an actual defense of small business on economic terms, versus even say medium size firms (50 employees +)? I ask because in so far as we enable far more of them to exist through regulatory exceptions, lower tax rates, and lower minimum wages; all they seem to do is pay people less, provide fewer benefits, more abusive working environments, higher prices to end consumers, and just be less efficient in general. Why do we want more of them?
I think (and maybe we can get this as a future post) that tech antitrust should first go after ISPs. I have bought stuff online from Walmart, Target, BestBuy, and, obviously, Amazon, but the last time I could pick from four different ISPs was when I was still living in Europe.
I think you elide too easily the issue of Amazon leveraging sales data to replicate unpatented items sold on their platform and then undercutting the original creator. I'm sure creators would love to have that not happen, but Amazon has so much market share in e-commerce that this is not a reasonable option.
This practice of leveraging a business line in which a company has preponderant market share to undercut competition in a related business line seems pretty straightforwardly monopolistic.
I don't know if this argument is about bigness or monopoly, but the most egregious truth about Amazon (to me, as a publisher) is their control of audio books. Yes, I can choose to list the audio version of my book there, but if I want decent pricing, I have to list it there exclusively. And I must accept their royalty terms (you'd expect that), but I have zero control over the retail price. None. We have an MSA with Amazon and make several large shipments every week and sell in ca. 90 countries. The distribution advantage they provide is enormous. I think what makes me squirm is that they could flip a switch and exert even more leverage. So all this to say that maybe you are right, but I'd say my fears aren't their bigness but rather their control, even if it's not monopolistic control.
Great post. If Hypocrite Hawley were really anti-bigness, he'd be proposing wealth taxes and estate taxes. Especially on estates over a billion dollars or half a billion or so. Maybe he'd be happier if Bezos bought MGM himself and licensed the rights to the movies to Amazon at egregious rates? Just kidding.
I am not a lawyer, but I think your point is both narrowly correct and also beside the point. The standard of concern is not whether something is or is not “a monopoly”. It’s whether someone becomes so large in a given market that they can (and do) engage in anti-competitive behavior. So in Microsoft’s case, the issue wasn’t having 90% market share in PC OS, it was leveraging that position to force PC makers to advantage Office and Explorer to the detriment of Netscape, Lotus, Corel etc who they saw as threats. People are using the term “monopoly” as a shorthand for “big enough to effectively engage in anticompetitive behavior absent oversight” which I think is fair. That said it is incumbent on the would-be regulators to describe exactly what behavior is inappropriate and a lot of what people criticize about Amazon I would agree with Matt is just fair business.
Very sensible, but it does not deal with two other aspects of bigness/monopoly: buying up of potential competitors before they can compete (Facebook-Instagram) and buying of a competitive firm by an actual monopoly (Verizon-content provider).
There is a case against bigness even when it isn’t monopolistic and even when fragmentation is somewhat less efficient.
I started a one attorney law firm for a number of reasons, one of which is I really didn’t like having a boss. A lot of people don’t like having bosses. A major driver of the gig/telework economy is that many employees would rather keep their bosses at arms length than have an authority figure in their face all day. This is salutary. Until 150 years ago, being an employee was seen as inconsistent with being a gentleman because having all of one’s income depend upon one authority figure is inconsistent with independence.
The best case for smallness is that it lets more people achieve independence. No single client of mine accounted for more than 6% of my revenue last year. If one client were 1/3 of my revenue, I would be much less independent. MY has a similar degree of independence as long as the substack execs don’t turn on him.
I’m not sure how effectively policy can promote the independence I described. Maybe the owners of car dealerships have independence, but they each have dozens of employees, and it’s not clear that selling cars for Provincial Pubah is better than selling office space for a multi billion dollar REIT. Fractured car retailing might make 3% of those in that industry “independent.”. Dentists have a degree of independence, but only at the expense of their hygienists, who are legally compelled to work for a dentist if they want to clean teeth.
Anti-bigness rhetoric, including ill considered accusations of monopoly, likely flows from a mix of the maverick spirit and envy of corporate elites. Many pine for independence without knowing how to jigger the economy to achieve it themselves. Not sure I have an answer here, beyond a robust safety net. And that’s not really an answer because entrepreneurs and professionals want a lot more than any safety net would give them. Status competition is hard.
Wow! Finally, a piece with which I must vigorously disagree. This specific area is one where your lack of specialist knowledge has tripped you up. A comment is no substitute for a graduate course in antitrust law and economies, so I'll limit myself to two points.
Monopoly understood as a single supplier of a good or service is very rare. In fact, the Sherman Act did not outlaw monopoly, it outlawed monopolizing. In other words, it was directed towards conduct which reduced competition. When a firm looms large in a marketplace it's ability to intimidate competitors and interfere with competition becomes larger, too. Hence, the Clinton Administration's antitrust suit against Microsoft. Their behavior in the web browser market was aimed at preventing the emergence of a threat to Microsoft's dominance in operating systems.
Also, size matters! From a purely antitrust perspective, "deep pockets" provide the resources for anti-competitive conduct. The fact that Jeff Bezos could give each member of Congress or their election opponent $100,000,000 and scarcely diminish his wealth must loom large in the thoughts of any governmental figure dealing with him.
The tension described in this post is a long-standing, understood tension within antitrust law. Antitrust case books in law school discuss it. So Matt is here taking a (very legitimate) side in a long-running debate within antitrust. Characterizing it as just a definitional matter of what Antitrust “is” is not fully informed.
Agree with this, and especially the last point that it needs to be evaluated case-by-case on an industry-specific basis.
Healthcare is an example where I think we need more bigness - specifically, more vertical integration of providers and payors.
Normal market forces don't work in healthcare at the procedure level - patients lack the expertise to really evaluate whether they should buy the healthcare services providers say they need, and providers lack incentive to be cost efficient because insurers pick up the tab. And because insurers are pass-through entities that need to compete with other insurers to keep providers in their network, they can't impose too many cost controls on providers. A way to solve that is by letting insurers buy providers and roll them up into larger at-risk vertically integrated healthcare delivery systems that compete on the basis of a single price - the per member premium - and overall service level to customers. So bigger, not smaller, in that industry. But I also found Stollers critique of bigness persuasive in a lot of other areas.
I assume Lina Khan's work will be addressed in a future post -- my impression is that her re-framing of monopoly and monopsony power has re-shaped the the current scholarly conversation about Amazon, hence her nomination to Biden's FTC. From the abstract to "Amazon's Antitrust Paradox", which is linked here https://scholar.google.com/citations?user=W9yXICgAAAAJ&hl=en :
"This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors."
What about the labor issues? A major part of the "anti-bigness" argument is that big corporations have been awful for American workers (and global workers, for that matter). Or do you plan to deal with that in a subsequent post?
>>>To get favorable listings on Amazon, an FBA seller can’t list a cheaper-than-Amazon price with some other merchant (including their own site).<<<
This strikes me as being an utterly reasonable policy. “We’re happy to give you access to our customers, but we want to ensure they get the best price possible.”
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.
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?
Also is there an actual defense of small business on economic terms, versus even say medium size firms (50 employees +)? I ask because in so far as we enable far more of them to exist through regulatory exceptions, lower tax rates, and lower minimum wages; all they seem to do is pay people less, provide fewer benefits, more abusive working environments, higher prices to end consumers, and just be less efficient in general. Why do we want more of them?
I think (and maybe we can get this as a future post) that tech antitrust should first go after ISPs. I have bought stuff online from Walmart, Target, BestBuy, and, obviously, Amazon, but the last time I could pick from four different ISPs was when I was still living in Europe.
I think you elide too easily the issue of Amazon leveraging sales data to replicate unpatented items sold on their platform and then undercutting the original creator. I'm sure creators would love to have that not happen, but Amazon has so much market share in e-commerce that this is not a reasonable option.
This practice of leveraging a business line in which a company has preponderant market share to undercut competition in a related business line seems pretty straightforwardly monopolistic.
I don't know if this argument is about bigness or monopoly, but the most egregious truth about Amazon (to me, as a publisher) is their control of audio books. Yes, I can choose to list the audio version of my book there, but if I want decent pricing, I have to list it there exclusively. And I must accept their royalty terms (you'd expect that), but I have zero control over the retail price. None. We have an MSA with Amazon and make several large shipments every week and sell in ca. 90 countries. The distribution advantage they provide is enormous. I think what makes me squirm is that they could flip a switch and exert even more leverage. So all this to say that maybe you are right, but I'd say my fears aren't their bigness but rather their control, even if it's not monopolistic control.
Great post. If Hypocrite Hawley were really anti-bigness, he'd be proposing wealth taxes and estate taxes. Especially on estates over a billion dollars or half a billion or so. Maybe he'd be happier if Bezos bought MGM himself and licensed the rights to the movies to Amazon at egregious rates? Just kidding.