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.
Sure I agree with that. But my point is that market power analysis is a necessary predicate to anything else. The premise of the case against Microsoft was that the network effects and size of the Windows market share created so much lock in that they were genuinely not any competitive pressure.
What I’m saying about Amazon is that’s not true even in a market like ebooks where they have huge market share. If kindle books started having a worse feature set than Apple Books, people would just switch. There’s very little lock in to any of this.
"If kindle books started having a worse feature set than Apple Books, people would just switch."
I think this claim is wrong, and probably key to some of your differences with Stoller. My observation is that the "activation energy" required to make a transition like this is quite high. Consumer laziness is a significant barrier to entry. If transferring the library of Kindle e-books into Apple's system requires any effort at all, a ton of people just won't.
I've been sort of meaning to switch from Apple's Podcasts app over to... something... for years. The Podcasts app is _terrible_. Much worse than the old iOS iTunes. But I keep putting up with it because it's just-barely-adequate, and I've been too busy to pick which alternative I want to commit to, and figure out how to port over my library of subscriptions and downloaded-but-not-yet-listened-to files. And I'm the sort of person who is sufficiently technically competent to do this kind of thing if I wanted to badly enough. 90+% of customers basically just use whatever app is put in front of them, and once hooked into it, will only switch if either the device forces them to (as with the end of iTunes), or in the rare cases where somebody really does figure out something that's _so_ much better that it spreads beyond the types of tech nerds who are willing to try new software all the time, and creates a wave of people transitioning to the new system (with attendant network effects, including ease of finding a friend who already switched and can help troubleshoot). That sort of wave is what Facebook sought to forestall by buying up competitors -- at least that way if Instagram actually displaced FB, it would still own the advertising-relevant data.
So we _don't_ get steady incremental improvements from a competitive market. We get mostly stagnation, with the occasional big leap forwards. We may be losing out on many potential improvements, because there's a lot of dumb luck involved in surviving the market, and a lot of smart people are just avoiding investment in "kill zones" where they think somebody like Google or Amazon or Facebook might actively seek to squeeze them out if they try to bring something new to the table.
In apps, I think Yglesias is right. You don't need to migrate your whole library to use a different app. (At least for people who read books and don't really refer back to them much, which I think is the most common use case for books.) You install Scribd or iBooks or Nook or whatever, and you're off to the races on your next book. Maybe the Kindle app falls into disuse and you don't install it when you replace your tablet. With podcasts, you need to tediously migrate a bunch of subscriptions and mark previously played episodes as played. With music, you do revisit the same album repeatedly, so migrating your library is a requirement to switch.
There are a few things worth mentioning about ebooks:
1. Apple tried to do price competition with Amazon, and was prevented from doing so by an FTC antitrust action. (Of course, forming an anti-Amazon cartel with a bunch of publishers is not the only way of competing with Amazon, but it is notable that Apple tried.)
2. Kindle provides an outstanding service with features that are AFAIK not replicated in other platforms, like sentence-level syncing between audio books and ebooks ("Whispersync for voice"). They also sell very high quality and cheep e-ink devices. The book prices quite price competitive from what I've seen, presumably because of contractual requirements when you publish a book on Kindle.
3. There are some ebook markets Amazon has just decided they don't care very much about, like technical/scientific books with equations. Some of those are "app only", not available for their small e-ink devices. But mostly even when offered they're a total waste of money. The "Remarkable" company Yglesias mentioned makes a tablet that can display PDFs very nicely, but overall it's a niche market with much more demanding typesetting than trade books. I think the same is sort of true for ebooks generally: it's a small market in the scheme of things, mostly important only to nerds and authors.
4. Amazon also provides fairly convenient ways to load your own documents (e.g. .mobi files directly from publishers) onto Kindles, or even upload/download them from Amazon's Kindle Cloud. I don't think there's much competitive pressure for this; they're just being nice.
Ebooks might seem like a niche market, but they are more popular with people who read a lot of books than with people who read relatively few, and those people represent a big percentage of book sales. Also those readers are more important for midlist authors than bestsellers.
It also varies a lot by genre, because of the different audiences of the different genres.
Even so, there are a bunch of midlist SF authors who have shared data, and they seem to get about 50% of their royalties from ebook sales - and that's almost certainly the highest level for anyone with a conventional publisher.
There are lots of self-published authors who are ebook-only or ebook-first (with just print-on-demand paper copies), especially in those that participate in Kindle Unlimited, and they are 100% ebook or almost so - but they're selling to the small audience of people that read a book a week or so.
Isn't one of the issues with the Amazon in the book market (among others) is that they don't allow people to discount elsewhere? So if Amazon is taking (30%) then you can't sell for 10% less on your website and keep the 20% difference. Nor can they sell on Walmart or B&N for less if either of those companies were willing to take a smaller cut.
But you don't have to sell through Amazon. You are free to sell through some other platform if that's what you want to do. But I think that is not a viable strategy because you wouldn't sell nearly as many books that way. So Amazon is offering a discovery and distribution platform in exchange for a cut of the revenue and (especially for a zero-marginal cost product like e-books) both that seller and Amazon are better off for it.
Amazon has close to 70% of the ebook market with B&N (Nook) having 25% of the rest. Most authors/publishers cannot afford to give up 70% of the market.
If your local electric company tripled it prices and then told you that if you don't like it, you could move to somewhere else, would you accept that as an acceptable option to them abusing their market position?
In your analogy, the electric company is requiring you to forgo the use of your house, a product the company _does not own_, in exchange for evading their charges. To evade Amazon's charges, Amazon only asks people to forgo Amazon's market, a product that Amazon has spent considerable money and effort into building and unequivocally owns. These are not comparable.
They aren't asking you to forgo the use of your home. You can live without electricity, or install solar panels or a diesel generator and provide your own power. To evade paying them what they ask for you simply have to avoid using the network they have spent significant time and effort building that the electric company unequivocally owns.
Having half your books in Nook and half in Kindle is mildly annoying, but it doesn't require lots of technical skill to use Calibre to migrate your library from one to the other. Maintaining that is annoying, but very few people have an ebook library that they need to access on two competing ereader devices - and even in a competitive marketplace for ereader devices, they still wouldn't because most people don't have two ereaders.
Yes it is a necessary predicate, but contrary to your thesis that it’s “not a monopoly” I think the analysis would show there are plenty of markets it operates where it has sufficient market power to be anticompetitive. Whether it does so or not (and how we define objective and enforceable rules to determine this) is the crux of the question and needs to be determined by the facts of each situation.
I'm an antitrust lawyer. He is broadly correct, and it isn't beside the point. Monopoly power (or at least market power) is what gives a firm the ability to engage in anticompetitive behavior (by that, I mean behavior that has anticompetitive effects, meaning it actually harms competition in the relevant market). If a firm does not have monopoly power (or at least market power), then its behavior will not appreciably harm competition--because there is competition!
There is a slight difference between monopoly power and market power. Monopoly power is the power to raise prices and exclude competition, and that is the standard used in unilateral conduct cases (i.e. Section 2 of the Sherman Act, willful monopolization or attempted monopolization). Market power is the power to raise prices, and that is the standard used in multilateral cases (i.e. Section 1 of the Sherman Act, conspiracies restraining trade). We apply a higher standard for monopolies because (1) it is harder for a single firm to accomplish something, and (2) we do not want to punish procompetitive conduct, which single firms regularly engage in. We apply a lower standard for conspiracies because as a general rule there is no good reason for competitors to work together, so we're not worried about punishing procompetitive conduct.
That's not all. The point that Matt essentially makes (at least subtly) is that before you even get to the question of monopoly power or anticompetitive effects, you have to first define the market in which you are assessing those things--they do not exist in a vacuum because that is how competition works.
Amazon may be big, but it has plenty of competitors in its various markets--in retail, it has Walmart and Target, for example; in grocery it has all sorts of competitors (those tend to be more regional markets, so you'd have to analyze where a given buyer can turn for those goods); in streaming, it has Netflix, Hulu, Disney+, etc. And the same goes for labor markets--Amazon employees could work at all sorts of other places, but UPS and Fedex come to the top of my mind for any warehouse worker.
So the point is, Amazon is not a monopoly, and regardless, that term is useful only in the context of a particular market that reflects economic realities. Amazon faces sufficient competition in just about every market in which it competes, and in most of those markets you couldn't come close to showing even market power, let alone monopoly power. So Amazon is not only not a monopoly, it cannot actually get away with anticompetitive behavior that in fact appreciably harms competition itself because Amazon in fact competes in very competitive markets. And, as such, people who call out Amazon for being a monopolist are really calling out Amazon for being big. And they should be intellectually honest about that, because the antitrust laws do not outlaw bigness, nor could they without becoming something other than antitrust (i.e. competition) law.
Absolutely. Microsoft are not the same as Amazon. They still use their dominance in desktop software to leverage into other industries (for example, they have taken an absolutely huge share of videoconferencing by bundling video into Teams, and Teams into Office, for 'free'. That's pretty classic anti-competitive behaviour. And it largely rests on the original dominance in office software which is hard to shift because no-one wants the hassle of retraining all their staff on new software.
Ken is precisely right. MSFT introducing Teams is not the same thing at all - is Zoom going to provide a path to displace Windows OS? That would be the competitive story akin to what happened with IE and Netscape. Introducing teams offers competition to zoom, it's fundamentally a good thing. (but I'll give you one similarity though -- like IE, Teams absolutely, fundamentally sucks).
But the harm of MSFT's conduct in the 90s case was maintaining its OS monopoly by closing off a potential avenue of competition via "middleware". Bill Gates famously recognized that if Netcape succeeded, app developers would write their programs for Netscape, and Netscape could run as "middleware" on top of IBM, Windows, Apple, whatever...That would take away Windows' primary advantage --the Applications Barrier to Entry. Middleware never did end up as an alternative avenue of competition to OS, so the DOJ theory never came to be. Which is maybe why people misunderstand that case and think it was all about MSFT taking over the browser market...that was the tactic, but it was not the harm.
The story you are telling about Teams is nothing like that.
"Middleware never did end up as an alternative avenue of competition to OS"
I think it did. There isn't a Windows client for Facebook or Gmail or Twitter; they just run inside a tab in your browser, and they run equally well in a tab in a browser on Linux or MacOS as they do on Windows.
But Bill Gate's (and DOJ's) thesis was that if every app is on the internet, Java/Netscape middleware blows up the moat protecting Windows OS (the applications barrier to entry) and thereby commoditizes operating systems -- and that seems overblown. Last time I checked, Windows is still dominant in desktop OS for home and enterprise, even though Android is free, and Mac made a comeback. You are right, of course, that many/most computing functions are now online and can be accessed via middleware, but it doesn't seem true that middleware became the alternative avenue to compete with Windows.
Also, I feel like it's worth noting that the narrative in the tech world around the microsoft/netscape dispute underrates the extent to which Netscape actively facilitated its own demise. The development and release of Navigator 4.0 was an utter debacle that the company never recovered from: they gave IE6 a massive window of opportunity and Microsoft acted accordingly.
I completely disagree with the very idea of anti-competitive behavior as commonly understood. Microsoft’s desire to “cut off Netscape's air supply” was perfectly fine.
In retrospect, I think nearly everyone was wrong about...nearly everything in the 2000 antitrust trial and what happened to Netscape. IE6 was a better product than NN4. ActiveDirectory was going to win the enterprise backoffice no matter what because the alternatives were all substantially worse. Netscape had no grounds to complain about bundling when they'd given away Navigator as a loss leader for nearly their entire existence. Mozilla produced a better web browser than Netscape Inc ever did.
And Microsoft's shareholders would have been _much_ better off if Gore had been elected and the DoJ had gone through with forcing them to divest Office and IE from Windows: Bush's election turned out to be the opening act for 15 years of near-total stagnation for Microsoft both as a company and a suite of products, and they didn't turn the ship around until very recently.
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).
So many of these issues are in fact well-discussed in antitrust caselaw and scholarship, you just have to do about an inch of digging.
Buying a potential competitor to maintain market power is already illegal -- so-called "potential competition" cases are already a "thing", although like most merger caselaw, the number of decisions is sparse (merger litigation is relatively rare). But there is still an impact -- its just less visible. For example, in pharma mergers, the FTC routinely sues to require merging pharma companies to divest late-stage pipeline products that might compete with the merged firm's existing product (and in some cases, they have required divestitures even where both firms just have pipeline products and are thus mere "potential" competitors).
If this is really a problem a la Facebook/Instagram, the fix may be small -- perhaps Congress or the courts should add an evidentiary presumption that the agencies can invoke when they show a certain likelihood of entry (FTC/DOJ have lost a few of these cases in recent years). A change along these lines has been proposed in some of the bills in Congress. It would likely work as it does with horizontal mergers, where once the agencies make the required showing, the defendants must come forward with pro-competitive justifications/efficiencies or else they lose. In practice, no defendant -- NONE -- has ever beaten the horizontal presumption of harm with efficiencies. With the right presumption, that might be a good fix. Then again, the impact is hard to assess - there are incentives for a business to enter an adjacent market and compete may change. The answers are not as easy as every critic assumes.
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.
I think these are reasons to think that small firms have hidden competitive advantages beyond a narrow efficiency lens, not reasons to think policy needs to promote small companies.
Hamiltonian industry and commerce vs Jeffersonian yeoman's republic - that's kind of another way to summarize the two meta points of view here. My read of Stoller's stuff is he's really pushing for a modern day version of an idealized Jeffersonian society, romanticized as that ideal may be.
I cannot strongly enough recommend following Sarah Taber on twitter (@sarahtaber_bww) for an infinite stream of hilarious, jaundiced views of the underbelly of the "small family farm" racket in the American heartland. And "racket" is most definitely the word.
Haven't investigated the details, but I've wondered if it might be possible to bring a fun False Claims Act lawsuit against a "family farm" that's violating state anti-corporate farming laws yet claims to be in compliance with all applicable state laws when applying for federal aid, like Multiple Peril Crop Insurance.
You would have to file suit against basically all of them.
And god, MPCI. With the caveat that I spent a great deal of time working at a company that sold market-rate parametric crop insurance policies and thus both know of whence I speak and am admittedly talking up my own portfolio: MPCI is a disaster and a fraud from beginning to end and should be shut down and replaced with absolutely nothing.
Ha, agree about MPCI. Too hot, get paid, too cool, get paid, too much rain or too little rain, get paid - okay, that's what it's for. But if you got impatient and recklessly planted your crop too early, or were lazy and planted too late, or left the seed in a hot shed to get heat damaged, or mixed up your herbicide wrong and killed your own crop, or failed to till, or were in any other way an incompetent farmer, just say it was a covered cause and get paid anyway. I've seen all of that.
As long as there are several car pubahs in an area — which is the way the US auto market works — the car salespeople have competition for their labor. The same goes for hygienists. Even if a given car salesperson for some reason is only skilled in selling a certain brand of car, s/he can just get a job with the brand’s pubah in the next town over. Car salespeople are reasonably independent.
Contrast that with a theoretical market where one or a handful of companies retail all cars. Car salespeople would be far less independent.
I'm trying to think of a _less_ sympathy-engendering argument against vertical integration and consolidation than "car salesman will have a harder time finding employment as car salesmen" and... look, I'm gonna have to get back to you on this.
There's really no good reason cars can't just be sold like white goods. Maybe there's a genuine reason to haggle over property, or even second-hand cars, but new cars should just be priced competitively in the market to sell at the RRP.
Even if there is a car pubah in the next town over, your chances of landing a job with him aren’t great if you get fired. I got fired by a firm 16 years ago, at which point recruiters who had been working with me dumped me. The need for references to get sought after jobs increases the captive power of bosses.
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.
Using a law designed to break up companies that had their own police forces and were literally murdering people in the streets to break up companies that have too much merchandising leverage is nuts. Congress is too dysfunctional to pass a relevant 21st century Sherman act. Prosecutors “making due” is really terrible for free societies and whatever we would gain by breaking up Amazon (I’m dubious there’s any upside short of a narrowly targeted boon to Walmart shareholders) we’d lose collectively more by encouraging a system that is already far too capricious and too powerful.
I should know I’m breaking the law when I’m committing the act, not retrospectively as judged by a politicized DOJ looking for trophies.
On the last point, that suggests that one should pass a law that doesn't take full effect until some time far enough in the future to spin off and wind down whatever activities will be banned, rather than suggesting that one should never pass a new law, right? (Like how we phase in new fuel efficiency rules for automobiles, but don't just grandfather in existing companies and their existing standards.)
What is the market that you're implying Amazon has a monopoly in? They consistently have less than a 40% share of all e-commerce- I've seen estimates of 38%, etc. So- which market? Microsoft had a much much larger share of all browsers at the time of your example
I could see them having very low percentage of the market for car parts, but a very high percentage for diapers. The overall "e-commerce" market may be only 40%, but that market contains everything sold online. They could easily hold 90%+ in hundreds of categories and 1% in hundreds of others. Should that impact our perspective?
To my understanding as a non-attorney, the first step of an antitrust lawsuit is defining the relevant market that is supposedly being monopolized. One could say that Joe's Coffee Shop (a single business) has a monopoly on coffee shops called Joe's on a certain corner, but that's obviously not going to convince a judge.
I'm not sure I believe that they hold 90%+ in any category, and I'm not sure that a judge would find dominance in a very narrow category to be an antitrust violation per se. But it's by definition subjective and is decided early in such a suit or enforcement action
I don't think they have any monopoly, but you could make an argument that they have too much leverage with manufactures in online retail. I think it's a bad argument, but I wouldn't guffaw before I disagreed.
A key bit here is this definition of monopolizing: "conduct which reduced competition." When Amazon knocks off existing products, they're not just being "mean," as MY says. They're using their market power to harm competitors in markets they don't even play in, like batteries. If I search for batteries, am I getting the results from a level playing field, or does Amazon favor its own brands? Are the reviews absolutely unbiased, or has Amazon favored its own products? There's no way to know.
It's a good question. It seems to me that once a brand is in the store, it's a level playing field. Safeway crackers and Saltines are presented equally. Amazon is ostensibly the same way, but with hundreds of brands. But we don't really know, right? And once they introduce Amazon branded crackers there are lots of reasons to think their algorithms will nudge search results toward their own brands. I mean, why wouldn't they? So now their unquestioned dominance in running a marketplace has suddenly given them power in the crackers market. I like the idea that there's a line between running the marketplace and being a vendor. Pick a side, Amazon.
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.
Are you talking about the “size” tension or am I missing what you’re referring to? Isn’t it true that size per se is not necessarily relevant as Yglesias describes?
Basically, there's a lot of evidence that the Congress that enacted the Sherman Act was concerned about bigness in general, and the effect of big companies on independent traders (i.e., small business) and not so much about economic efficiency. Which makes sense--the Sherman Act was enacted in 1890, before most of the modern economic theories of efficiency and competition, including concepts like deadweight loss, were developed. The problem is that once those economic theories were developed, it became clear that bigness is very often pro-competitive and good in economic terms: large firms are very often big because they are more efficient, and they very often drive down prices.
And that's the tension. The enactors of the Sherman Act seem to have thought that bigness was unqualifiedly bad, but we now know that in fact, bigness is often good in strictly economic efficiency terms. If we destroy Amazon and Walmart to protect general stores on Main Street, consumers will pay higher prices and the economy will be less efficient.
Matt's post assumes that the Sherman Act should only be concerned with efficiency. Maybe! But it's far from clear that the Congress that enacted the Sherman Act thought so.
Right on. Its also unclear why we should care about what the writers of the Sherman Act thought or what the terms "restraint of trade" or "monopolization" meant to them. We can't know and don't know. Those same guys pretty clearly set out a very short statute that was meant to be developed by common law courts, and it has. We shouldn't be textualists or originalists when it comes to the Constitution, and certainly not when it comes to a bunch of random legislators in 1890 (or 1913 or 1950).
We do know what they intended though, from reading the primary sources. The bill was to harm big interests and restore power and income to the noble, hard-working small businessman. It’s a very bad law, but alas, we’re still stuck with it.
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."
"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 [...]"
I just want to stress here - the "predatory pricing" argument is that Amazon isn't charging _enough_?
Yes, that's correct. Amazon is being attacked from both angles on this.
The predatory pricing accusation comes from the fact that less funded competitors than Amazon can be driven out of the market not through honest competition with Amazon but instead through using their immense funds to undercut competing marketplaces in a way that competitors cannot match. It's a very old tactic for market capture.
Right, but I've been hearing that for 20 years about Amazon, and for almost as long about Walmart before that - that their sinister "predatory pricing" scheme is to forgo market-clearing levels of profit margin in order to outcompete mom-and-pop in various markets, then once they've swept the field clear of all competitors, jack prices and cash in.
But it's literally never worked like that. There's no signs that it works like that - free shipping and low prices on Amazon have gotten them less than 40% of the e-commerce market two decades later. There's just no sign that Phase 2 of the Evil Plan to Extort US Consumers is immanent or even possible or that Amazon's copious shareholders are just going to wait forever for them to do it.
It's an "old tactic for market capture" that, overall, has literally never captured a market, because every time some proto-Amazon succeeded in setting up the market conditions for Phase 2, as soon as they jack prices new market entrants pop up to undercut them. Even if Amazon knocks you out of business in 2021, there's no reason you can't re-enter the market in 2022. You get to start as many businesses as you want.
When I took anti-trust law, the section on predatory pricing was difficult to teach literally because there are so few examples of predatory pricing actually working lol
I won't make any claims about Amazon having done this, but it's exactly how railroads and airlines have always operated whenever regulators don't force them to keep sustainable prices. When an upstart starts operating on a given route, the big established company undercuts them until they go out and then raise prices to back where they were before. For utilities and other things with major network costs or network effects, this can be a highly effective strategy for preventing competitors from even bothering to try. (Why build a second track from Philadelphia to Pittsburgh if the Pennsylvania Railroad will just cut fares long enough to make me go bankrupt and then buy the track I built from my creditors?)
Walmart may not have managed to corner the market, but it's more of a factor of the internet disrupting things than the tactic not working. The entire American gilded age is full of this tactic working very well.
The modern argument for antitrust / anti-bigness / anti-whatever comes from the desire to have dynamic and innovative markets, not from the defense of consumer welfare. Looking at it through that lens the very existence of a company with 40%(!?!) of a market is a problem for free competition. IMO, though, their marketplace isn't as much of a problem as their other business arms *cough*AWS*cough*.
Also, people don't have unlimited money to start businesses. Somebody's livelihood being destroyed not through honest competition, but through dumping money into a market is something that shouldn't happen. Otherwise you'll have an economy made up of the people capable of getting money to start businesses over and over.
Another post that asserts that 40% market share is over some kind of threshold that means the market isn't "dynamic" or "innovative", without any argument or evidence why I should think that's the case. So, I don't think that's the case.
Having your prices undercut because someone else's business model permits them to undercut you is literally the definition of "honest competition."
It's literally not? There's price differentiation - which is an obviously widely used business tactic - and the intentionally cratering prices go force competitors out without actually competing with them. Especially because Amazon uses money it gets from other markets (AWS specifically) to fund this. Intent matters here.
Amazon is trading at 60x earnings, which is insane for a market leader whose recent profits were swollen by the pandemic and which may struggle to maintain its market share.
It’s certainly correct that Amazon’s executives have strong incentives to maintain the narrative of rapid growth thst makes such earnings multiples possible. However, this means recording big year over year earnings gains, and that’s gonna be hard as we emerge from the pandemic.
Amazon is up to 10% in total digital advertising spend (Google is 29% and Facebook is 25%) and 19% is search ad spend (Google is at 57%). I think a lot of the AMZN bull story is how you think the digital ad market will develop and how much more share Amazon will take. It's certainly now conceivable they could flip the market.
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?
(1) Some unions have tried to organize Amazon workers and when unions are running campaigns they generally take a kitchen sink approach to criticizing the target company which has led to some spurious antitrust arguments that are really about labor organizing.
(2) Are big companies, as a rule, worse for labor. My read of the evidence is that it’s the opposite and productive and pay are better at big companies and big companies also offer more chance for promotion.
Arguably, the whole point of franchising and contracting jobs out to smaller businesses is to exploit the de facto and de jure ability of smaller businesses to do things with workers that larger businesses can't.
Imagine a janitorial services company with four employees that bids low because they pay under the table, dock pay below the minimum, violate child labor and OSHA laws, etc. If the base rate of being caught abusing an employee is 1 in a thousand (almost surely a massive overestimate), there's a better than 90% chance that they get away with it for 25 years (which is only 100 employee-years).
25 years is enough time, especially with all the various tax subsidies for small businesses, for the owner of that business to make enough to retire, so there's no reason to have a time horizon much longer than that.
I am open to convincing on this but I always find it odd that the articles about Amazon warehouses play it up like it's some sort of new innovation in terrible working conditions. It doesn't sound great but none of it sounds much worse than my experience working at a grocery store service deli.
I know several people who have worked at Amazon fulfillment centers either seasonally or full-time. It's of course just anecdotal but the impression I get from them is that the work sucks but the actual relevant alternative jobs would be as bad or worse. The job with Amazon pays significantly better though.
It's reasonably likely that Amazon (and the delivery services) pushing up low-skill wages in the wake of the pandemic is a bigger factor in restaurants and hotels having trouble hiring back workers than the extra unemployment.
"This new study comes from the Strategic Organizing Center (SOC), a coalition of labour unions. It analysed workplace safety data reported to the US Occupational Safety and Health Administration from 2017 to 2020.
It found that "workers at Amazon warehouses are not only injured more frequently than in non-Amazon warehouses, they are also injured more severely".
Workers forced to take time off for injuries were absent for an average of 46.3 days, it said - a week longer than the average across the warehouse industry.
And compared to its largest retail competitor Walmart, Amazon's overall injury rate was more than double, at 6.5 per 100 employees compared with three."
>>>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.”
The problem is that it means that the seller can't list different prices with different merchants based on the different cuts that the merchants take.
So if Amazon's cut is 40% and eBay's is 20%, I can't sell at (myprice * 1.67) on Amazon and (myprice *1.25) on eBay. But that means that eBay has no incentive to take a lower cut, which makes the market uncompetitive.
They can, yes. But then you have a real question on Amazon's market power - if it's sufficiently large that a small seller loses more by giving up on Amazon (even though their non-Amazon sales are now at lower prices which attracts more customers) than by accepting the higher retail price and selling via Amazon.
If that's true, then that's Amazon using market power to maintain higher prices and higher margins for Amazon, which is characteristic monopoly abuse.
I think that retail price fixing should be generally unlawful. Amazon should have a perfect right to require a supplier not to sell to another retailer at a lower price than to Amazon (ie a wholesale MFN clause). But they should not be able to require their supplier to control the retail price.
Indeed, I'd go further - suppliers should not legally be able to control the retail price. They determine the wholesale price, the price that retailers pay them. They can negotiate discounts for particular retailers, they can agree to MFN clauses or not, etc. But the retailer can set their own price, choose their own margin, and discount whenever they like with no need to even inform the supplier that they are discounting. The discount would obviously come out of the retailer's margin.
They can, contractually. If I sell via eBay, I decide what price the buyer pays and then eBay takes a cut. If eBay lowers its cut while the listing is up, the buyer price doesn't change, I just get more money.
That's wrong. eBay should be able to change the "Buy It Now" price at any time without consulting the seller, as long as the seller still receives the same amount of money - ie by eBay adjusting its cut. If they did that now, it would be a breach of their contract with the seller.
But in this case Amazon is (or would claim) that it is not the retailer or the supplier, rather that it is providing the marketplace as a service so the supplier can become a seller. Its product is the marketplace and offers it under a set of terms. Guaranteeing the lowest price to buyers is one of the things that makes its marketplace attractive to buyers (and, consequently, sellers)
Sure they do. They can take a lower cut in order to attract more sellers to their platform. Or to have sellers sell exclusively through eBay instead of both eBay and Amazon.
I wasn't quite convinced. It's leveraging the market power (everyone is used to shopping at Amazon) to prevent people from reflecting the FBA cost in the price of the item. If they run their own site/shipping without that cost, why shouldn't they be able to sell for that lower price? If FBA is really great on its own merits, it should be worth it to allow merchants to list a higher price.
Competition policy is about more than "is there a monopoly or is there not", it's about avoiding abuses of market power and using policy to lower prices for consumers. Now it's not a *huge* issue, and probably not as bad as Apple's "I want 30% of everything because I spent 15 minutes reviewing your app" policy. But I don't think it would be disastrous for consumers if the FTC told Amazon to knock it off.
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?
Every business starts small at some point - we want more of them some small number of them that a few of them will become big business and generate enormous growth that was previously non existent.
Multitasking makes me incoherent. This should be - we want more small companies because out of all that start, a few will rise to be large business. Those will generate enormous growth that previously didn't exist.
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.
Two things. First of all, just to be clear, under existing precedent, it is not unlawful to be a monopolist (e.g. Alcoa -- the height of antitrust enforcement in the 1950s - "A single producer may be the survivor out of a group of active competitors, merely by virtue of his superior skill, foresight and industry"). What Section 2 prohibits is "exclusionary conduct" to "maintain" or "acquire" monopoly power.
Being the first company in the 1970s/80s to dig up a city streets and lay cable (often via an explicit government franchise agreement) is not exclusionary conduct. You can obviously change the law of course, but helpful reminder about what it is now.
But lets think about what ideal policy would be. What conduct of ISPs do you allege is (or should be) unlawful? To be clear, you actually have to prove an antitrust violation in order to seize a company's property and forcibly divest it, cause, you know, Due Process, so you can't just say I don't like them they are awful. Is the complaint that the ISP charges a price you think is too high, for service that is not as good as you think it should be? How do you differentiate the current ISP price from any other price? What price would be ok? $40 a month for internet? What's to stop someone else from saying that's too high? The marginal cost of delivering service? How will any firm pay off the fixed costs? (especially when the marginal cost is small but the fixed costs of the system or enormous). Who will oversee and monitor compliance on this price level? And what incentive will the ISP have to reduce its costs if doing so reduces its ability to charge a higher price?
More to the point, lets say you succeed -- you win an antitrust case and establish that charging a "high" price is unlawful. Good job. Does any firm -- say Google start's a "fiber" company and calls it "Google Fiber" - wild idea I realize -- does that firm have any incentive to build out an extremely expensive fiber system to deliver internet now that "charging a high price" is unlawful? (Google already found that the return on that investment was not worth it). What rational firm will enter a market given that uncertainty? What impact does a price control have on these other entrants?
More to the point -- say you succeed and break Comcast or Cox or Charter into 5 different regional ISP companies a' la the AT&T breakup. What have you accomplished? Have you created the incentives for one regional ISP to enter into a rival geography? How? Have you lowered the price of entry? Is it cheaper to dig up streets now that the company is smaller?
(remember, you just established that charging a high price is unlawful, so you actually increased the uncertainty of profit and thus the barrier to entry). I don't think so.
As to why you had four ISPs in Europe -- did you literally have four co-ax cables in your street? Or did you simple have four companies, each of which could use the same wires, to deliver you service on your screen? Because that's not the same thing as actual competition -- if you simply made Comcast rent out its network to four different ISP "brands", you'd think you have "choices," but you wouldn't-- you are ultimately using the same wire, and the owner of that wire will still charge the monopoly price and deliver the monopoly quality of service. You've accomplished nothing.
Nor is antitrust enforcement going to solve this problem. If you want to expand supply, you actually have to expand supply. Otherwise you are moving around deck chairs (and introducing a new level of middleman). There are three options in my view: one is subsidize more broadband -- much of the country doesn't have it yet (still) -- so perhaps that is the best option. Then again, that costs a lot of money, that money will be captured by existing players, and maybe its not a great use of public resources to wire up Wyoming? Another option is regulate broadband prices, setting some number that they cannot go above via the FCC. That introduces new issues -- again, who exactly is going to invest in broadband if you just imposed price controls? What incentive do they have to improve service if their price is capped?
The last option is to leave it as is. 5G is coming, and there is some indication that the ISPs will soon face competition from the Big 3 of AT&T, Verizon, and T-Mobile in the form of wireless routers -- instead of digging up the streets, they deliver broadband quality internet via a device that talks with the 5G towers. That will at least give most customers some options -- its not magic though. And it may take too long.
My own view - some sort of broadband subsidy is needed for low income folks. Maybe some subsidy for broadband rural development, although I'm a bit skeptical of further subsidizing rural areas beyond what they get. I think 5G will help a lot.
Antitrust enforcement to randomly break up the ISPs, on the other hand, is a hopeless distraction.
Now that I have a little bit more time, let me add to my previous post. First, as far as price controls are considered, I'm generally skeptical. For example, I strongly oppose rent control in most cases. I would also oppose regulating the final price for broadband (maybe with an exception for some basic 1Mbps service for low-income households).
However, access to fiber isn't like that, because it's very hard to build competing fiber networks, just as it's hard to build competing power grids. This is why I want some way to allow multiple ISPs to compete over the same lines. (Also, because I remember how the market was back home when there was only a single ISP, and how much it changed when that single ISP was legally made to compete.) Now, there are multiple models for this. Back in Europe we have government-owned roads without tolls, government-owned roads with tolls, and privately-owned roads with tolls. Different access models to electricity also exist in different areas in the US.
The absurdity of the fiber situation in the US is highlighted by the amount of people who look to Starlink or 5G to provide competition for fiber. Sure, you can convince people to replace the power grid with batteries that will be delivered to them once a week, but something must go horribly wrong with the power grid to make the latter option viable. It's a very similar thing to trying to transmit information through the air instead of using wires.
So, the market monopoly is over the physical wires, yes. This makes as much sense as selling exclusive rights to VW over some highway and barring owners of other brands from using it. I agree that regional breakup of ISPs will achieve nothing.
The issue you solve is the following. I know a person who literally moved less than half a mile away, and got a vastly lower price from Comcast for the same service. The difference was that in the second case there were also AT&T wires available. In Europe, that’s a solved problem.
Right. So we need to incentivize AT&T (or Verizon or Google or someone) to lay fiber optic (nobody lays cable anymore) to get to the nirvana of European broadband. I live in DC, where I had both Verizon, RCN, and Comcast, and then move a bit further out into NoVA. How does DOJ filing an antitrust case to breakup/regulate Comcast incentivize Verizon to dig up my residential street to lay fiber?
I've never understood why the electrical company is also not a cable company. Assume there is some regulatory issue, but since every house is having electrical lines run to it, why not have them run fiber optic to it as well?
This is indeed one way you can do it. Or you can mandate that the electricity company provides access to a similar broadband utility. Disclaimer: I’m not a lawyer, and I don’t know if current laws allow that.
However, I’m an engineer who has lived under two different legal systems (EU, USA), and also observes how in both the EU and the US there are different legal arrangements for natural monopolies like roads, electricity, broadband, water, and sewage.
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.
Amazon didn't invent that. Many companies, like Target for example, have been doing that for years. They see something that's popular and contract with a manufacturer in China or somewhere to make a store brand version for them, with just enough changes to hopefully fend off a trademark or trade dress lawsuit.
Even progressive capitalist darling Costco does this: if having to compete with the Kirkland house brand were a death knell for their suppliers, you'd think that there would be a lot fewer of them.
The primary issue is that search space is so much more valuable than good shelf space to the point where it's a difference in kind rather than degree. Being able to show up as the first search results just matters so much more, especially when you can move your own product there and competitors further down or even onto the forbidden second page of results.
I think Matt is a bit too sanguine about how brands launch; Amazon is a huge part of the market for e-commerce and their ability to credibly dunk a competitor's product after copying it (and they get a lot more data on it during) is much stronger
It's, like, epistemically certain that being bumped to the second page of search results in Amazon results in a greater decline in sales than being completely dropped by Walmart.
Absolutely but I would argue that Amazon's competitive position in e-commerce is fundamentally different from Target's in retail or Kroeger's in grocery. YMMV, but my bigger point was that I do think it's a grey area - it's not laughable to claim that Amazon has a monopolistic position in e-commerce in my opinion.
The question in antitrust is what is the "relevnat market," and to do that we ask what are substitutes from the view of a consumer? Is a physical store a substitute for e-commerce and vice versa? Sure, on some level. But do they restrain each others pricing? We answer that question not by asking what you personally do -- the question is, does a price increase on Amazon for bath soap cause enough customers to go to CVS and Rite Aid such that it is unprofitable to raise the price in the first place? It's an empirical question -- one that antitrust economists love to tackle because in the retail context, you have so much scanner data that you can tease out the impacts of small pricing changes on demand. My guess, given that Amazon charges relatively low prices across the board, is that they are indeed in the same market. So yes, Amazon's e-commerce market position can be said to have a "powerful" or whatever adjective you want. But that's not going to be a relevant antitrust market, which is what counts in an antitrust claim, absent some empirical evidence to the contrary.
As to your original point, on Amazon leveraging sales data and undercutting the originator, as others point out this is true of any retailer and any business. But more to the point, why is it a harm? The originator's idea was so unoriginal its not subject to a patent. Good! Patents inhibit competition -- if Amazon is selling a cheaper version of the same product, that's competition baby! And if you say, BUT that copying undermines the incentive to create in the first place. True! Copying is good for competition but it can undermine incentives to create. That's why we have patents -- they protect certain kinds of "original" and useful ideas. But your hypo notes that the idea was unpatentable. Tough cookies.
Oh, it violates the originator's trademark you say? They invested in creating the brand equity, and now Amazon is useful deceptive logos and tactics that confuse consumers who want to buy the original but get snookered? You are in luck! File a Lanham Act claim and get yourself some treble damages.
Otherwise, you are literally complaining about one firm trying to sell a product in competition with another. If you make that illegal, you will get less competition, not more.
"Absolutely but I would argue that Amazon's competitive position in e-commerce is fundamentally different from Target's in retail or Kroeger's in grocery."
Well, ok, but then do so - make that argument. Because it's not in any way self-evident that Amazon's position is different, aside from having taken e-commerce sufficiently seriously enough to innovate in it.
Target was so unserious about e-commerce that they literally subcontracted their entire web store to Amazon to operate under the Target name. Naturally Amazon got the better of that arrangement until ended in acrimony.
To a great extent, Amazon's biggest stroke of genius during the 2000s was finding ways (AWS, Kindle, free shipping with Prime...) to make it look like selling things online was so unprofitable that Target, Walmart, Best Buy, CVS, etc. had no interest in offering online ordering.
That strikes me as a slightly-bonkers take: the reason Amazon started AWS was because their website would crash every time Christmas shopping season rolled around. Famously. But if they invested in the server capacity to support seasonal loads, then it would sit idle most of the rest of the year. But if they rented it out, they'd have to rent it on ridiculous 9-month leases so that they could take it back from their tenants in time for Christmas (or else it doesn't solve the seasonal load problem.)
The innovation was spot pricing, basically setting up an auction market for their own unused server capacity. It turns out that a lot of online industries have seasonal or periodic load demands distributed over times of the year or times of the day.
I think it's more that during that period Amazon had the advantage of being led by a CEO with a long-term vision and the ability to withstand short-term profitability pressure from investors. Whereas Target, for example, was run by hired-gun executives who were tasked with, and did, the job of keeping earnings and share prices consistent quarter to quarter. But that's all they did. Target by then was a very different company from the one it had been when it was run by the Dayton family, with deep and long-term ties to Minnesota and the Twin Cities, and who were more likely to see themselves as keepers of an institution in trust for the community.
I think Amazon occasionally has gone beyond the bounds of normal business behavior here. Not always, but occasionally.
For example, take the story of the "Everyday Sling" camera bag. Amazon stole the trademark and reused the design almost exactly.
I don't see Walmart or Kroger making their own generic soap as the same thing. The equivalent would be copying a Louis Vuitton bag and putting an Amazon logo on it. Zara has been sued multiple times for this.
I haven't kept up on it recently but in the early 2000s Target was routinely a defendant in trademark lawsuits for doing exactly that kind of thing - a cost of doing business. They had a whole team of buyers whose job was basically to source mfgrs in China to make store brand knockoffs of popular brand name items. The parent of one of my kid's nursery school classmates worked for Target and that was his job - a very interesting job at the time.
So bring a Lanham Act Claim? That's literally what that law is for if there's actually a trademark violation here. But it a bag with a strap-- hardly a mRNA drug here -- I'm pretty suspicious of claims that consumers are really fooled and they are getting their Peak branded bag. If selling a knock off of something popular is illegal, you'll get a lot fewer knocks offs and a lot more expensive stuff.
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.
Sure I agree with that. But my point is that market power analysis is a necessary predicate to anything else. The premise of the case against Microsoft was that the network effects and size of the Windows market share created so much lock in that they were genuinely not any competitive pressure.
What I’m saying about Amazon is that’s not true even in a market like ebooks where they have huge market share. If kindle books started having a worse feature set than Apple Books, people would just switch. There’s very little lock in to any of this.
"If kindle books started having a worse feature set than Apple Books, people would just switch."
I think this claim is wrong, and probably key to some of your differences with Stoller. My observation is that the "activation energy" required to make a transition like this is quite high. Consumer laziness is a significant barrier to entry. If transferring the library of Kindle e-books into Apple's system requires any effort at all, a ton of people just won't.
I've been sort of meaning to switch from Apple's Podcasts app over to... something... for years. The Podcasts app is _terrible_. Much worse than the old iOS iTunes. But I keep putting up with it because it's just-barely-adequate, and I've been too busy to pick which alternative I want to commit to, and figure out how to port over my library of subscriptions and downloaded-but-not-yet-listened-to files. And I'm the sort of person who is sufficiently technically competent to do this kind of thing if I wanted to badly enough. 90+% of customers basically just use whatever app is put in front of them, and once hooked into it, will only switch if either the device forces them to (as with the end of iTunes), or in the rare cases where somebody really does figure out something that's _so_ much better that it spreads beyond the types of tech nerds who are willing to try new software all the time, and creates a wave of people transitioning to the new system (with attendant network effects, including ease of finding a friend who already switched and can help troubleshoot). That sort of wave is what Facebook sought to forestall by buying up competitors -- at least that way if Instagram actually displaced FB, it would still own the advertising-relevant data.
So we _don't_ get steady incremental improvements from a competitive market. We get mostly stagnation, with the occasional big leap forwards. We may be losing out on many potential improvements, because there's a lot of dumb luck involved in surviving the market, and a lot of smart people are just avoiding investment in "kill zones" where they think somebody like Google or Amazon or Facebook might actively seek to squeeze them out if they try to bring something new to the table.
In apps, I think Yglesias is right. You don't need to migrate your whole library to use a different app. (At least for people who read books and don't really refer back to them much, which I think is the most common use case for books.) You install Scribd or iBooks or Nook or whatever, and you're off to the races on your next book. Maybe the Kindle app falls into disuse and you don't install it when you replace your tablet. With podcasts, you need to tediously migrate a bunch of subscriptions and mark previously played episodes as played. With music, you do revisit the same album repeatedly, so migrating your library is a requirement to switch.
There are a few things worth mentioning about ebooks:
1. Apple tried to do price competition with Amazon, and was prevented from doing so by an FTC antitrust action. (Of course, forming an anti-Amazon cartel with a bunch of publishers is not the only way of competing with Amazon, but it is notable that Apple tried.)
2. Kindle provides an outstanding service with features that are AFAIK not replicated in other platforms, like sentence-level syncing between audio books and ebooks ("Whispersync for voice"). They also sell very high quality and cheep e-ink devices. The book prices quite price competitive from what I've seen, presumably because of contractual requirements when you publish a book on Kindle.
3. There are some ebook markets Amazon has just decided they don't care very much about, like technical/scientific books with equations. Some of those are "app only", not available for their small e-ink devices. But mostly even when offered they're a total waste of money. The "Remarkable" company Yglesias mentioned makes a tablet that can display PDFs very nicely, but overall it's a niche market with much more demanding typesetting than trade books. I think the same is sort of true for ebooks generally: it's a small market in the scheme of things, mostly important only to nerds and authors.
4. Amazon also provides fairly convenient ways to load your own documents (e.g. .mobi files directly from publishers) onto Kindles, or even upload/download them from Amazon's Kindle Cloud. I don't think there's much competitive pressure for this; they're just being nice.
Ebooks might seem like a niche market, but they are more popular with people who read a lot of books than with people who read relatively few, and those people represent a big percentage of book sales. Also those readers are more important for midlist authors than bestsellers.
It also varies a lot by genre, because of the different audiences of the different genres.
Even so, there are a bunch of midlist SF authors who have shared data, and they seem to get about 50% of their royalties from ebook sales - and that's almost certainly the highest level for anyone with a conventional publisher.
There are lots of self-published authors who are ebook-only or ebook-first (with just print-on-demand paper copies), especially in those that participate in Kindle Unlimited, and they are 100% ebook or almost so - but they're selling to the small audience of people that read a book a week or so.
Isn't one of the issues with the Amazon in the book market (among others) is that they don't allow people to discount elsewhere? So if Amazon is taking (30%) then you can't sell for 10% less on your website and keep the 20% difference. Nor can they sell on Walmart or B&N for less if either of those companies were willing to take a smaller cut.
But you don't have to sell through Amazon. You are free to sell through some other platform if that's what you want to do. But I think that is not a viable strategy because you wouldn't sell nearly as many books that way. So Amazon is offering a discovery and distribution platform in exchange for a cut of the revenue and (especially for a zero-marginal cost product like e-books) both that seller and Amazon are better off for it.
Amazon has close to 70% of the ebook market with B&N (Nook) having 25% of the rest. Most authors/publishers cannot afford to give up 70% of the market.
If your local electric company tripled it prices and then told you that if you don't like it, you could move to somewhere else, would you accept that as an acceptable option to them abusing their market position?
In your analogy, the electric company is requiring you to forgo the use of your house, a product the company _does not own_, in exchange for evading their charges. To evade Amazon's charges, Amazon only asks people to forgo Amazon's market, a product that Amazon has spent considerable money and effort into building and unequivocally owns. These are not comparable.
They aren't asking you to forgo the use of your home. You can live without electricity, or install solar panels or a diesel generator and provide your own power. To evade paying them what they ask for you simply have to avoid using the network they have spent significant time and effort building that the electric company unequivocally owns.
Having half your books in Nook and half in Kindle is mildly annoying, but it doesn't require lots of technical skill to use Calibre to migrate your library from one to the other. Maintaining that is annoying, but very few people have an ebook library that they need to access on two competing ereader devices - and even in a competitive marketplace for ereader devices, they still wouldn't because most people don't have two ereaders.
Yes it is a necessary predicate, but contrary to your thesis that it’s “not a monopoly” I think the analysis would show there are plenty of markets it operates where it has sufficient market power to be anticompetitive. Whether it does so or not (and how we define objective and enforceable rules to determine this) is the crux of the question and needs to be determined by the facts of each situation.
I'm an antitrust lawyer. He is broadly correct, and it isn't beside the point. Monopoly power (or at least market power) is what gives a firm the ability to engage in anticompetitive behavior (by that, I mean behavior that has anticompetitive effects, meaning it actually harms competition in the relevant market). If a firm does not have monopoly power (or at least market power), then its behavior will not appreciably harm competition--because there is competition!
There is a slight difference between monopoly power and market power. Monopoly power is the power to raise prices and exclude competition, and that is the standard used in unilateral conduct cases (i.e. Section 2 of the Sherman Act, willful monopolization or attempted monopolization). Market power is the power to raise prices, and that is the standard used in multilateral cases (i.e. Section 1 of the Sherman Act, conspiracies restraining trade). We apply a higher standard for monopolies because (1) it is harder for a single firm to accomplish something, and (2) we do not want to punish procompetitive conduct, which single firms regularly engage in. We apply a lower standard for conspiracies because as a general rule there is no good reason for competitors to work together, so we're not worried about punishing procompetitive conduct.
That's not all. The point that Matt essentially makes (at least subtly) is that before you even get to the question of monopoly power or anticompetitive effects, you have to first define the market in which you are assessing those things--they do not exist in a vacuum because that is how competition works.
Amazon may be big, but it has plenty of competitors in its various markets--in retail, it has Walmart and Target, for example; in grocery it has all sorts of competitors (those tend to be more regional markets, so you'd have to analyze where a given buyer can turn for those goods); in streaming, it has Netflix, Hulu, Disney+, etc. And the same goes for labor markets--Amazon employees could work at all sorts of other places, but UPS and Fedex come to the top of my mind for any warehouse worker.
So the point is, Amazon is not a monopoly, and regardless, that term is useful only in the context of a particular market that reflects economic realities. Amazon faces sufficient competition in just about every market in which it competes, and in most of those markets you couldn't come close to showing even market power, let alone monopoly power. So Amazon is not only not a monopoly, it cannot actually get away with anticompetitive behavior that in fact appreciably harms competition itself because Amazon in fact competes in very competitive markets. And, as such, people who call out Amazon for being a monopolist are really calling out Amazon for being big. And they should be intellectually honest about that, because the antitrust laws do not outlaw bigness, nor could they without becoming something other than antitrust (i.e. competition) law.
Absolutely. Microsoft are not the same as Amazon. They still use their dominance in desktop software to leverage into other industries (for example, they have taken an absolutely huge share of videoconferencing by bundling video into Teams, and Teams into Office, for 'free'. That's pretty classic anti-competitive behaviour. And it largely rests on the original dominance in office software which is hard to shift because no-one wants the hassle of retraining all their staff on new software.
Ken is precisely right. MSFT introducing Teams is not the same thing at all - is Zoom going to provide a path to displace Windows OS? That would be the competitive story akin to what happened with IE and Netscape. Introducing teams offers competition to zoom, it's fundamentally a good thing. (but I'll give you one similarity though -- like IE, Teams absolutely, fundamentally sucks).
But the harm of MSFT's conduct in the 90s case was maintaining its OS monopoly by closing off a potential avenue of competition via "middleware". Bill Gates famously recognized that if Netcape succeeded, app developers would write their programs for Netscape, and Netscape could run as "middleware" on top of IBM, Windows, Apple, whatever...That would take away Windows' primary advantage --the Applications Barrier to Entry. Middleware never did end up as an alternative avenue of competition to OS, so the DOJ theory never came to be. Which is maybe why people misunderstand that case and think it was all about MSFT taking over the browser market...that was the tactic, but it was not the harm.
The story you are telling about Teams is nothing like that.
"Middleware never did end up as an alternative avenue of competition to OS"
I think it did. There isn't a Windows client for Facebook or Gmail or Twitter; they just run inside a tab in your browser, and they run equally well in a tab in a browser on Linux or MacOS as they do on Windows.
But Bill Gate's (and DOJ's) thesis was that if every app is on the internet, Java/Netscape middleware blows up the moat protecting Windows OS (the applications barrier to entry) and thereby commoditizes operating systems -- and that seems overblown. Last time I checked, Windows is still dominant in desktop OS for home and enterprise, even though Android is free, and Mac made a comeback. You are right, of course, that many/most computing functions are now online and can be accessed via middleware, but it doesn't seem true that middleware became the alternative avenue to compete with Windows.
“That's pretty classic anti-competitive behaviour.”
No, it’s classic competitive behavior. You have it precisely backwards. And Zoom still dominates.
“…to advantage Office and Explorer to the detriment of Netscape, Lotus, Corel etc who they saw as threats.”
Yes, it was an example of regulators and the courts protecting competitors, not protecting competition.
Also, I feel like it's worth noting that the narrative in the tech world around the microsoft/netscape dispute underrates the extent to which Netscape actively facilitated its own demise. The development and release of Navigator 4.0 was an utter debacle that the company never recovered from: they gave IE6 a massive window of opportunity and Microsoft acted accordingly.
I completely disagree with the very idea of anti-competitive behavior as commonly understood. Microsoft’s desire to “cut off Netscape's air supply” was perfectly fine.
In retrospect, I think nearly everyone was wrong about...nearly everything in the 2000 antitrust trial and what happened to Netscape. IE6 was a better product than NN4. ActiveDirectory was going to win the enterprise backoffice no matter what because the alternatives were all substantially worse. Netscape had no grounds to complain about bundling when they'd given away Navigator as a loss leader for nearly their entire existence. Mozilla produced a better web browser than Netscape Inc ever did.
And Microsoft's shareholders would have been _much_ better off if Gore had been elected and the DoJ had gone through with forcing them to divest Office and IE from Windows: Bush's election turned out to be the opening act for 15 years of near-total stagnation for Microsoft both as a company and a suite of products, and they didn't turn the ship around until very recently.
Netscape had “grounds to complain.” Whether those were reasonable and just is irrelevant, and that’s the core defect of American antitrust law.
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).
Yes I agree there are other issues here — needs more posts
To be fair, Matt does say this is just one aspect of bigness/tech
So many of these issues are in fact well-discussed in antitrust caselaw and scholarship, you just have to do about an inch of digging.
Buying a potential competitor to maintain market power is already illegal -- so-called "potential competition" cases are already a "thing", although like most merger caselaw, the number of decisions is sparse (merger litigation is relatively rare). But there is still an impact -- its just less visible. For example, in pharma mergers, the FTC routinely sues to require merging pharma companies to divest late-stage pipeline products that might compete with the merged firm's existing product (and in some cases, they have required divestitures even where both firms just have pipeline products and are thus mere "potential" competitors).
If this is really a problem a la Facebook/Instagram, the fix may be small -- perhaps Congress or the courts should add an evidentiary presumption that the agencies can invoke when they show a certain likelihood of entry (FTC/DOJ have lost a few of these cases in recent years). A change along these lines has been proposed in some of the bills in Congress. It would likely work as it does with horizontal mergers, where once the agencies make the required showing, the defendants must come forward with pro-competitive justifications/efficiencies or else they lose. In practice, no defendant -- NONE -- has ever beaten the horizontal presumption of harm with efficiencies. With the right presumption, that might be a good fix. Then again, the impact is hard to assess - there are incentives for a business to enter an adjacent market and compete may change. The answers are not as easy as every critic assumes.
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.
I think these are reasons to think that small firms have hidden competitive advantages beyond a narrow efficiency lens, not reasons to think policy needs to promote small companies.
Hamiltonian industry and commerce vs Jeffersonian yeoman's republic - that's kind of another way to summarize the two meta points of view here. My read of Stoller's stuff is he's really pushing for a modern day version of an idealized Jeffersonian society, romanticized as that ideal may be.
I like smallness but I don’t like peasants farming 8 acre plots producing 120 bushels of corn (current value about $600) a year. It’s a tough issue
I cannot strongly enough recommend following Sarah Taber on twitter (@sarahtaber_bww) for an infinite stream of hilarious, jaundiced views of the underbelly of the "small family farm" racket in the American heartland. And "racket" is most definitely the word.
Haven't investigated the details, but I've wondered if it might be possible to bring a fun False Claims Act lawsuit against a "family farm" that's violating state anti-corporate farming laws yet claims to be in compliance with all applicable state laws when applying for federal aid, like Multiple Peril Crop Insurance.
You would have to file suit against basically all of them.
And god, MPCI. With the caveat that I spent a great deal of time working at a company that sold market-rate parametric crop insurance policies and thus both know of whence I speak and am admittedly talking up my own portfolio: MPCI is a disaster and a fraud from beginning to end and should be shut down and replaced with absolutely nothing.
Ha, agree about MPCI. Too hot, get paid, too cool, get paid, too much rain or too little rain, get paid - okay, that's what it's for. But if you got impatient and recklessly planted your crop too early, or were lazy and planted too late, or left the seed in a hot shed to get heat damaged, or mixed up your herbicide wrong and killed your own crop, or failed to till, or were in any other way an incompetent farmer, just say it was a covered cause and get paid anyway. I've seen all of that.
As long as there are several car pubahs in an area — which is the way the US auto market works — the car salespeople have competition for their labor. The same goes for hygienists. Even if a given car salesperson for some reason is only skilled in selling a certain brand of car, s/he can just get a job with the brand’s pubah in the next town over. Car salespeople are reasonably independent.
Contrast that with a theoretical market where one or a handful of companies retail all cars. Car salespeople would be far less independent.
I'm trying to think of a _less_ sympathy-engendering argument against vertical integration and consolidation than "car salesman will have a harder time finding employment as car salesmen" and... look, I'm gonna have to get back to you on this.
Why do I need a car salesperson? I don’t need a bread salesperson: I just pick a loaf off the shelf.
There's really no good reason cars can't just be sold like white goods. Maybe there's a genuine reason to haggle over property, or even second-hand cars, but new cars should just be priced competitively in the market to sell at the RRP.
I bought a white car once. Never again.
Even if there is a car pubah in the next town over, your chances of landing a job with him aren’t great if you get fired. I got fired by a firm 16 years ago, at which point recruiters who had been working with me dumped me. The need for references to get sought after jobs increases the captive power of bosses.
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.
Using a law designed to break up companies that had their own police forces and were literally murdering people in the streets to break up companies that have too much merchandising leverage is nuts. Congress is too dysfunctional to pass a relevant 21st century Sherman act. Prosecutors “making due” is really terrible for free societies and whatever we would gain by breaking up Amazon (I’m dubious there’s any upside short of a narrowly targeted boon to Walmart shareholders) we’d lose collectively more by encouraging a system that is already far too capricious and too powerful.
I should know I’m breaking the law when I’m committing the act, not retrospectively as judged by a politicized DOJ looking for trophies.
On the last point, that suggests that one should pass a law that doesn't take full effect until some time far enough in the future to spin off and wind down whatever activities will be banned, rather than suggesting that one should never pass a new law, right? (Like how we phase in new fuel efficiency rules for automobiles, but don't just grandfather in existing companies and their existing standards.)
Can't agree more with that last sentence - it's a problem not just in antitrust but a lot of other areas too.
What is the market that you're implying Amazon has a monopoly in? They consistently have less than a 40% share of all e-commerce- I've seen estimates of 38%, etc. So- which market? Microsoft had a much much larger share of all browsers at the time of your example
I could see them having very low percentage of the market for car parts, but a very high percentage for diapers. The overall "e-commerce" market may be only 40%, but that market contains everything sold online. They could easily hold 90%+ in hundreds of categories and 1% in hundreds of others. Should that impact our perspective?
To my understanding as a non-attorney, the first step of an antitrust lawsuit is defining the relevant market that is supposedly being monopolized. One could say that Joe's Coffee Shop (a single business) has a monopoly on coffee shops called Joe's on a certain corner, but that's obviously not going to convince a judge.
I'm not sure I believe that they hold 90%+ in any category, and I'm not sure that a judge would find dominance in a very narrow category to be an antitrust violation per se. But it's by definition subjective and is decided early in such a suit or enforcement action
“Should that impact our perspective?”
Yes. It should make us exceedingly humble when deciding on whether or not to interfere in the market.
I don't think they have any monopoly, but you could make an argument that they have too much leverage with manufactures in online retail. I think it's a bad argument, but I wouldn't guffaw before I disagreed.
A key bit here is this definition of monopolizing: "conduct which reduced competition." When Amazon knocks off existing products, they're not just being "mean," as MY says. They're using their market power to harm competitors in markets they don't even play in, like batteries. If I search for batteries, am I getting the results from a level playing field, or does Amazon favor its own brands? Are the reviews absolutely unbiased, or has Amazon favored its own products? There's no way to know.
If you want to read more on Amazon's abuses of its market position, check out the House report here: https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf?utm_campaign=4493-519.
But why is that different from grocery chain brands or what Trader Joe's does or whatever?
It's a good question. It seems to me that once a brand is in the store, it's a level playing field. Safeway crackers and Saltines are presented equally. Amazon is ostensibly the same way, but with hundreds of brands. But we don't really know, right? And once they introduce Amazon branded crackers there are lots of reasons to think their algorithms will nudge search results toward their own brands. I mean, why wouldn't they? So now their unquestioned dominance in running a marketplace has suddenly given them power in the crackers market. I like the idea that there's a line between running the marketplace and being a vendor. Pick a side, Amazon.
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.
Are you talking about the “size” tension or am I missing what you’re referring to? Isn’t it true that size per se is not necessarily relevant as Yglesias describes?
Basically, there's a lot of evidence that the Congress that enacted the Sherman Act was concerned about bigness in general, and the effect of big companies on independent traders (i.e., small business) and not so much about economic efficiency. Which makes sense--the Sherman Act was enacted in 1890, before most of the modern economic theories of efficiency and competition, including concepts like deadweight loss, were developed. The problem is that once those economic theories were developed, it became clear that bigness is very often pro-competitive and good in economic terms: large firms are very often big because they are more efficient, and they very often drive down prices.
And that's the tension. The enactors of the Sherman Act seem to have thought that bigness was unqualifiedly bad, but we now know that in fact, bigness is often good in strictly economic efficiency terms. If we destroy Amazon and Walmart to protect general stores on Main Street, consumers will pay higher prices and the economy will be less efficient.
Matt's post assumes that the Sherman Act should only be concerned with efficiency. Maybe! But it's far from clear that the Congress that enacted the Sherman Act thought so.
Right on. Its also unclear why we should care about what the writers of the Sherman Act thought or what the terms "restraint of trade" or "monopolization" meant to them. We can't know and don't know. Those same guys pretty clearly set out a very short statute that was meant to be developed by common law courts, and it has. We shouldn't be textualists or originalists when it comes to the Constitution, and certainly not when it comes to a bunch of random legislators in 1890 (or 1913 or 1950).
We do know what they intended though, from reading the primary sources. The bill was to harm big interests and restore power and income to the noble, hard-working small businessman. It’s a very bad law, but alas, we’re still stuck with it.
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've been with Kaiser Permanente (vertically integrated) for years and find them to be excellent. I've also heard that doctors really like it too.
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."
"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 [...]"
I just want to stress here - the "predatory pricing" argument is that Amazon isn't charging _enough_?
Yes, that's correct. Amazon is being attacked from both angles on this.
The predatory pricing accusation comes from the fact that less funded competitors than Amazon can be driven out of the market not through honest competition with Amazon but instead through using their immense funds to undercut competing marketplaces in a way that competitors cannot match. It's a very old tactic for market capture.
Right, but I've been hearing that for 20 years about Amazon, and for almost as long about Walmart before that - that their sinister "predatory pricing" scheme is to forgo market-clearing levels of profit margin in order to outcompete mom-and-pop in various markets, then once they've swept the field clear of all competitors, jack prices and cash in.
But it's literally never worked like that. There's no signs that it works like that - free shipping and low prices on Amazon have gotten them less than 40% of the e-commerce market two decades later. There's just no sign that Phase 2 of the Evil Plan to Extort US Consumers is immanent or even possible or that Amazon's copious shareholders are just going to wait forever for them to do it.
It's an "old tactic for market capture" that, overall, has literally never captured a market, because every time some proto-Amazon succeeded in setting up the market conditions for Phase 2, as soon as they jack prices new market entrants pop up to undercut them. Even if Amazon knocks you out of business in 2021, there's no reason you can't re-enter the market in 2022. You get to start as many businesses as you want.
When I took anti-trust law, the section on predatory pricing was difficult to teach literally because there are so few examples of predatory pricing actually working lol
I won't make any claims about Amazon having done this, but it's exactly how railroads and airlines have always operated whenever regulators don't force them to keep sustainable prices. When an upstart starts operating on a given route, the big established company undercuts them until they go out and then raise prices to back where they were before. For utilities and other things with major network costs or network effects, this can be a highly effective strategy for preventing competitors from even bothering to try. (Why build a second track from Philadelphia to Pittsburgh if the Pennsylvania Railroad will just cut fares long enough to make me go bankrupt and then buy the track I built from my creditors?)
You’re talking about the airlines we cut big checks to every year because none of them can operate at a profit at all?
Seems like more proof of my thesis: Phase 2 of this “plan” never seems to actually happen.
Walmart may not have managed to corner the market, but it's more of a factor of the internet disrupting things than the tactic not working. The entire American gilded age is full of this tactic working very well.
The modern argument for antitrust / anti-bigness / anti-whatever comes from the desire to have dynamic and innovative markets, not from the defense of consumer welfare. Looking at it through that lens the very existence of a company with 40%(!?!) of a market is a problem for free competition. IMO, though, their marketplace isn't as much of a problem as their other business arms *cough*AWS*cough*.
Also, people don't have unlimited money to start businesses. Somebody's livelihood being destroyed not through honest competition, but through dumping money into a market is something that shouldn't happen. Otherwise you'll have an economy made up of the people capable of getting money to start businesses over and over.
Another post that asserts that 40% market share is over some kind of threshold that means the market isn't "dynamic" or "innovative", without any argument or evidence why I should think that's the case. So, I don't think that's the case.
Having your prices undercut because someone else's business model permits them to undercut you is literally the definition of "honest competition."
It's literally not? There's price differentiation - which is an obviously widely used business tactic - and the intentionally cratering prices go force competitors out without actually competing with them. Especially because Amazon uses money it gets from other markets (AWS specifically) to fund this. Intent matters here.
Yes -- which is why people think it's closer to "monopsony" power than monopoly power.
In what market is Amazon the sole buyer?
Amazon is trading at 60x earnings, which is insane for a market leader whose recent profits were swollen by the pandemic and which may struggle to maintain its market share.
It’s certainly correct that Amazon’s executives have strong incentives to maintain the narrative of rapid growth thst makes such earnings multiples possible. However, this means recording big year over year earnings gains, and that’s gonna be hard as we emerge from the pandemic.
Amazon is up to 10% in total digital advertising spend (Google is 29% and Facebook is 25%) and 19% is search ad spend (Google is at 57%). I think a lot of the AMZN bull story is how you think the digital ad market will develop and how much more share Amazon will take. It's certainly now conceivable they could flip the market.
https://www.emarketer.com/content/amazon-s-share-of-us-digital-ad-market-surpassed-10-2020
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?
I think there are two categories of labor issues:
(1) Some unions have tried to organize Amazon workers and when unions are running campaigns they generally take a kitchen sink approach to criticizing the target company which has led to some spurious antitrust arguments that are really about labor organizing.
(2) Are big companies, as a rule, worse for labor. My read of the evidence is that it’s the opposite and productive and pay are better at big companies and big companies also offer more chance for promotion.
Arguably, the whole point of franchising and contracting jobs out to smaller businesses is to exploit the de facto and de jure ability of smaller businesses to do things with workers that larger businesses can't.
Imagine a janitorial services company with four employees that bids low because they pay under the table, dock pay below the minimum, violate child labor and OSHA laws, etc. If the base rate of being caught abusing an employee is 1 in a thousand (almost surely a massive overestimate), there's a better than 90% chance that they get away with it for 25 years (which is only 100 employee-years).
25 years is enough time, especially with all the various tax subsidies for small businesses, for the owner of that business to make enough to retire, so there's no reason to have a time horizon much longer than that.
Is that necessarily a bad thing? (Sorry if I’m reading too much into your post)
Your second point here would be a phenomenal standalone piece of its own.
It was! Check out https://www.slowboring.com/p/small-business-is-not-the-answer in the archives.
If you'd like to hear a pretty convincing case for it, read Big Business by Tyler Cowen
Larger employers offer higher pay, better benefits, and are regulated more closely than smaller employers. https://jacobinmag.com/2018/01/small-businesses-workers-wages
Global workers have benefited from the development that has resulted from offshoring, spurred by investments only large companies could make.
I am open to convincing on this but I always find it odd that the articles about Amazon warehouses play it up like it's some sort of new innovation in terrible working conditions. It doesn't sound great but none of it sounds much worse than my experience working at a grocery store service deli.
I know several people who have worked at Amazon fulfillment centers either seasonally or full-time. It's of course just anecdotal but the impression I get from them is that the work sucks but the actual relevant alternative jobs would be as bad or worse. The job with Amazon pays significantly better though.
It's reasonably likely that Amazon (and the delivery services) pushing up low-skill wages in the wake of the pandemic is a bigger factor in restaurants and hotels having trouble hiring back workers than the extra unemployment.
Interesting, I hadn't thought about that but it seems plausible. Amazon in particular is on a massive hiring binge at the moment.
Statistically, it does look like Amazon is worse than comparable employers: https://www.bbc.com/news/technology-57332390
"This new study comes from the Strategic Organizing Center (SOC), a coalition of labour unions. It analysed workplace safety data reported to the US Occupational Safety and Health Administration from 2017 to 2020.
It found that "workers at Amazon warehouses are not only injured more frequently than in non-Amazon warehouses, they are also injured more severely".
Workers forced to take time off for injuries were absent for an average of 46.3 days, it said - a week longer than the average across the warehouse industry.
And compared to its largest retail competitor Walmart, Amazon's overall injury rate was more than double, at 6.5 per 100 employees compared with three."
Seeing as the opposite is true I don't think that is a problem.
>>>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.”
The problem is that it means that the seller can't list different prices with different merchants based on the different cuts that the merchants take.
So if Amazon's cut is 40% and eBay's is 20%, I can't sell at (myprice * 1.67) on Amazon and (myprice *1.25) on eBay. But that means that eBay has no incentive to take a lower cut, which makes the market uncompetitive.
But can't the seller just choose not to use Amazon in that case?
They can, yes. But then you have a real question on Amazon's market power - if it's sufficiently large that a small seller loses more by giving up on Amazon (even though their non-Amazon sales are now at lower prices which attracts more customers) than by accepting the higher retail price and selling via Amazon.
If that's true, then that's Amazon using market power to maintain higher prices and higher margins for Amazon, which is characteristic monopoly abuse.
I think that retail price fixing should be generally unlawful. Amazon should have a perfect right to require a supplier not to sell to another retailer at a lower price than to Amazon (ie a wholesale MFN clause). But they should not be able to require their supplier to control the retail price.
Indeed, I'd go further - suppliers should not legally be able to control the retail price. They determine the wholesale price, the price that retailers pay them. They can negotiate discounts for particular retailers, they can agree to MFN clauses or not, etc. But the retailer can set their own price, choose their own margin, and discount whenever they like with no need to even inform the supplier that they are discounting. The discount would obviously come out of the retailer's margin.
“…suppliers should not legally be able to control the retail price”
They aren’t able to do that. You only imagine they can.
They can, contractually. If I sell via eBay, I decide what price the buyer pays and then eBay takes a cut. If eBay lowers its cut while the listing is up, the buyer price doesn't change, I just get more money.
That's wrong. eBay should be able to change the "Buy It Now" price at any time without consulting the seller, as long as the seller still receives the same amount of money - ie by eBay adjusting its cut. If they did that now, it would be a breach of their contract with the seller.
“…I decide what price the buyer pays and then eBay takes a cut.”
You don’t decide what the buyer pays. The buyer decides that.
But in this case Amazon is (or would claim) that it is not the retailer or the supplier, rather that it is providing the marketplace as a service so the supplier can become a seller. Its product is the marketplace and offers it under a set of terms. Guaranteeing the lowest price to buyers is one of the things that makes its marketplace attractive to buyers (and, consequently, sellers)
Sure they do. They can take a lower cut in order to attract more sellers to their platform. Or to have sellers sell exclusively through eBay instead of both eBay and Amazon.
Fair point.
I wasn't quite convinced. It's leveraging the market power (everyone is used to shopping at Amazon) to prevent people from reflecting the FBA cost in the price of the item. If they run their own site/shipping without that cost, why shouldn't they be able to sell for that lower price? If FBA is really great on its own merits, it should be worth it to allow merchants to list a higher price.
Competition policy is about more than "is there a monopoly or is there not", it's about avoiding abuses of market power and using policy to lower prices for consumers. Now it's not a *huge* issue, and probably not as bad as Apple's "I want 30% of everything because I spent 15 minutes reviewing your app" policy. But I don't think it would be disastrous for consumers if the FTC told Amazon to knock it off.
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?
Every business starts small at some point - we want more of them some small number of them that a few of them will become big business and generate enormous growth that was previously non existent.
Multitasking makes me incoherent. This should be - we want more small companies because out of all that start, a few will rise to be large business. Those will generate enormous growth that previously didn't exist.
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.
Two things. First of all, just to be clear, under existing precedent, it is not unlawful to be a monopolist (e.g. Alcoa -- the height of antitrust enforcement in the 1950s - "A single producer may be the survivor out of a group of active competitors, merely by virtue of his superior skill, foresight and industry"). What Section 2 prohibits is "exclusionary conduct" to "maintain" or "acquire" monopoly power.
Being the first company in the 1970s/80s to dig up a city streets and lay cable (often via an explicit government franchise agreement) is not exclusionary conduct. You can obviously change the law of course, but helpful reminder about what it is now.
But lets think about what ideal policy would be. What conduct of ISPs do you allege is (or should be) unlawful? To be clear, you actually have to prove an antitrust violation in order to seize a company's property and forcibly divest it, cause, you know, Due Process, so you can't just say I don't like them they are awful. Is the complaint that the ISP charges a price you think is too high, for service that is not as good as you think it should be? How do you differentiate the current ISP price from any other price? What price would be ok? $40 a month for internet? What's to stop someone else from saying that's too high? The marginal cost of delivering service? How will any firm pay off the fixed costs? (especially when the marginal cost is small but the fixed costs of the system or enormous). Who will oversee and monitor compliance on this price level? And what incentive will the ISP have to reduce its costs if doing so reduces its ability to charge a higher price?
More to the point, lets say you succeed -- you win an antitrust case and establish that charging a "high" price is unlawful. Good job. Does any firm -- say Google start's a "fiber" company and calls it "Google Fiber" - wild idea I realize -- does that firm have any incentive to build out an extremely expensive fiber system to deliver internet now that "charging a high price" is unlawful? (Google already found that the return on that investment was not worth it). What rational firm will enter a market given that uncertainty? What impact does a price control have on these other entrants?
More to the point -- say you succeed and break Comcast or Cox or Charter into 5 different regional ISP companies a' la the AT&T breakup. What have you accomplished? Have you created the incentives for one regional ISP to enter into a rival geography? How? Have you lowered the price of entry? Is it cheaper to dig up streets now that the company is smaller?
(remember, you just established that charging a high price is unlawful, so you actually increased the uncertainty of profit and thus the barrier to entry). I don't think so.
As to why you had four ISPs in Europe -- did you literally have four co-ax cables in your street? Or did you simple have four companies, each of which could use the same wires, to deliver you service on your screen? Because that's not the same thing as actual competition -- if you simply made Comcast rent out its network to four different ISP "brands", you'd think you have "choices," but you wouldn't-- you are ultimately using the same wire, and the owner of that wire will still charge the monopoly price and deliver the monopoly quality of service. You've accomplished nothing.
Nor is antitrust enforcement going to solve this problem. If you want to expand supply, you actually have to expand supply. Otherwise you are moving around deck chairs (and introducing a new level of middleman). There are three options in my view: one is subsidize more broadband -- much of the country doesn't have it yet (still) -- so perhaps that is the best option. Then again, that costs a lot of money, that money will be captured by existing players, and maybe its not a great use of public resources to wire up Wyoming? Another option is regulate broadband prices, setting some number that they cannot go above via the FCC. That introduces new issues -- again, who exactly is going to invest in broadband if you just imposed price controls? What incentive do they have to improve service if their price is capped?
The last option is to leave it as is. 5G is coming, and there is some indication that the ISPs will soon face competition from the Big 3 of AT&T, Verizon, and T-Mobile in the form of wireless routers -- instead of digging up the streets, they deliver broadband quality internet via a device that talks with the 5G towers. That will at least give most customers some options -- its not magic though. And it may take too long.
My own view - some sort of broadband subsidy is needed for low income folks. Maybe some subsidy for broadband rural development, although I'm a bit skeptical of further subsidizing rural areas beyond what they get. I think 5G will help a lot.
Antitrust enforcement to randomly break up the ISPs, on the other hand, is a hopeless distraction.
Now that I have a little bit more time, let me add to my previous post. First, as far as price controls are considered, I'm generally skeptical. For example, I strongly oppose rent control in most cases. I would also oppose regulating the final price for broadband (maybe with an exception for some basic 1Mbps service for low-income households).
However, access to fiber isn't like that, because it's very hard to build competing fiber networks, just as it's hard to build competing power grids. This is why I want some way to allow multiple ISPs to compete over the same lines. (Also, because I remember how the market was back home when there was only a single ISP, and how much it changed when that single ISP was legally made to compete.) Now, there are multiple models for this. Back in Europe we have government-owned roads without tolls, government-owned roads with tolls, and privately-owned roads with tolls. Different access models to electricity also exist in different areas in the US.
The absurdity of the fiber situation in the US is highlighted by the amount of people who look to Starlink or 5G to provide competition for fiber. Sure, you can convince people to replace the power grid with batteries that will be delivered to them once a week, but something must go horribly wrong with the power grid to make the latter option viable. It's a very similar thing to trying to transmit information through the air instead of using wires.
So, the market monopoly is over the physical wires, yes. This makes as much sense as selling exclusive rights to VW over some highway and barring owners of other brands from using it. I agree that regional breakup of ISPs will achieve nothing.
The issue you solve is the following. I know a person who literally moved less than half a mile away, and got a vastly lower price from Comcast for the same service. The difference was that in the second case there were also AT&T wires available. In Europe, that’s a solved problem.
Right. So we need to incentivize AT&T (or Verizon or Google or someone) to lay fiber optic (nobody lays cable anymore) to get to the nirvana of European broadband. I live in DC, where I had both Verizon, RCN, and Comcast, and then move a bit further out into NoVA. How does DOJ filing an antitrust case to breakup/regulate Comcast incentivize Verizon to dig up my residential street to lay fiber?
The same way that we incentivize someone to bring electricity cables and water pipes to the exact same area.
I've never understood why the electrical company is also not a cable company. Assume there is some regulatory issue, but since every house is having electrical lines run to it, why not have them run fiber optic to it as well?
This is indeed one way you can do it. Or you can mandate that the electricity company provides access to a similar broadband utility. Disclaimer: I’m not a lawyer, and I don’t know if current laws allow that.
However, I’m an engineer who has lived under two different legal systems (EU, USA), and also observes how in both the EU and the US there are different legal arrangements for natural monopolies like roads, electricity, broadband, water, and sewage.
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.
Amazon didn't invent that. Many companies, like Target for example, have been doing that for years. They see something that's popular and contract with a manufacturer in China or somewhere to make a store brand version for them, with just enough changes to hopefully fend off a trademark or trade dress lawsuit.
Even progressive capitalist darling Costco does this: if having to compete with the Kirkland house brand were a death knell for their suppliers, you'd think that there would be a lot fewer of them.
The primary issue is that search space is so much more valuable than good shelf space to the point where it's a difference in kind rather than degree. Being able to show up as the first search results just matters so much more, especially when you can move your own product there and competitors further down or even onto the forbidden second page of results.
I think Matt is a bit too sanguine about how brands launch; Amazon is a huge part of the market for e-commerce and their ability to credibly dunk a competitor's product after copying it (and they get a lot more data on it during) is much stronger
It's, like, epistemically certain that being bumped to the second page of search results in Amazon results in a greater decline in sales than being completely dropped by Walmart.
Can Amazon sell enough Amazon Basics desk lamps or whatever so that all non-Amazon desk lamps get bumped to page 2? I haven't seen that happen.
Absolutely but I would argue that Amazon's competitive position in e-commerce is fundamentally different from Target's in retail or Kroeger's in grocery. YMMV, but my bigger point was that I do think it's a grey area - it's not laughable to claim that Amazon has a monopolistic position in e-commerce in my opinion.
Matt addresses this point already.
The question in antitrust is what is the "relevnat market," and to do that we ask what are substitutes from the view of a consumer? Is a physical store a substitute for e-commerce and vice versa? Sure, on some level. But do they restrain each others pricing? We answer that question not by asking what you personally do -- the question is, does a price increase on Amazon for bath soap cause enough customers to go to CVS and Rite Aid such that it is unprofitable to raise the price in the first place? It's an empirical question -- one that antitrust economists love to tackle because in the retail context, you have so much scanner data that you can tease out the impacts of small pricing changes on demand. My guess, given that Amazon charges relatively low prices across the board, is that they are indeed in the same market. So yes, Amazon's e-commerce market position can be said to have a "powerful" or whatever adjective you want. But that's not going to be a relevant antitrust market, which is what counts in an antitrust claim, absent some empirical evidence to the contrary.
As to your original point, on Amazon leveraging sales data and undercutting the originator, as others point out this is true of any retailer and any business. But more to the point, why is it a harm? The originator's idea was so unoriginal its not subject to a patent. Good! Patents inhibit competition -- if Amazon is selling a cheaper version of the same product, that's competition baby! And if you say, BUT that copying undermines the incentive to create in the first place. True! Copying is good for competition but it can undermine incentives to create. That's why we have patents -- they protect certain kinds of "original" and useful ideas. But your hypo notes that the idea was unpatentable. Tough cookies.
Oh, it violates the originator's trademark you say? They invested in creating the brand equity, and now Amazon is useful deceptive logos and tactics that confuse consumers who want to buy the original but get snookered? You are in luck! File a Lanham Act claim and get yourself some treble damages.
Otherwise, you are literally complaining about one firm trying to sell a product in competition with another. If you make that illegal, you will get less competition, not more.
"Absolutely but I would argue that Amazon's competitive position in e-commerce is fundamentally different from Target's in retail or Kroeger's in grocery."
Well, ok, but then do so - make that argument. Because it's not in any way self-evident that Amazon's position is different, aside from having taken e-commerce sufficiently seriously enough to innovate in it.
Target was so unserious about e-commerce that they literally subcontracted their entire web store to Amazon to operate under the Target name. Naturally Amazon got the better of that arrangement until ended in acrimony.
To a great extent, Amazon's biggest stroke of genius during the 2000s was finding ways (AWS, Kindle, free shipping with Prime...) to make it look like selling things online was so unprofitable that Target, Walmart, Best Buy, CVS, etc. had no interest in offering online ordering.
That strikes me as a slightly-bonkers take: the reason Amazon started AWS was because their website would crash every time Christmas shopping season rolled around. Famously. But if they invested in the server capacity to support seasonal loads, then it would sit idle most of the rest of the year. But if they rented it out, they'd have to rent it on ridiculous 9-month leases so that they could take it back from their tenants in time for Christmas (or else it doesn't solve the seasonal load problem.)
The innovation was spot pricing, basically setting up an auction market for their own unused server capacity. It turns out that a lot of online industries have seasonal or periodic load demands distributed over times of the year or times of the day.
I think it's more that during that period Amazon had the advantage of being led by a CEO with a long-term vision and the ability to withstand short-term profitability pressure from investors. Whereas Target, for example, was run by hired-gun executives who were tasked with, and did, the job of keeping earnings and share prices consistent quarter to quarter. But that's all they did. Target by then was a very different company from the one it had been when it was run by the Dayton family, with deep and long-term ties to Minnesota and the Twin Cities, and who were more likely to see themselves as keepers of an institution in trust for the community.
I think Amazon occasionally has gone beyond the bounds of normal business behavior here. Not always, but occasionally.
For example, take the story of the "Everyday Sling" camera bag. Amazon stole the trademark and reused the design almost exactly.
I don't see Walmart or Kroger making their own generic soap as the same thing. The equivalent would be copying a Louis Vuitton bag and putting an Amazon logo on it. Zara has been sued multiple times for this.
https://www.theverge.com/2021/3/3/22311574/peak-design-video-amazon-copy-everyday-sling-bag
I haven't kept up on it recently but in the early 2000s Target was routinely a defendant in trademark lawsuits for doing exactly that kind of thing - a cost of doing business. They had a whole team of buyers whose job was basically to source mfgrs in China to make store brand knockoffs of popular brand name items. The parent of one of my kid's nursery school classmates worked for Target and that was his job - a very interesting job at the time.
So bring a Lanham Act Claim? That's literally what that law is for if there's actually a trademark violation here. But it a bag with a strap-- hardly a mRNA drug here -- I'm pretty suspicious of claims that consumers are really fooled and they are getting their Peak branded bag. If selling a knock off of something popular is illegal, you'll get a lot fewer knocks offs and a lot more expensive stuff.
But as Matt points out everyone does that Costco grocery. I man Amazon is not nice but monopoly isn’t the problem.
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.