On June 16, Amazon announced it was purchasing the Whole Foods grocery chain for $13.7 billion, marking another move toward monopolizing retail in the United States. The latest acquisition has several activists and academics concerned about Amazon’s growing monopoly and power over markets. And the announcement has already plummeted the stocks of its competitors.
Amazon has built an Internet empire. It competes with Netflix and Hulu in providing films, television shows, and original programming—recently expanding Amazon Video globally. It provides authors with independent publishing services. In August 2016, Bloomberg noted Amazon is taking business away from UPS, FedEx, and other shipping services as it expands its delivery and logistics network. Amazon provides web services in the form of servers, software, cloud space and financial services. The company also offers credit and loans to both sellers and customers.
A recent article in Yale Law Journal by Lina M. Khan, a student and policy director for Zephyr Teachout’s 2014 campaign for New York governor against Andrew Cuomo, outlines the anti-trust concerns in regards to Amazon’s aggressive expansion. There are shortcomings in current laws, preventing the country from meaningfully addressing the company’s anti-trust implications.
“The titan in e-commerce is Amazon—a company that has built its dominance through aggressively pursuing growth at the expense of profits and that has integrated across many related lines of business,” wrote Khan. “As a result, the company has positioned itself at the center of Internet commerce and serves as essential infrastructure for a host of other businesses that now depend on it. This Note argues that Amazon’s business strategies and current market dominance pose anticompetitive concerns that the consumer welfare framework in antitrust fails to recognize.”
Khan cited Amazon’s first few years of growth and development, during which the company managed to continue running despite suffering drastic losses. Founded in 1994, the company didn’t report its first quarterly profit until 2002. But even since then, Amazon has continued posting losses, yet has remained a Wall Street favorite. “The company barely ekes out a profit, spends a fortune on expansion and free shipping and is famously opaque about its business operations,” reported International Business Times in 2013. The article explains that Amazon’s increase in revenue was completely poured into lowering prices and offering services like free shipping to eliminate competition, or to expand into different industries. This monopolistic business model has come at the expense of its workers and rival small businesses.
Amazon and its managers use unattainable productivity goals to maximize warehouse employee output and exploit their job insecurity. The company often hires temporary workers from labor recruiters to replace employees as needed.
Subsequently, Amazon has faced several employee lawsuits, including one over its unwillingness to compensate for time spent in mandatory security lines exiting the warehouse, aimed at combating theft. In January 2016, Amazon settled that lawsuit for $3.7 million. In October 2016, delivery drivers filed a lawsuit against Amazon for paying them as independent contractors, but stipulating they follow rules and company practices as employees. “The company’s winners dream up innovations that they roll out to a quarter-billion customers and accrue small fortunes in soaring stocks,” reported The New York Times in 2015 on the predatory business model Amazon uses to exploit low ranked employees. “Losers leave or are fired in annual culling of the staff—’purposeful Darwinism,’ one former Amazon human resources director said. Some workers who suffered from cancer, miscarriages, and other personal crises said they had been evaluated unfairly or edged out rather than given time to recover.”
Amazon has eliminated its small businesses and independent retailer competition through price reductions close to cost, as well as providing amenities like free shipping. Its power and resources have allowed Amazon to boost itself in different marketplaces, all behind the veil of the (mostly sales tax-free) internet, shielding it from the kinds of criticisms that Wal-Mart’s business practices provoke.
Amazon’s book marketplace, the “Gazelle Project,” was inspired by a quote by CEO Jeff Bezos. Stalking publishers “the way a cheetah would pursue a sickly gazelle,” Bezos pushes publishers to reduce book prices in order to acquire a listing on Amazon, undercutting all competition.
When rival competition emerges, Amazon either buys them out or pours in funds into underselling the company until they cede to selling or go bankrupt, like Bezos did to Diapers.com. Amazon has also reportedly offered customers a $5 rebate if they scan items in stores using their app, and buy them on Amazon instead.
Khan noted that anti-trust laws haven’t been updated for the Internet age. “Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition,” Khan wrote. “It is as if Bezos charted the company’s growth by first drawing a map of antitrust laws, and then devising routes to smoothly bypass them.”
Amazon has built, expanded, and acquired the infrastructure their competition depends on, and it exploits this power to eliminate any neutrality in the competitive process. The company’s size and broad scope enables it to selectively choose who uses it services, how, and on what terms, while increasingly tipping the competitive balance in their favor. Khan concludes by outlining two avenues of possible solutions for Amazon’s monopoly; “restoring traditional antitrust principles to create a presumption of predation and to ban vertical integration by dominant platforms could help maintain competition in these markets,” or based on the presumption that dominant online platforms like Amazon are inherently monopolistic, applying regulations similar to those enacted for public utilities to mitigate any abuse of power from the dominant platform. Both avenues demand analyzing current legal framework and amending it to address the internet economy, and in that economy, what the law should identify as unhealthy threats to maintaining a free, competitive market.