Decades of lax antitrust enforcement helped Amazon, and the tech giants, to become among the largest and most profitable corporations in the world. Policymakers and antitrust enforcers have undertaken extensive investigations into their monopoly power over commerce and communications, which has led to a range of actions to rein in their economic power and anticompetitive conduct.
Weak antitrust enforcement, however, was not the only mechanism Big Tech leveraged for building market dominance. As Stacy Mitchell’s research shows, these corporations very effectively hid both the telltale evidence of their monopoly power and their strategies for gaining that power in public financial disclosures that concealed and misdirected key sources of their profits. The strong antitrust enforcement actions that Big Tech is facing could be enhanced by shining more sunlight on how the tech giants make their monopoly profits. The U.S. Securities and Exchange Commission (SEC), which is the federal agency tasked with bringing corporate America’s finances into the open, has the power to fix this problem.
Take Amazon, for example. The corporation has business units that span a wide range of activities. It has an e-commerce site, its own online retail sales, and its brick-and-mortar stores. It has an advertising business, cloud computing (Amazon Web Services, AWS), a wide network of warehouses and logistics, growing payment systems, and more.
Amazon has long claimed that it operates its e-commerce business at thin margins while relying on other business lines, such as its cloud division (AWS), for profits. However, Amazon’s marketplace generated $140 billion in 2023 from just the fees it imposes on third-party sellers. The 2023 Federal Trade Commission’s (FTC) lawsuit underscored this fact –– Amazon’s e-commerce business is “enormously profitable.”
How is Amazon allowed to keep important and market-relevant information private? Federal financial disclosure rules, also known as segment financial reporting, are not sufficient to ensure corporations disclose this information. It is at the corporation management’s discretion as to how they disclose their profits, giving them ample leeway to structure their disclosures in ways that obscure profits from monopolistic business activity.
The SEC is charged with overseeing corporate financial disclosures. Under SEC rules, public corporations must file quarterly reports disclosing revenue, expenses, profits, and other metrics, known as the 10-K. In the 1970s, the agency adopted segment disclosure rules explicitly for antimonopoly purposes. This ensured that conglomerates disclosed key data along business lines so they couldn’t conceal monopolization strategies by blending multiple business lines.
In practice, however, the SEC rules give corporations “near total managerial discretion” to decide what counts as a segment. In other words, Amazon and other megacorporations are allowed to lump together separate business lines and report aggregated data. In effect, they can legally conceal outsized profits from specific business lines that could alert antitrust enforcers to a lack of competition.
The SEC can address Amazon’s secrecy and disclose its profit centers by:
Better policing of corporate disclosures by the SEC won’t solve the problem of rising corporate concentration. With more information, however, there can be more informed reporting and public scrutiny of megacorporations’ business models, which will allow antitrust enforcers to intervene earlier, before corporations get any more powerful.
This ILSR report finds that Amazon is exploiting its gatekeeper power to impose huge fees on the third-party sellers that rely on its marketplace.
How Amazon uses its monopoly power to extract extreme and rapidly growing fees from businesses on their site that have little choice to reach customers.
This ILSR/Jobs with Justice fact sheet looks at how Amazon is undermining wages and conditions for working people, and driving growing inequality.
ILSR Co-Director Stacy Mitchell testified on Amazon's market power before the House Judiciary Committee as part of its antitrust investigation into dominant digital platforms.