If you read the recently unsealed materials from the federal antitrust lawsuit against Amazon, you’ll see why the company wanted to keep them under wraps. According to the unredacted notes from one meeting, Jeff Bezos directed his team to stuff more ads into search results, even if it meant accepting more ads internally categorized as irrelevant to what users were looking for. Other quoted documents reveal the company working to conceal a mysterious price-hiking algorithm, in part because “of increased media focus.” Similarly unflattering nuggets abound.
But here’s something you won’t find in those materials, because it was deemed too sensitive to unredact: precisely how Amazon makes its money. Nearly 30 years after the company was founded, we still don’t really know. Amazon has long cultivated the impression that it operates its shopping platform at razor-thin margins, relying instead on its cloud division, Amazon Web Services (AWS), for much of its profit. And yet the Federal Trade Commission’s lawsuit contends that Amazon’s e-commerce business is, in fact, “enormously profitable.” The resolution to this dispute is likely to figure heavily in whether the judge finds that Amazon is merely a benevolent retail giant or a destructive monopoly. And regardless of what happens in the Amazon case, the fact that large corporations have been able to keep such basic information private helps explain why policy makers, journalists, and the public were so slow to recognize the growing problem of monopolization in America.
Much has been written about how the economy became dominated by an ever-shrinking number of corporate titans, and about the threats this poses to people, local communities, and democracy itself. The phenomenon is not limited to Big Tech; it’s everywhere you look, including in food, health care, airlines, and live events. The leading cause has been the systematic weakening of antitrust enforcement and the appointment of monopoly-friendly judges to the federal bench since the 1980s. But, as the Amazon case suggests, another important, underappreciated factor has also been at work: a staggering lack of transparency. One reason that today’s juggernauts have managed to get so dominant is that they have been able to conduct much of their business in the shadows.
The blame lies with the agency tasked with bringing corporate America’s finances into the open: the U.S. Securities and Exchange Commission. Under SEC rules, public corporations must file quarterly reports disclosing revenue, expenses, profits, and other metrics. Initially, only company-wide data were required. But in 1966, the Senate antitrust subcommittee held a series of hearings exploring how weak financial-reporting rules threatened competitive markets. A main focus was how conglomerates—companies that combine multiple businesses under one roof—could hide information about their subsidiaries that, if revealed, might be evidence of anticompetitive behavior. Following the hearings, the SEC revised its rules to require corporations to disclose financial data for each of their major divisions, or segments. The aim was to ensure that investors and the public had a clear view of each unit on its own.
Continue reading this article in The Atlantic.
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