In the News: Olivia LaVecchia & Stacy Mitchell
June 7th, 2018
Media Outlet: The Ringer
The Ringer is a publication that covers media, sports, and technology. Their reporter Victor Luckerson covers the machinations of Big Tech, including in his monopoly primer on the biggest power players in Silicon Valley and beyond. In his section on Amazon Luckerson cites our Amazon report and the original writing from ILSR co-director and Community-Scaled Economy initiative director Stacy Mitchell.
Here’s our contribution:
Where They Dominate: Amazon’s initial line of business—selling books online—is also its most dominant market. The company commands 50 percent of all book sales in the United States and 75 percent of all e-book sales. Amazon has used its dominance in books to pressure publishers in the past, preventing preorders and purposely delaying deliveries for the book publisher Hachetteduring a pricing dispute in 2014. But long term, antitrust watchers are more concerned about Amazon’s domination of cloud computing, where its Web Services product has had more than 60 percent of the market share. “Some of the parties that use [Amazon Web Services] are concerned that Amazon might use that service to harm them in the businesses in which Amazon and they compete,” First says. “If you were Netflix, you might be concerned that you now have all your data on AWS, and lo and behold, you’re competing against Amazon in digital entertainment.”
Who’s After Them: Donald Trump, who seems to have a personal beef with Jeff Bezos, has floated the idea of siccing the Justice Department on Amazon multiple times, but he’s unlikely to follow through on the threat. The company might be in more trouble if Democrats manage to regain control of Congress and implement a trust-busting agenda.
Is Bigger Better? Amazon is quick to point out that its market share in overall retail sales remains relatively small, at 4 percent (Walmart still dwarfs the online retailer in revenue). The fact that Amazon’s strategy is largely based on undercutting competitors’ prices also makes it a tough antitrust target—the biggest antitrust action in e-books came not against Amazon, but against Apple and book publishers for conspiring to increase book prices. At a recent shareholder meeting, Bezos said he believes the company will pass any increased government scrutiny “with flying colors.”
The Surgery: Amazon Web Services could feasibly be spun off from the retail arm—it’s already listed as a separate business line in the company’s quarterly earnings reports. There’s also an emerging argument that Amazon Marketplace, where third-party sellers conduct about half of all Amazon retail transactions, should be split off from Amazon’s internal storefront because of the power Amazon exerts over its merchants. “Amazon is both serving as a critical platform for all these businesses but simultaneously in competition with [them],” Khan says.