This has been a major gap between the American understanding of monopoly protection and the European one.
In the European space, protection of smaller business' ability to compete is factored in. But the US space, in general, has not cared if smaller businesses can compete and tends to take a laissez-faire attitude towards business-on-business market pressures. It's the effect of the market on consumers that's paramount.
To be honest, I'm not sold on the European-style philosophy. Guilds traditionally empowered tradespeople, but they also had a reputation for holding back innovation and punishing new ideas that didn't fit the existing paradigms. Amazon, for example, has made book-buying so cheap nationally that individual bookstores have trouble competing. Amazon's other failings aside (which should be addressed by sweeping employee / labor protections, not by breaking up Amazon): should Grandma's books be more expensive in general so the local bookstore owner gets to enjoy the lifestyle of self-business-ownership to which he is accustom? Why / why not?
No, no, no. Amazon disrupted the grip that publishing houses had on publishing, they have democratized writing. Publishers and bookstores had restricted markets that were dictated by a few big publishing houses. Amazon disrupted that, which has lead to far more books being written. Books that have been self-published. How on earth is that considered a failing?
Bookstores are no longer viable, because Amazon has obviated the need for a brick and mortars store, and it passes the benefit on to both consumer and author alike, in reduced prices and thus increased sales.
Since Amazon is not in the authorship business itself, since it gets an equal profit on all books, its book business is a lovely example of markets working to further society.
Amazon's problem is in the use of data metrics on its giant store to create products that compete with its partners. The Amazon Essentials line is anticompetitive IMO, because as the operator of such a large platform, Amazon has a responsibility to the US economy.
> Amazon's problem is in the use of data metrics on its giant store to create products that compete with its partners. The Amazon Essentials line is anticompetitive IMO, because as the operator of such a large platform, Amazon has a responsibility to the US economy.
Curious on your thoughts about Kroger/Great Value/Archer Farms (Target) brand items? At least Amazon marks them clearly as house-brand, Archer Farms is practically camouflaged at Target among the brand names, and it's placed pretty prominently too.
Personally I think it's hard to draw a distinction between the two cases - either they're both fine or they're both not. My line would be closer to: if Amazon noticed a certain thing was selling really well, created their own version of that thing, and then de-listed the original thing from their store, that seems like the point at which it becomes anti-competitive to me.
Store brands are an age-old practice so it's interesting to revisit them in the context of mega-corps like Amazon. Although WalMart+Great Value is probably a similar scale.
> and then de-listed the original thing from their store
While they don't delist items, their algo favors products they sell directly to the extent that Amazon will get the buy box over a third party seller even when that seller is reputable and cheaper. Add that the 3rd party seller has to pay a sales fee to Amazon, often making it impossible to compete with them without approaching zero margin.
It's not delisting but it's the next best thing. If Amazon starts selling something you sell, your sales are gone, you were just free market research for them.
>While they don't delist items, their algo favors products they sell......
Which is still the same in the Target example where their own brand product get much favourable placement. This practice has been going on for so long possibly before all of us on HN were born.
I would argue its not similar at all. Finding those reputable sellers can be more difficult whereas this would be similar to the same target item showing up four or six different times on the shelf intermixed and tagged multiple times. No?
Not really, Visual Merchandising and placement is a field on its own. Target knew precisely where to put items if they dont want that brand to do any sales, to the point where it could be 30% to 40% drop even from a Reputable brand and sellers, and 70%+ from lesser known brands, effectively killing it.
It is a tactic often used in dispute, that is why Brands needs to work on Branding to combat this stronghold from Distribution. And one reason why small brands likes the Internet so much rather than working with conventional distribution channel.
If you're selling to Target they can certainly hurt your sales with unfavorable placement, but the impact isn't really comparable to the buy box on Amazon, the overwhelming majority of sales are buy box clicks.
A direct comparison would be target putting your product behind their product on the shelf where the shopper can't see it without digging for it.
All they are doing is learning what is worth white-labeling. They still need to manufacture a product that is equal to or better than what it is competing with. The overwhelming majority of these products are absolutely generic things for which there are already many alternatives and Amazon is adding one more.
So, I though Amazon mostly got to where they are by exploiting the poorly-designed concept of sales tax by selling things across state lines, knowing full well that no one cruelly pays "use tax", and so was able to sell things much cheaper than brick and mortar stores; and then when people tried to "fix" sales tax (still a broken concept) by charging Amazon in as many situations as they could, Amazon pushed back hard until they could see the two major brick and mortar book companies failing, and then said they would comply but only if they could have one more tax free year. Like, I certainly remember people I knew even say out loud they were buying books on Amazon due to the lack of sales tax, but it could be that they just didn't know that there was some other thing about "democratizing writing" that was causing their experience to be cheaper somehow.
I wonder if Amazon Essentials also plays into the quality problems that they have. I often buy Amazon Essentials because it's the easiest way to find a product that isn't a fly by night knock off.
You could have made the same argument about Standard Oil - until the competition were crushed and prices went up.
Which is why lower consumer prices aren't a valid defence against anti=trust. Nor is the argument that markets "naturally" lead to monopolies or (at best) oligopolies and cartels - even though empirically they do. So much so that setting out to create a monopoly is a bullet point on many unicorn-wannabe business plans.
The problem is abuse of power without oversight.
YouTube can screw over content creators with its insane system of copyright strikes. PayPal and Amazon can keep legitimately earned money on the pretext of non-existent ToC violations. Apple can decide to bar you from the App Store on a whim and clean-room your best green shoots ideas into its own products. Google can decide that you earned too much in ad revenue and shut you down just because it can.
People have lost businesses and livelihoods because of these practices. The monopoly position held by these companies makes them unassailable.
During standard oils run, the price of kerosene, dropped from 35 cents to 8 cents, and their percentage of the oil market actually decreased significantly long before it was broken up.
I read about that a while ago. This raised the question in the back of my mind: did the investors (Rockefeller) actually want Standard Oil to be broken up? As I understand it, it ended up being incredibly profitable for them.
> You could have made the same argument about Standard Oil - until the competition were crushed and prices went up.
Prices didn't go up until the government forced Standard Oil to break up. It had nothing to do with the competition being "crushed"; it had to do with the government taking the attitude you mention, that lower consumer prices didn't matter. Which seems daft since lower consumer prices mean consumers, i.e., the people, are better off.
The opposite of lower consumer prices not mattering, is lower consumer prices being the only thing that matters. It seems you are suggesting prices are the only thing. The key phrase here is “market power”, not just prices.
==since lower consumer prices mean consumers, i.e., the people, are better off.==
> It seems you are suggesting prices are the only thing.
No, but any supposed other benefits that outweigh prices getting higher are even harder to measure, so basing government intervention on them is even harder to justify.
> Over what time frame are they better off?
Um, whatever time frame the prices are lower?
> Are workers (also people) better off?
If they have to spend less on what they need, it would seem so.
“Things are hard to measure, so we should just focus on what’s easy, regardless of its actual effectiveness” doesn’t seem like a great compromise.
“Spend less on what they need” is same Walmart argument we’ve heard for decades. Meanwhile, the middle class shrinks and many of the things people need to improve their lives (shelter, healthcare, education) get more and more expensive and wages stagnate.
> Which seems daft since lower consumer prices mean consumers, i.e., the people, are better off.
I don't think that necessarily follows; price is big, but not everything. I don't care how cheap products are on Amazon, I still refuse to buy computer storage or anything that goes in the human body since they are either unwilling or unable to deal with counterfeiting problem.
> I don't care how cheap products are on Amazon, I still refuse to buy computer storage or anything that goes in the human body since they are either unwilling or unable to deal with counterfeiting problem.
Standard Oil didn't have a "counterfeiting problem", so I don't see how this is relevant to them. Or, for that matter, to any other large monopoly that has been broken up by antitrust action.
Also, you as a consumer might judge that, for example, you don't trust Amazon to deliver the product you want in a certain area, regardless of how low the price is. That's fine. But that in itself is no argument for breaking up Amazon in an antitrust action. It's just an argument for not trusting Amazon for certain types of products.
The issue is the consumer harm that comes from the combination of not trusting Amazon to deliver the qualities you care about for a certain class of product and there being no alternative suppliers because Amazon drove them out of business.
It seems like there aren’t any middle-quality products anymore: you can buy a cheap plastic item that never works quite right and will break next month, or you can buy a chrome-plated showpiece item that costs too much. Where’s the non-disposable, ugly, bulletproof utility version these days?
> It seems like there aren’t any middle-quality products anymore
I think there still are, but I agree it's very hard to find any on Amazon, at least in a lot of product categories. You have to spend time trawling actual brick and mortar stores.
YouTube can screw over content creators with its insane system of copyright strikes. PayPal and Amazon can keep legitimately earned money on the pretext of non-existent ToC violations. Apple can decide to bar you from the App Store on a whim and clean-room your best green shoots ideas into its own products. Google can decide that you earned too much in ad revenue and shut you down just because it can.
The problem is abuse of power without oversight
This is exactly how I feel about me dealing as a business with the big corps. But I did not actually had this experience myself. Reason is simple: I just do not engage. As a business I do not uses any cloudy stuff at all. Everything I do I host either myself or on rented servers that I could change on a moment's notice. No Youtube, no Apple app store, no hosting my software using Azure/Amazon/etc, no Github (I host my own), no Gmail etc.etc.
Is it? Or is that what good regulation is for? What if YouTube and their competitors all nerfed and deplatformed popular creators because of advertiser pressures? Isn’t this a better argument for regulation?
Remember that the reason that Bork defined antitrust the way he did was because there wasn’t a methodical definition of where it should be applied in the 60’s, and the govt was arbitrarily interventionist.
When it comes to books, Amazon didn't abuse their power. The big fights were because Amazon wanted to set their own prices in their own store, something that is pretty standard in most markets.
such a small trite comment can't really be taken by itself as a consideration of whether or not amazon has behaved in an anti-competitive manner. it's not appropriate to look at a part of amazon's portfolio in isolation; their dominance in one particular area is not particularly anti-competitive. amazon's book sales dominance, nor their dominance as an e-commerce platform, seem to be particularly egregious.
what's clear, however, is that they use their e-commerce position to also one-up competitors as a retailer. they have access to data about what's hot, what could benefit from a more economic option, etc. which they can use - perhaps anti-competitively (by e.g. intentionally selling at loss to defeat the new competitor).
additionally, their entire cloud computing arm affords them the opportunity to run other parts of their business at a massive loss, perhaps intentionally (again, to defeat competitors) as needed.
as an analogy, imagine if standard oil also had a financial operation that low-balled "normal" banks, intentionally losing money on every loan or instrument, just so those other banks blew up.
Right? That's the thing; it's not. Not by consumers, anyway.
Now, French book-sellers, on the other hand, appreciate the law that keeps them in business for aesthetic reasons, whether or not it makes economic sense or they can stay financially competitive when the price of data transmission has crashed past too-small-to-meter-per-word.
Indeed, Amazon's behavior isn't the same shape as a typical monopolist. Krugman wrote an article a while back about this that I think cuts to the heart of the matter:
No, c1b got it. The comment was open-ended, but I've definitely seen pushback on the way Amazon has floored the price on books. France sued the hell out of them for undercutting prices so deep that individual corner store retailers couldn't compete.
The biggest factor which is not considered in antitrust law is the fact that large corporations, by virtue of controlling a lot of capital, have access to a larger share of all the new money which is created out of thin air and injected into the economy as credit.
Economists are quick to point out that the new money which is created of of thin air is not given outright, but rather, it is loaned out - Therefore, by virtue of having to pay it back, corporations do not have an unfair advantage.
I disagree with this conclusion because an entity's access to loans is based almost entirely on how much collateral they possess - This necessarily implies that those entities which have more capital are able to take out bigger loans and thus derive more profits from these loans.
For example, if you have $100K in a particular asset (e.g. stocks), you can use that as collateral to borrow an additional $100K and you end up controlling $200K worth of assets in total.
So if the yield on those assets is 10% per year, you will end up getting 20% per year relative to your own capital. 20% of $100K is $20K.
So according to this principle, a company which has $100 million in assets can borrow an additional $100 million - This means that an asset class which can generate 10% yield can be bought on leverage to generate 20% yield on the initial capital.
20% of $100 million is $20 million. This means that $10 million of that profit was derived entirely from credit which was printed out of thin air by banks. That $10 million is free money and was given solely on the basis of existing capital.
This is why the rich get richer; it has nothing to do with value creation. Whenever banks print money out of thin air and inject it into the economy, everyone in the country who receives a salary in that currency ends up paying for that equally because of dilution in the value of their salaries.
In effect, this means that, salary earners and small capital owners are subsidizing big capital owners. This is what is fundamentally unfair about our financial system and why big corporations have to be limited; they're not successful because they're efficient, they're successful because they own more capital than everyone else and can thus access most of the newly 'printed' fiat money.
You can't just blame Amazon on loss of business for brick-and-mortar bookstores. In my country we don't have Amazon, yet paper book sales are decreasing because why buy if you can just download for free. And if you want to pay, it's just easier to buy online (ebook or paper). Not to mention that probably overall demand for reading books is decreasing.
I think there is an argument about wealth inequality there. Wealth that previously was distributed among local bookstores is now concentrated in a single company and it's shareholders. That's a pretty naive analysis, but I suspect Amazon's monopoly power has contributed to America's increasing wealth inequality.
This. Most booksellers could have just sold their bookstores years ago and bought shares of Amazon and done far better because they simply can't provide a faster, cheaper and better experience for their customers than Amazon can.
> because they simply can't provide a... better experience for their customers than Amazon can
That's debatable. If I want a specific book, sure. But Amazon simply cannot replicate the experience of browsing a bookstore looking for an interesting book to read. I cannot physically hold the book in my hands, flip through it's pages, maybe read a few excerpts, etc. And if I'm buying a used book, I can't inspect the actual condition myself before purchasing.
That's hard. What is the middle ground between encouraging innovation and healthy competition, and forcing companies to forego more profit in order to be good citizens and practice social responsibility? They should not be suddenly exempt from being part of a society.
In the European space, protection of smaller business' ability to compete is factored in. But the US space, in general, has not cared if smaller businesses can compete and tends to take a laissez-faire attitude towards business-on-business market pressures. It's the effect of the market on consumers that's paramount.
To be honest, I'm not sold on the European-style philosophy. Guilds traditionally empowered tradespeople, but they also had a reputation for holding back innovation and punishing new ideas that didn't fit the existing paradigms. Amazon, for example, has made book-buying so cheap nationally that individual bookstores have trouble competing. Amazon's other failings aside (which should be addressed by sweeping employee / labor protections, not by breaking up Amazon): should Grandma's books be more expensive in general so the local bookstore owner gets to enjoy the lifestyle of self-business-ownership to which he is accustom? Why / why not?