Is Amazon A Monopoly? Ctd

Many readers join the debate:

I can’t figure out whether Yglesias was being naïve when he says that “suffice it to say that ‘low and often non-existent profits’ and ‘monopoly’ are not really concepts that go together.” That’s exactly what monopolies do. They have enough capital to take a loss for long enough to wipe out the competition, then they take of advantage of being a monopoly.

Another elaborates by making a key distinction:

Amazon is not a retail monopoly.  However, it is quickly becoming a wholesale monopsony (a market form in which there is only one buyer for goods) with respect to books, e-books, and likely other product categories.

By driving down prices and operating at a loss for decades, Amazon is driving out all other potential buyers and resellers of these goods. This may sound good on the surface for consumers (low prices, yay!), but the concern is if Amazon becomes the only viable buyer (and therefore the only viable reseller), there will be no one left to step up as an alternative when Bezos decides he is ready to turn a profit and jacks up prices. Not to mention what happens to the suppliers (publishers and authors) when Amazon (as the sole buyer) drives prices down to unsustainable levels, which in turn will result in less choice for consumers. Many have written on this subject, including the NYT.

Another has a favorable view of the mega-company:

Amazon, as a monopsony, is not something the government should be stomping on, as long as it continues to provide good value to consumers. Amazon is losing money in these efforts and that can’t go on forever. Other businesses may struggle, but that’s generally to the benefit of consumers. Tough for business owners, sure, but business ain’t beanbag.

As far as beating up Hachette goes, Amazon is fighting to be able to discount e-books. Hachette wants to keep prices high, and keep paying authors an absurdly low royalty for e-books. Amazon certainly has its flaws (treatment of warehouse employees among them), but in the book market – which I know about as a publisher, author, and reader – Amazon has been a massive force for good. There are thousands of authors now making good money from Amazon who would never have had a chance under the old publishing system.

But another isn’t a fan:

The issue with Amazon (and Walmart) is not that they are monopolies.  Depending on the market in question, these two may or may not possess majority marketshare (in small towns, WalMart and Amazon may be your only choices for many things).  On the other hand, neither of them are (per the law) predatory monopolies – companies that drive competitors out of business and then raise prices once the competition is extinguished and collect monopoly rents.  Instead, Amazon and Walmart keep prices low and generally provide good service, which largely immunizes them from much antitrust scrutiny in the US. The behavior that gets companies in trouble with antitrust authorities in this country is any form of price-fixing or other scheme to charge customers more than they would be charged in a competitive marketplace.  Complaints that WalMart harms consumers by “reducing choice” (not carrying a wider range of products that might be carried were the retail market less concentrated) have been generally laughed out of court by federal judges.

Instead, the issue with both companies is that they are ruthless monopsonies that viciously exploit their vendors and their workforce.  Both companies demand (and get) price concessions from manufacturers that are arguably responsible for lots of outsourcing and such; both companies are also well-known for mistreating their employees.  US antitrust law, which focuses on harm to consumers (in their capacity as consumers) is not well-situated to focus on predatory monopsony behavior (after all, it was Apple and the publishers who were prosecuted for anti-trust behavior in the recent Amazon fight, even though they were aligning themselves against the 800lb gorilla in the retail book market).  US antitrust law doesn’t generally give a rip about mom-and-pop stores being run out of business.  (European authorities are more able to deal with predatory monospony behavior; whether this is good or bad policy is an interesting question).  And labor relations are, with a few exceptions, outside the scope of anti-trust law – unless business cartels attempt to fix wages in the absence of collective bargaining, anti-trust law simply doesn’t apply.

Another, more neutral observer details the company’s vast services:

I’ve been following the discussion about Amazon as a monopoly and it seems that some people miss the power of Amazon as a company that wants to be your only source for everything. The company is not only your first place to look for anything you may like to purchase from electronics, to house items, to even clothing. Amazon seems to have a hand on every slice of the consumer experience. With Amazon you have prime to get anything in two days without worrying about shipping, but in addition you get a service “prime instant video” that is a competitor of Netflix, Hulu, and regular TV. You also can get your Amazon phone (competing against Apple, Samsung, Google) and your Kindle fire (Nexus, Samsung and iPad tablet rival). Your Kindle also serves as your ebook reader (vs B&N Nook, now a Samsung tablet). On top of that Amazon has also its own app store (vs Google play and iTunes), and now I understand you can also have your music stored in the cloud by Amazon.

But Amazon is also your source for all the back-end computing cloud needs. You can have your files on AmazonCloud Drive, but if you are a company wanting a solution for your IT needs you can use Amazon Web Services and have everything you need from basic website setup to sophisticated data mining applications. AWS even has scientific clients as you can run sophisticated modeling software to do advanced drug search and any other complex data processing and searches. In fact Amazon is looking for academic clients for their AWS system.

If you need to search for anything you want to buy, you don’t even need Google to do the search. Unlike Facebook, Amazon doesn’t nag me to their website every day to waste my time with the latest viral news or inane discussions. They have never asked for anything too personal but they have everything they need to know about my personal interests if they just look at my purchases and regular browsing habits in their website.

They seem to have a knack to pick businesses and services that are going to be necessary as long as humans want to be consumers, and in principle you can have pretty much every need covered in their ecosystem.

(Full disclose: the Dish gets about 3 percent of its annual revenue from Amazon’s affiliate program, detailed here.)