Understand Amazon Before The Next Train Leaves The Station

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Oliver Munday

Mark Twain called it the Gilded Age. In his period there was plenty of reason to be concerned about monopoly powers, especially those of railroads. Echoes in the present day, of reasons to be concerned about the same, seem to be getting louder and clearer. We have shared concerns about Amazon in the past. Those were mostly little creepy concerns. But little creepy things sometimes grow big. Sometimes Amazon big. Thanks to Lina M. Khan, a legal fellow with the Open Markets Program at New America and the author of “Amazon’s Antitrust Paradox,” recently published by the Yale Law Journal. She has made clear, in a concise essay, exactly what we need to be concerned about with Amazon.

…For consumers, so far, Amazon has delivered many benefits. Its Prime program enables users to receive, through a click, almost any item within two days. But for producers — those who make and create things — Amazon’s dominance poses immense risks.

Think of Amazon as a 21st-century version of the 19th-century railroads that connected consumers and producers. Because of their gatekeeper role, railroads had power to discriminate, both among users and in favor of their own wares. These middlemen could tax the farmers and oil producers who depended on their rails — or deny them a ride and sink their livelihoods.

In several key ways, Amazon uses its power as the railroads did. By integrating across business lines, Amazon now competes with the companies that rely on its platform. This decision to not only host and transport goods but to also directly make and sell them gives rise to a conflict of interest, positioning Amazon to give preferential treatment to itself.

The vast troves of information it collects enable it to self-deal with great finesse. News accounts tell how Amazon exploits data collected on the businesses using its platform to go head-to-head with them.

And like the railroads of yore, Amazon dictates terms and prices to those dependent on its rails. During negotiations with the publisher Hachette over e-book pricing, Amazon showed its might by effectively disabling sales of thousands of Hachette’s books overnight.

This was not an isolated instance: Reports chronicle how executives tinker with recommendation formulas that determine whether customers see certain goods, turning algorithms on and off as retailers watch sales flow and dry up, Amazon’s hand on the spigot.

Amazon’s purchase of Whole Foods will expand its dominance and heighten conflicts of interest. Prime memberships will enable Amazon to extend its online dominance into physical retail — using stores for pick-up, for example — and to use physical stores to entrench its power online. By bundling services and integrating grocery stores into its logistics network, the company will be able to shut out or disfavor rival grocers and food delivery services…

Read the whole op-ed here.

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