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Break Up Amazon

The actions of the monopolistic giant are dangerous and anticompetitive.
May 20, 2020
Break Up Amazon
Packed goods on a conveyor belt at a distribution center of US online retail giant Amazon. (Photo by INA FASSBENDER/AFP via Getty Images)

The coronavirus pandemic is diminishing or destroying countless American businesses—large and small. Not Amazon, though.

Lockdown is its friend: Amazon is widely perceived as our national supply chain, and many people, stuck at home for weeks, understandably feel grateful to the company for its deliveries of vital supplies. In reality, though, the pandemic is intensifying Amazon’s stranglehold on American life.

“My nightmare scenario is an economic shock that leaves every Main Street firm without Wall Street connections, and every tech startup that is trying to compete with the big guys, starved for cash and vulnerable to predatory acquisition,” warns Senator Josh Hawley (R-Missouri). “We can’t stand by and let Amazon, Facebook, Google, and all the rest gobble up all the innovators in our economy.”

But the problem is bigger yet. We are selling our societal soul to an avaricious mega-corporation in exchange for cheap and easy home delivery. More than 40 percent of all the money Americans spend online goes to Amazon. That includes 40 percent of paper book sales and 90 percent of ebook and audiobook sales, and about a third of the video streaming market.

Amazon’s sales platform is omnipresent: “At any moment,” Franklin Foer writes, “its website has more than 600 million items for sale and more than 3 million vendors selling them.” Roughly half of American households are enrolled in Amazon Prime.

It owns Whole Foods. It owns Zappos, the shoe company. It owns Twitch, the popular livestreaming service.

Behind the scenes, Amazon is one of the world’s largest providers of cloud storage and computing power, services it sells to more than a million companies, including some that are its competitors in other domains, as well as to government agencies (including the CIA).

Notes Charles Duhigg in the New Yorker: “No other tech company does as many unrelated things, on such a scale, as Amazon.”

How did Amazon amass unparalleled economic leverage? By ruthlessly suffocating competition.

First, Amazon undercut competitors by offering consumers cheaper prices, even when it has meant operating at a loss. As a result, as Robinson Meyer reports in the Atlantic,

Amazon has grown so large that it can undercut other companies just by announcing that it will soon compete with them. When Amazon purchased Whole Foods, its market cap rose by $15.6 billion—some $2 billion more than it paid for the chain. Meanwhile, the rest of the grocery industry immediately lost $37 billion in market value.

Second, Amazon used its massive sales platform to control, undercut, and compete with the millions of vendors who depend on it. To sell their products on Amazon’s site, suppliers and retailers had to let Amazon collect valuable data on which products were becoming popular. Amazon then used that data to undermine those companies. As the New York Times reports, paraphrasing a criticism voiced by a coalition trying to force the company to reform, “Amazon competes with other companies to make and sell goods, and then dictates the terms by which those competitors find their customers on Amazon’s platform and controls how they ship their wares to market.”

This licenses a multiplicity of abusive practices. One victim is Birkenstock, the maker of the iconic sandals. As Duhigg reports, the company found that Amazon was allowing third-party retailers to sell badly made counterfeit Birkenstock sandals at cut-rate prices, thereby harming Birkenstock’s brand and ability to set prices. Not only did Amazon refuse to police this fraud, but it bought over a year’s supply of Birkenstock inventory to resell on its site—essentially allowing the web giant to take over the pricing and marketing of Birkenstock’s products. When Birkenstock protested, Amazon ignored them. After Birkenstock refused to do further business with it, Amazon went to Birkenstock’s authorized retailers to try to buy up their supplies.

Amazon also uses its vast market share to beat into submission the companies that want their products sold on its platform. When the publisher Hachette complained about the prices Amazon was charging for its books and ebooks, “Amazon delayed shipments of Hachette books,” writes Foer. “When consumers searched for some Hachette titles, it redirected them to similar books from other publishers.” When Hachette published my novel Eden In Winter, Amazon did precisely that.

Further, Amazon itself uses data from retailers who sell on its site to clone their most successful products and then compete with them by undercutting prices. The company “has a track record of cloning products that succeed so it can help itself to the margins,” writes antitrust expert Tim Wu in Wired. As Slate recently noted, “the company is sophisticated enough in learning our habits to produce countless AmazonBasics knockoffs of popular products.”

Finally, Amazon has acquired over 90 business enterprises, including former competitors. Despite this, Foer writes, Amazon has escaped scrutiny under the antitrust laws.

Amazon increases its economic power by amassing political power. Between 2012 and 2019, its expenditures on lobbying increased by 470 percent. It manipulates the tax code: After paying no federal tax in 2017 or 2018, it paid barely more than 1 percent in 2019—further swelling its coffers. In 2018, when Seattle passed a modest corporate tax to fund affordable housing and homeless shelters, Amazon bludgeoned its city council into repealing the tax (although the author of the tax proposal promised recently to try again).

Amazon is now America’s second-largest employer. But its abuse of employees is the human cost of home delivery. Here’s Duhigg:

More than a hundred thousand people work at Amazon’s fulfillment centers, and nearly everything they do is digitally tracked and evaluated, meaning that if someone falls behind—even for just a few minutes—it can be grounds for reprimand. Many employees carry handheld scanners that deliver a constant stream of instructions, such as a countdown clock detailing how many seconds remain until the next item must be plucked from a shelf. Workers can walk more than fifteen miles a day, and their breaks, including trips to the bathroom, are brief and closely measured.

For these workers, the cost of failure is termination; of success, the prospect of crippling injuries. One told Duhigg that he was “expected to grab an item every eight seconds, and has seen co-workers injure their wrists, knees, shoulders, and backs by repeatedly kneeling, or by rushing up and down ladders. ‘There’s a constant pressure to hit your numbers,’ he said. If you get four writeups within ninety days for falling below the expected productivity rate, you will be fired.” Another employee told Frontline: “The part they don’t talk about is the safety rules that you have to ignore to make rate.”

The Atlantic reports an injury rate at fulfillment centers “more than double the national average for the warehousing industry” in 2018. Amazon’s increasing use of robots seems to worsen this: At one Amazon facility that has incorporated robots into the fulfillment process, the injury rate was more than triple the national average. And those are just the injuries we know about; according to former managers, Amazon has a practice of underreporting injuries.

Amazon sustains its mechanized netherworld by ferociously suppressing unionization—and by employing lawyers who specialize in union-busting. In 2000, Amazon shut down a call center whose workers were attempting to organize. In 2014, Duhigg reports, an Amazon manager thwarted another unionization effort by giving an “emotional speech about his youth: after his father had died, steps from his front door, the union had offered no support.” It was all a lie: The manager’s father had really been “a partner at an insurance agency, not a union member, and had died while jogging, on vacation in South Carolina.” In 2017, when Amazon bought Whole Foods, store managers received a video explaining how to discourage unionization.

For a quarter-century, Amazon’s anti-unionization tactics have succeeded. Little wonder that the company feels free to illegally obstruct employees from reporting injuries.

This past January, Slate surveyed industry experts to rate the thirty most dangerous tech companies. Amazon earned the worst ranking. In addition to remarking on the conditions in the company’s warehouses, Slate noted that Amazon’s “‘last mile’ shipping operation has led to burnout, injuries and deaths.”

Moreover, Amazon’s willingness to sell phony, imitation products is not simply dishonest—it’s dangerous. Notes Duhigg: “A recent investigation by the Wall Street Journal identified thousands of products for sale on Amazon that ‘have been declared unsafe by federal agencies, are deceptively labeled or are banned by figure regulators,’ including children’s toys containing dangerous levels of lead. Many of these products were shipped from Amazon warehouses.”

To stay competitive with Amazon, other businesses are adopting its practices. “The company has pointed out that it still has a smaller share of total retail than Walmart,” notes Slate. “But Walmart is becoming more and more like Amazon. And so is the entire economy.”

That’s profoundly undesirable. As Wu told Duhigg: “If you’re a consumer, it’s perfect for maximizing the efficiency of finding what you want and getting it as cheap and fast as possible. But, the thing is, most of us aren’t just consumers.”

Indeed. Writes Foer:

As Trump runs down the country, [Amazon CEO Jeff] Bezos builds things that function as promised. Yet the erosion of democracy comes in different forms. Untrammeled private power might not seem the biggest threat when public power takes such abusive form. But the country needs to . . . consider the longer sweep of history before permitting so much responsibility to pool in one man, who, without ever receiving a vote, assumes roles once reserved for the state.

COVID-19 only deepens Amazon’s dominance. Politico reports that perhaps 100,000 retail outlets are likely to close within five years, according to one analysis. J.C. Penney announced this week that it will be closing nearly 30 percent of its stores. The company that owns The Gap, Old Navy, and Banana Republic has warned that it may have to start closing locations, too.

Meanwhile, Amazon claims to be doing God’s work during the pandemic. But by prioritizing groceries and sanitation supplies, it has slowed delivery times for many of the third-party sellers it prodded to use its platform, jeopardizing their survival.

As they founder, Amazon’s sales explode. As other stocks plummet, Amazon’s soars—even as it puts workers at greater risk. By mid-April, the Washington Post reported, the coronavirus had infected workers in at least 74 Amazon warehouses and delivery facilities. (The New York Times yesterday reported on the conditions in the Amazon warehouse apparently with the biggest outbreak in April, although the actual figures are hard to come by.) Faced with employee protests over working conditions which enhanced the dangers of COVID-19, Amazon fired protest organizers—some for supposedly “violating internal policies.”

Another protester, Christian Smalls, previously involved in union-organizing activities, was terminated in late March, supposedly for “putting the health and safety of others at risk.” But notes obtained by Vice News showed Amazon’s general counsel discussing how Smalls could be portrayed as “not smart or articulate” to discredit the organizing movement. Amazon represents perfectly the pandemic’s Hobbesian catch-22: risk your health or lose your job.

A top Amazon executive quit to protest these firings, calling them “evidence of a vein of toxicity running through the company culture.” Of the embattled workers, he rightly said: “Any plausible solution has to start with increasing their collective strength.”

How would a decent government help to accomplish this? To start, by protecting the right to unionize and unleashing OSHA to scour Amazon workplaces.

But the broader problem is regulatory myopia. We license Amazon’s corporate sociopathy in exchange for lower prices.

The antitrust laws were originally about more than preventing price-fixing. They were also meant to ensure competition, encourage innovation, and prevent mammoth business enterprises from becoming all-powerful—thereby preserving democracy.

But in recent decades, some legal theorists argued that the chief legitimate concern of antitrust enforcement is assuring low prices for consumers. Indeed, in a 2004 Supreme Court opinion, Justice Antonin Scalia asserted that “the mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system.” This monopoly-friendly ideology gives Amazon its free rein.

It is time that we restore antitrust law to its original and salutary purposes.

First, we should bar Amazon from further dominating commerce through predatory abuses of its sales platform, including using third-party suppliers’ data to compete with them and even to produce Amazon’s own “cloned” versions of their products.

Second, Amazon should be barred from predatory pricing practices—such as selling products at a loss—intended to destroy competitors.

Third, federal regulators should be empowered to scrutinize Amazon’s corporate acquisitions—past and present—and unwind those deemed anticompetitive.

Fourth, our tax laws must be strengthened to prevent Amazon from dodging taxes.

Finally, the government should prevent Amazon from making or allowing the sale of knockoffs that are unsafe or defective, or that infringe on intellectual property.

None of this would prevent Amazon from delivering our groceries, books, or toilet paper. It would simply diminish its erosion of America’s common decency—and our collective infantilization.

Richard North Patterson

Richard North Patterson is a lawyer, political commentator and best-selling novelist. He is a former chairman of Common Cause and a member of the Council on Foreign Relations.