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Why We Must Rein in Amazon—and How

The web behemoth’s anti-competitive, anti-union conduct is coming under increasing scrutiny.
April 12, 2021
Why We Must Rein in Amazon—and How

The suffocating omnipresence of Amazon presents a fundamental question: Will Americans sell our societal soul for one-click home delivery?

An aversion to “big government” has long suffused our political debate. But what of a corporate predator grown so powerful that it transcends governance while inducing supine mass dependence? Matt Stoller aptly summarizes the company’s overweening imprint:

[Amazon] is effectively an economy in itself, adding on to its cloud computing, retail and logistics arms everything from podcasting to low-orbit, satellite-delivered broadband to home security to microchip development to prescription drug distribution to trucking to military contracting.

Amazon sells cloud computing services to countless companies and government agencies—including the CIA. It’s America’s second-largest employer—often at substandard wages and dangerous working conditions—having erased brick-and-mortar retailers who provided better jobs. Yet it extracts huge tax breaks from states and cities in exchange for locating facilities.

Half of all online retail commerce goes to or through Amazon; it offers more than 600 million items from over 3 million vendors; and it reaches roughly half of American households through Amazon Prime—which, perforce, has become a major source of online entertainment. Through a $10 billion, ten-year deal with the NFL, fans of Thursday Night Football must now stream on Amazon Prime.

The pandemic only deepened our reliance on cheap and easy home delivery. As countless businesses shuttered, Amazon’s profits skyrocketed, and its stock rose 80 percent.

But we are—or should be—more than units of consumption divorced from our larger society. Amazon—not government—is changing the face of America by infantilizing Americans.

Its deceptively modest beginnings proved paradigmatic: undercutting booksellers by offering discounts they couldn’t match—until Amazon sold half the new books bought by American readers.

Thus empowered, it strong-armed publishers by victimizing their authors. During a pricing dispute with Hachette, Amazon refused or delayed book orders; eliminated discounts; and steered customers to other writers. Sales by Hachette authors plummeted.

It went into publishing, signing big-name authors—whereupon it refused to sell Amazon e-books or audiobooks to libraries. If you want either one, you must pay Amazon.

With books as catspaw, Amazon leveraged its Internet sales platform into an economic anaconda—extensively described by Karen Weise in the New York Times—through offering to share it with vendors in exchange for a cut of their sales. A flood of vendors leapt at the chance to reach consumers in numbers hitherto inconceivable.

But 27 cents on the dollar was but the beginning of what became systematic coercion. Amazon punished vendors if their products were available elsewhere at a better price—and, in some cases, refused access if they sold through anyone else. To further quash competition from other platforms, it cut the price of vendors’ products below what they sought, then paid them the difference—effectively converting vendors to instruments of market dominance.

Amazon required vendors to purchase advertising on its website—an expenditure essential to maintaining sales and, therefore, a ranking which entitled them to the preferential placement through which Amazon directs customers to products. But Amazon also pushes its own products in competition with vendors, using its platform to secure an advantage. Worse, Amazon uses sales data from its vendors to design knock-offs of their most popular products—then sells them at a lower price.

To accelerate delivery times, Amazon opened huge warehouses—and then informed vendors that those who used them would be eligible for Amazon Prime, thereby broadening Prime’s popularity among consumers. By 2013, the number of vendors using Amazon warehouses had risen by 65 percent. In turn, vendors had to pay a monthly fee merely to speak to a live customer sales representative about any delivery problems.

By now consumers are addicted to Amazon Prime. And so, of necessity, are Amazon’s vendors.

As I recently detailed, Amazon perpetuates this cycle of subjugation through an army of workers subjected to unsafe and often dehumanizing working conditions; frequently substandard wages; and coercive practices meant to intimidate them from seeking union representation. In brief:

Amazon employees are digitally tracked and evaluated; falling behind can be grounds for reprimand or termination. Many carry handheld scanners that deliver a constant stream of exhortations to work quickly, and bathroom breaks are closely monitored. Repetitive stress injuries are routine; in consequence, Amazon workers suffer an injury rate more than twice the national average.

During the pandemic, Amazon met demand by hiring more workers and jamming its expanded workforce close together. Those who protested unsafe health conditions were reprimanded or fired. By October 2020, nearly 20,000 Amazon employees had contracted COVID-19. In February 2021, New York’s attorney general sued Amazon for inadequately protecting its workers.

Throughout its existence, Amazon has suppressed unionization by harassing pro-union workers; firing organizers; and subjecting employees to mandatory propaganda sessions riddled with deceptions and threats of dire consequences—successfully thwarting every organizing effort at Amazon facilities, most recently in Bessemer, Alabama. When workers at one facility began pursuing unionization, Amazon shut it down.

Nor does Amazon acknowledge any obligation to our larger society. It makes billions from government contracts, yet in 2018 paid no corporate income tax. In the past two years, it enjoyed an effective tax rate of 4.3 percent.

When, in 2018, its home city of Seattle passed a small income tax to address homelessness and improve transportation, Amazon threatened to cancel its planned expansion, and bankrolled an initiative to repeal the tax. Intimidated, the City Council revoked it—saving Amazon roughly $20 million annually on an income of $230 billion.

Last year, Amazon spent nearly $19 million to lobby the government. Among the company’s chief priorities are selling their cloud computing services to federal agencies; powering a planned e-commerce portal for federal purchases—and avoiding federal regulation.

What does it say about the current state of our governance, one must ask, that Amazon thrives on federal largesse while practicing corporate sociopathy with near-impunity?

One answer resides in the dual evisceration of antitrust law and the ethos of wider corporate citizenship which began in the 1980s. Under this new dispensation, the sole concern of antitrust law was whether corporate collusion raised consumer prices, and the sole obligation of a corporation was to enhance shareholder profits.

Government regulation diminished; wages and benefits suffered; the right to organize was gutted. This environment allowed Amazon to treat its employees like human widgets; build a punitive sales platform in which it competed with captive vendors; and drive competitors out of business by selling goods below cost.

Today, this comprehensive pathology arouses urgent calls for reform. The prominent academic Tim Wu argues that “the broad tenor of antitrust enforcement should be animated by a concern that too much concentrated economic power will translate into too much political power.” Similarly, the scholar Lina Khan notes that the “thousands of retailers and independent businesses that must ride Amazon’s rails to reach market are increasingly dependent on their biggest competitor”—licensing Amazon to leverage its platform to block or suppress competition.

These very concerns animated the formation of antitrust law—and the increasing scrutiny of Amazon.

Last year, a voluminous report by the House Judiciary Committee concluded that Amazon “has monopoly power over many small- and medium-sized businesses”; that these businesses generally “do not have a viable alternative to Amazon for reaching online consumers”; and that Amazon “has engaged in extensive anticompetitive conduct in its treatment of third-party sellers”—which “behind closed doors, the company refers to . . . as ‘internal competitors.’”

Further, the report noted, over 73 percent of vendors on Amazon use the company’s services to fulfill orders—enhancing its economic leverage. Finally, the report suggests that Amazon “uses its high and steady profits from [its cloud computing business] to subsidize . . . other lines of business, including its retail operation.”

This last observation squares with the argument advanced by another budding scholar of antitrust law. Fordham University law student Shaoul Sussman believes Amazon guilty of “predatory pricing”—selling its products below cost to undercut competitors—a practice illegal under existing law. Accordingly, Sussman asserts, Amazon rigs the corporate books to conceal that it subsidizes this practice through profits from other operations.

The pressure to regulate corporate predation intensifies. Senator Amy Klobuchar recently proposed an overhaul of antitrust laws. President Biden has named Wu as an adviser on antitrust matters, and announced his intention to nominate Khan to the Federal Trade Commission. Last week a broad coalition of trade groups—including the National Grocers Association, the American Booksellers Association, and the Alliance for Pharmacy Compounding—called for stricter laws to prevent Amazon from selling its own products in competition with its vendors.

Barring predatory pricing is a start. So is preventing Amazon from strong-arming or competing with vendors and cloning their products—if necessary by separating Amazon’s own product line from its platform for third-party sales. Concurrently, Amazon should spin off its cloud computing services, compelling its retail arm to profit on its own.

Finally, the government should protect Amazon workers by rigorously inspecting its workplaces, and safeguarding their right to unionize.

It’s long past time to stop Amazon from being a law unto itself—or an instrument of America’s degradation.

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.