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Don't Let Amazon Get Any Bigger

A damning congressional report about Big Tech helps make the case to break up Jeff Bezos empire.

By

Stacy Mitchell

Ms. Mitchell is a co-director of the Institute for Local Self-Reliance.

Oct. 8, 2020

We tend to credit Amazon's enormous reach to its inventiveness. Jeff Bezos has built a logistics operation that rivalsUPS and FedEx in the volume of packages it delivers to consumers in the United States. Amazon's Alexa is thedominant operating system in the new arena of voice-enabled devices and web access.

Amazon produces clothing and advanced computer chips, dispenses a growing share of the nation's prescriptiondrugs, markets surveillance services to police departments, and runs a rapidly expanding advertising business.

But the evidence presented this week in

a long report by the House Judiciary Committee

, following a bipartisaninvestigation of the tech giants, tells a very different story. Amazon's website forms a choke point through whichother companies must pass to reach the market. It has exploited this commanding position to strong-arm othercompanies, control their means of distribution and drive them out of business.

While the report concludes that Apple, Facebook and Google are also abusing their monopoly power, its findingsabout Amazon deserve our special attention. Through its marketplace, cloud division and voice interface, Amazonfunctions as essential infrastructure for an astonishing array of companies and industries. This gives it anextraordinary view into the activities of other businesses and an unparalleled ability to manipulate markets to itsown advantage.

Preventing dangerous concentrations of private power is part of the necessary checks and balances of a democraticsociety, and it is Congress's responsibility. The Judiciary Committee offers several proposals for what Congressshould consider doing; the most important is its suggestion to break up Amazon and the other companies in"structural separations."

To better understand why, it's helpful to take a closer look at exactly how Amazon became such a force.

Amazon used to rely on other carriers. Today it controls a major share of the logistics industry. It's now delivering

two-thirds

of the items ordered on its website and a growing share of those purchased on other sites, such as eBay.Analysts

expect

Amazon to surpass UPS and FedEx in total package volume by 2022. It's also rapidly gaining on thePostal Service, which saw its parcel volume

shrink

last year, in part because of Amazon's inroads.

Amazon accomplished this feat not just by competing with these other carriers on price and service. Rather, itexploited its control over the many businesses that depend on its website to reach consumers. It did this by makinga seller's visibility on its site, which dominates e-commerce traffic, largely

contingent

on buying Amazon'swarehousing and shipping services. Not surprisingly, the share of sellers using these services has

skyrocketed

andnow tops more than 85 percent.

Amazon's path to commanding the voice sector began with a series of acquisitions, including

a British company

thathad created software with a remarkable grasp of natural language. That technology, on which Alexa was built, gaveAmazon a crucial head start. It then leveraged its dominance in e-commerce and sheer size to take over thisemerging field.

10/13/2020 Opinion | Don't Let Amazon Get Any Bigger - The New York Times

https://www.nytimes.com/2020/10/08/opinion/amazon-antitrust.html 2/3

One tactic involved frequently putting its Echo line of smart speakers on sale, which some saw as effectively sellingthem

at a loss

. While Amazon can rely on revenue from other parts of its empire to subsidize such loss leaders,smaller competitors, such as Sonos, can't do the same.

Amazon also

restricted

competitors from promoting their speakers on its site. And entrepreneurs

told

The WallStreet Journal that Amazon appeared to use its venture capital arm, the Alexa Fund, to help develop competingproducts. (Amazon has disputed their account.) Eight months after investing in the start-up Nucleus and getting anup-close look at its proprietary information, for example, Amazon

announced

an Alexa-enabled device that didmany of the same things as Nucleus.

These tactics have put rivals at a distinct disadvantage, no matter how superior their products. Echo now accountsfor nearly

70 percent

of the U.S. smart-speaker market. And with Alexa functioning as the intermediary betweenusers and the appliances and services they interact with, Amazon has gained a rich stream of data that it can use toexpand into still more industries.

Mr. Bezos has often described Amazon's strategy as a "flywheel" the idea that momentum in each area of itsbusiness drives momentum in the others, creating a machine that spins ever faster. This is a metaphor formonopolization. Amazon exploits its power in one sector to take over neighboring markets. Each new conquest addsmore momentum. The flywheel accelerates.

And it poses a considerable threat to American vitality. Investors talk of a "kill zone" for start-ups around the techgiants broad segments of the market that lack competition because new entrants are seen as doomed and cannotattract investment.

It's not only the big ideas that we're in danger of losing; independent businesses are disappearing, and with them acrucial source of new ideas and products. A

survey

of about 1,000 independent businesses last year showed thatAmazon overwhelmingly ranked as their top challenge. Most of those who responded, including most of thoseselling on its platform, said that Amazon is hurting their business. The loss of these businesses doesn't just dampeninnovation; it saps the strength and well-being of communities.

This is why the most important of the Judiciary Committee's recommendations is its call for legislation that wouldeffectively split up big tech platforms like Amazon by breaking them up in "structural separations" and forbiddingthem from operating in adjacent lines of business to those they are already dominant in.

This approach has been used in the past. In the early 20th century, Congress barred railroads from producing anddistributing goods that required rail transport. Policymakers employed a similar approach to telecommunicationsand banking.

Compelling Amazon to spin off its online marketplace, retail, cloud and logistics divisions as distinct companieswould eliminate its ability to exploit its dominance in one part of its business to thwart competition in another.

But that isn't enough to restore a fair and open online market. We also need rules that would require major digitalplatforms to provide reasonable terms for access to their platforms and bar them from discriminating againstcompanies.

Finally, it's imperative to correct the failings in antitrust enforcement that have enabled Amazon to amass suchpower and abuse it. In recent decades, the courts and the antitrust agencies have weakened our once strongantitrust laws. As a result, Amazon has been able to vanquish competitors using tactics such as

predatory pricing

that might have invited criminal prosecution in an earlier era.

This permissive stance, the committee found, has also allowed Amazon to buy up other companies with the aim ofsnuffing out potential rivals and taking control of emerging technologies. Its report calls for imposing new hurdleson acquisitions by the tech giants and legislation to restore the vigor of the antitrust laws.

10/13/2020 Opinion | Don't Let Amazon Get Any Bigger - The New York Times

https://www.nytimes.com/2020/10/08/opinion/amazon-antitrust.html 3/3

Jeff Bezos once led an inventive start-up, but today he commands an impenetrable empire. "No company is likely topose a threat to Amazon's dominance in the near or distant future," the House investigation concludes. There is noother rival, no matter how smart, creative, or popular, that can change that. Congress will have to step in.

Stacy Mitchell (@

stacyfmitchell

) is a co-director of the Institute for Local Self-Reliance.

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