12 ms·

Amazon: A New Kind of Antitrust Risk

111 points by firloop 6y ago

jawns 6y ago
Unfortunately, anti-competitiveness regulations can only go so far. A better step, albeit a much more controversial one, is to address the problem at an earlier level. Before companies have the ability to engage in sustained anti-competitive behavior, they have to grow to a certain size. This allows them to use their heft to squeeze out competitors. Amazon and Walmart, for instance, have enough cash that they can consistently underprice smaller competitors until they go under. And what happens next? The Wal-Mart Effect, where people who otherwise might have been able to own and sustain small businesses now need to become employees with no ownership stake, allowing the mega-corps to continue growing larger and squeezing out more competitors. And that has major public-welfare implications. So how would we address this problem at an earlier stage? It would involve pulling a lot of levers -- taxes probably being the biggest one -- to make it harder for mega-corps to compete purely on size, rather than on innovation or quality. It would also involve a major mindset shift. We need to recognize the hidden negative consequences of an economic environment in which massive conglomeration is widespread and encouraged, while small-business and cooperative ownership is disincentivized.
- throwaway189262 6y ago
  Progressive corporate tax would be perfect for this. Lobbyists insist that corporations are people. So we should tax them like people
  - marcosdumay 6y ago
    Progressive taxation is a really interesting idea, but it must take into account ownership structures and concentration of control of those corporations. It's not an easy thing to do.
  - darksaints 6y ago
    I'd much prefer zero corporate tax, reverting to a passthrough taxation model, with capital gains and dividends taxed as income. The corporate tax, being a profit tax, inherently has infinite forms of tax avoidance because expenses must be accounted for and expenses can be creatively structured to avoid paying taxes. Personal income taxes do not have that inherent susceptibility to avoidance. Perhaps more importantly, corporations effectively form "unions" for wealthy people, which are an effective unit for lobbying. Jeff Bezos, for example, only owns something like 15% of Amazon...but he gets to use 100% of Amazon's resources to lobby the government and try to sell government representatives on the idea that what's good for Jeff is also good for Amazon's employees and the American public. Shift those taxes to personal income, and all of a sudden that sales pitch becomes a lot less convincing.
    - throwaway189262 6y ago
      There's a problem with taxing money extracted from the business as well. Business owners can just go on "company" vacations, drive corporate cars, etc. This already happens to an extent. Without corporate tax, wealthy business owners probably won't pay any tax at all. They'll just pay themselves with absurd benefits from company accounts. Or perhaps, just endlessly take out loans against their ownership stake. No taxes if you never pay them back
      - davinic 6y ago
        But the laws can be structured to deal with those issues, much as they are today.
- SquishyPanda23 6y ago
  > We need to recognize the hidden negative consequences of an economic environment in which massive conglomeration is widespread and encouraged, while small-business and cooperative ownership is disincentivized. This doesn't seem likely. It's pretty fundamental to much of tech growth that founders and investors see the possibility of a monopoly. Some investors like Thiel explicitly advocate for building a monopoly.
- dustingetz 6y ago
  Underneath the monopoly problem is the nationstate problem. The issue is about power and how to limit it with rules, but rules are too exploitable at multiple layers unless all the players agree to play by them. So first we need the world governments to consolidate (which is happening – USA federal level growing in power relative to individual states, EU growing in power relative to countries, and of course 1000 years ago power was much more dispersed than today).
  - netcan 6y ago
    This sort of position is part of the reason why monopolies are such a hard problem to address. At one end, it's all inherent in capitalism. We can't address anything without transcending capitalism, the nation state, etc. At the other end, it's all inherent in capitalism. We can't address anything without destroying capitalism, the nation state, etc.
    - deleted 6y ago
      [deleted]
    - SQueeeeeL 6y ago
      Those both sound like the same position. Your also ignoring the third position (which is the best one)! Accepting nothing matters and allowing capitalism to control the world and that megacorps are eventually going to steamroll all of us. At least then we'll have cool bladerunner cities (probably kinda awful for all the human beings, but at least we don't have to question the status quo)
      - sudosysgen 6y ago
        Well, nothing matters but I don't like to get steamrolled. Also, it's kind of interesting how in our circles it's legitimately easier to imagine the world ending than for capitalism to end.
    - dustingetz 6y ago
      I'm saying that we just have to wait. Governments have been consolidating and will continue to consolidate and society will become resilient to these problems like it is resilient to everything else, & probably in time for your kids to see it. In the meantime, hard problem is hard.
- BurningFrog 6y ago
  What you're describing is Walmart consistently selling cheaper goods than any competitor can. This is good for consumers. Anti-trust laws should protect consumers, not competing companies.
  - jhloa2 6y ago
    Is it really that good for consumers? I don't buy a lot of things at Walmart because I find that it's generally low-quality. Since they've run many smaller businesses out of the local area, it's now more expensive and time consuming for me to find higher quality items. Also, even if Walmart is selling cheaper good than their competitors, what's stopping them from raising prices once they've decimated the competition? More options is almost always better for the consumers.
  - mullingitover 6y ago
    It's very generous of you to assume that this isn't garden variety dumping. Once the competition is gone we're reliant purely on Walmart's generosity and have zero assurance they won't do the sane business move of recouping their previous losses.
  - jawns 6y ago
    It is only good for consumers in the short term, when there are many other options. But over the long term, why would a company need to compete on price if it's already squeezed out all its competition? There is also the effect on labor to consider. Is it really a net positive if consumers can save X dollars on products at Walmart if its moving into a community drives down wages by X dollars?
    - BurningFrog 6y ago
      If the big company raises prices later, it leaves room for competitors to undersell them. I know the popular story is that then they lower prices again, and crush these competitors again, etc. It's an intuitive story, but from what I've read about economists studying this, that "common sense" effect isn't how the real world works.
lukejduncan 6y ago
Wow it’s really creepy that there is a subscribe button that is prefilled with my email address. I realize that sub stack has this information, because I’ve subscribed to other newsletters, but I don’t associate myself with having an account with substack or with that any of my personal information or credentials should somehow cross the barrier between newsletters. Also, I’m just super paranoid I might accidentally click subscribe while scrolling.
- deleted 6y ago
  [deleted]
cowpig 6y ago
A simple law that I think would solve a lot of the perverse incentives that exist in platform economies: Make it illegal to compete on your own platform. Amazon would no longer be allowed to sell products on Amazon. Google would no longer be allowed to promote its own services on Google. etc.. It's pretty obvious to me that platforms are natural monopolies: the best platform experience is where there's just one and it has all the inventory. I wonder what the side-effects of a law like this would be? Would it create new problems I'm not thinking of?
- sreekotay 6y ago
  This is a nice-ish idea. But... does that mean that Apple and MS would not ve allowed to make any apps if they make the OS?
  - AnthonyMouse 6y ago
    It would, but would that be the end of the world? So they'd spin off Office into a separate company. What would that hurt?
- benologist 6y ago
  This is possibly going to happen due to the anti-trust investigations into Apple, Amazon, Google and Facebook: > One possibility is what he described as a Glass-Steagall law for technology platforms. That Depression-era law separated commercial and investment banking until it was repealed during the Clinton administration. For tech companies, it would mean prohibiting them from running a platform and competing on it at the same time. > That’s a common complaint about Amazon in particular because it both runs a marketplace and competes with third-party sellers with its own line of products. https://www.bloomberg.com/news/articles/2020-08-26/house-antitrust-panel-to-propose-fixes-for-big-tech-dominance https://www.bloomberg.com/news/articles/2020-08-26/house-ant... https://www.macrumors.com/2020/08/26/antitrust-investigation-apple-disturbing-behavior/ https://www.macrumors.com/2020/08/26/antitrust-investigation...
- ericmay 6y ago
  Do you extend this to store brands? Should Kroger be able to offer Kroger Private Selection alongside other brands? -edit- Here's another one. Should Amazon be forced to let Kroger sell Kroger Private Selection in their Whole Foods stores (and vice-versa)? Why or why not?
antb123 6y ago
https://conversationswithtyler.com/episodes/jason-furman/ https://conversationswithtyler.com/episodes/jason-furman/ Jason furman, a well known economist, argues that Amazon is not really a risk as they compete with Walmart and basically all retail (he doesn't break out the book segment). A bigger monopoly risk are firms which grow by buying competitors. Looking at you facebook.
- canada2020 6y ago
  Right. In addition to Walmart, I think Shopify also has a chance at taking on Amazon, from a different angle. More broadly, all big retailers seem to target Amazon as a common enemy.
rogerkirkness 6y ago
This feels a lot like when JP Morgan and Morgan Stanley were separated. The combination of commerce layer and infrastructure layer turn out to be too important when combined, and too hard to assail in a free markets sense.

111 points by firloop 6y ago

Unfortunately, anti-competitiveness regulations can only go so far. A better step, albeit a much more controversial one, is to address the problem at an earlier level. Before companies have the ability to engage in sustained anti-competitive behavior, they have to grow to a certain size. This allows them to use their heft to squeeze out competitors. Amazon and Walmart, for instance, have enough cash that they can consistently underprice smaller competitors until they go under. And what happens next? The Wal-Mart Effect, where people who otherwise might have been able to own and sustain small businesses now need to become employees with no ownership stake, allowing the mega-corps to continue growing larger and squeezing out more competitors. And that has major public-welfare implications. So how would we address this problem at an earlier stage? It would involve pulling a lot of levers -- taxes probably being the biggest one -- to make it harder for mega-corps to compete purely on size, rather than on innovation or quality. It would also involve a major mindset shift. We need to recognize the hidden negative consequences of an economic environment in which massive conglomeration is widespread and encouraged, while small-business and cooperative ownership is disincentivized.

throwaway189262 6y ago
Progressive corporate tax would be perfect for this. Lobbyists insist that corporations are people. So we should tax them like people
- marcosdumay 6y ago
  Progressive taxation is a really interesting idea, but it must take into account ownership structures and concentration of control of those corporations. It's not an easy thing to do.
- darksaints 6y ago
  I'd much prefer zero corporate tax, reverting to a passthrough taxation model, with capital gains and dividends taxed as income. The corporate tax, being a profit tax, inherently has infinite forms of tax avoidance because expenses must be accounted for and expenses can be creatively structured to avoid paying taxes. Personal income taxes do not have that inherent susceptibility to avoidance. Perhaps more importantly, corporations effectively form "unions" for wealthy people, which are an effective unit for lobbying. Jeff Bezos, for example, only owns something like 15% of Amazon...but he gets to use 100% of Amazon's resources to lobby the government and try to sell government representatives on the idea that what's good for Jeff is also good for Amazon's employees and the American public. Shift those taxes to personal income, and all of a sudden that sales pitch becomes a lot less convincing.
  - throwaway189262 6y ago
    There's a problem with taxing money extracted from the business as well. Business owners can just go on "company" vacations, drive corporate cars, etc. This already happens to an extent. Without corporate tax, wealthy business owners probably won't pay any tax at all. They'll just pay themselves with absurd benefits from company accounts. Or perhaps, just endlessly take out loans against their ownership stake. No taxes if you never pay them back
    - davinic 6y ago
      But the laws can be structured to deal with those issues, much as they are today.
SquishyPanda23 6y ago
> We need to recognize the hidden negative consequences of an economic environment in which massive conglomeration is widespread and encouraged, while small-business and cooperative ownership is disincentivized. This doesn't seem likely. It's pretty fundamental to much of tech growth that founders and investors see the possibility of a monopoly. Some investors like Thiel explicitly advocate for building a monopoly.
dustingetz 6y ago
Underneath the monopoly problem is the nationstate problem. The issue is about power and how to limit it with rules, but rules are too exploitable at multiple layers unless all the players agree to play by them. So first we need the world governments to consolidate (which is happening – USA federal level growing in power relative to individual states, EU growing in power relative to countries, and of course 1000 years ago power was much more dispersed than today).
- netcan 6y ago
  This sort of position is part of the reason why monopolies are such a hard problem to address. At one end, it's all inherent in capitalism. We can't address anything without transcending capitalism, the nation state, etc. At the other end, it's all inherent in capitalism. We can't address anything without destroying capitalism, the nation state, etc.
  - deleted 6y ago
    [deleted]
  - SQueeeeeL 6y ago
    Those both sound like the same position. Your also ignoring the third position (which is the best one)! Accepting nothing matters and allowing capitalism to control the world and that megacorps are eventually going to steamroll all of us. At least then we'll have cool bladerunner cities (probably kinda awful for all the human beings, but at least we don't have to question the status quo)
    - sudosysgen 6y ago
      Well, nothing matters but I don't like to get steamrolled. Also, it's kind of interesting how in our circles it's legitimately easier to imagine the world ending than for capitalism to end.
  - dustingetz 6y ago
    I'm saying that we just have to wait. Governments have been consolidating and will continue to consolidate and society will become resilient to these problems like it is resilient to everything else, & probably in time for your kids to see it. In the meantime, hard problem is hard.
BurningFrog 6y ago
What you're describing is Walmart consistently selling cheaper goods than any competitor can. This is good for consumers. Anti-trust laws should protect consumers, not competing companies.
- jhloa2 6y ago
  Is it really that good for consumers? I don't buy a lot of things at Walmart because I find that it's generally low-quality. Since they've run many smaller businesses out of the local area, it's now more expensive and time consuming for me to find higher quality items. Also, even if Walmart is selling cheaper good than their competitors, what's stopping them from raising prices once they've decimated the competition? More options is almost always better for the consumers.
- mullingitover 6y ago
  It's very generous of you to assume that this isn't garden variety dumping. Once the competition is gone we're reliant purely on Walmart's generosity and have zero assurance they won't do the sane business move of recouping their previous losses.
- jawns 6y ago
  It is only good for consumers in the short term, when there are many other options. But over the long term, why would a company need to compete on price if it's already squeezed out all its competition? There is also the effect on labor to consider. Is it really a net positive if consumers can save X dollars on products at Walmart if its moving into a community drives down wages by X dollars?
  - BurningFrog 6y ago
    If the big company raises prices later, it leaves room for competitors to undersell them. I know the popular story is that then they lower prices again, and crush these competitors again, etc. It's an intuitive story, but from what I've read about economists studying this, that "common sense" effect isn't how the real world works.

lukejduncan 6y ago

Wow it’s really creepy that there is a subscribe button that is prefilled with my email address. I realize that sub stack has this information, because I’ve subscribed to other newsletters, but I don’t associate myself with having an account with substack or with that any of my personal information or credentials should somehow cross the barrier between newsletters. Also, I’m just super paranoid I might accidentally click subscribe while scrolling.

deleted 6y ago
[deleted]

cowpig 6y ago

A simple law that I think would solve a lot of the perverse incentives that exist in platform economies: Make it illegal to compete on your own platform. Amazon would no longer be allowed to sell products on Amazon. Google would no longer be allowed to promote its own services on Google. etc.. It's pretty obvious to me that platforms are natural monopolies: the best platform experience is where there's just one and it has all the inventory. I wonder what the side-effects of a law like this would be? Would it create new problems I'm not thinking of?

sreekotay 6y ago
This is a nice-ish idea. But... does that mean that Apple and MS would not ve allowed to make any apps if they make the OS?
- AnthonyMouse 6y ago
  It would, but would that be the end of the world? So they'd spin off Office into a separate company. What would that hurt?
benologist 6y ago
This is possibly going to happen due to the anti-trust investigations into Apple, Amazon, Google and Facebook: > One possibility is what he described as a Glass-Steagall law for technology platforms. That Depression-era law separated commercial and investment banking until it was repealed during the Clinton administration. For tech companies, it would mean prohibiting them from running a platform and competing on it at the same time. > That’s a common complaint about Amazon in particular because it both runs a marketplace and competes with third-party sellers with its own line of products. https://www.bloomberg.com/news/articles/2020-08-26/house-antitrust-panel-to-propose-fixes-for-big-tech-dominance https://www.bloomberg.com/news/articles/2020-08-26/house-ant... https://www.macrumors.com/2020/08/26/antitrust-investigation-apple-disturbing-behavior/ https://www.macrumors.com/2020/08/26/antitrust-investigation...
ericmay 6y ago
Do you extend this to store brands? Should Kroger be able to offer Kroger Private Selection alongside other brands? -edit- Here's another one. Should Amazon be forced to let Kroger sell Kroger Private Selection in their Whole Foods stores (and vice-versa)? Why or why not?

antb123 6y ago

https://conversationswithtyler.com/episodes/jason-furman/ https://conversationswithtyler.com/episodes/jason-furman/ Jason furman, a well known economist, argues that Amazon is not really a risk as they compete with Walmart and basically all retail (he doesn't break out the book segment). A bigger monopoly risk are firms which grow by buying competitors. Looking at you facebook.

canada2020 6y ago
Right. In addition to Walmart, I think Shopify also has a chance at taking on Amazon, from a different angle. More broadly, all big retailers seem to target Amazon as a common enemy.

rogerkirkness 6y ago

This feels a lot like when JP Morgan and Morgan Stanley were separated. The combination of commerce layer and infrastructure layer turn out to be too important when combined, and too hard to assail in a free markets sense.