Amazon plays rough. So what

Written by New York Times | Updated: Oct 15 2014, 07:36am hrs
Is Amazon a monopoly That certainly is what Franklin Foer, the editor of The New Republic, thinks. In the magazines current issue, he has written a lengthy polemic denouncing the company for all manner of sins. The headline reads: Amazon Must Be Stopped.

Shopping on Amazon, he writes, has so ingrained itself in modern American life that it has become something close to our unthinking habit, and the company has achieved a level of dominance that merits the application of a very old label: monopoly.

Foers brief is that Amazon undercuts competitors so ruthlessly and squeezes suppliers so brutallyin its pursuit of bignessthat it has become highly worrisome. Its founder and chief executive, Jeff Bezos, borrowed his personal style from the parsimonious Sam Walton, the founder of (shudder) Walmart, and Foer notes that pushing suppliers has always been the key to Walmarts low prices, just as it is for Amazons.

But, he says, when Amazon does it, the effect is somehow darker. Why Because without the constraints of brick and mortar, it considers nothing too remote from its core business, so it has grown to sell server space to the CIA, produce original television shows about bumbling Congressmen, and engineer its own line of mobile phones. What, precisely, is darker about making TV shows about bumbling Congressmen is left unsaid.

And then, of course, there is the book business, which Amazon most certainly dominates, with 67% of the e-book market and 41% of the overall book market, by some estimates. Foer devotes a big chunk of his essay to Amazons ongoing efforts to disintermediate the book business, most vividly on display in its current battle over e-book pricing with Hachette, in which it is punishing Hachette by putting its books at a disadvantage on its website compared with other publishers books. Foer worries about what Amazons tactics will ultimately mean for book advances. And he fears that books will become commoditiseddeflating Salman Rushdie and Jennifer Egan novels to the price of a Diet Coke.

What he doesnt saybecause he cantis that Amazon is in clear violation of the countrys antitrust laws. As Annie Lowrey and Matthew Yglesias both pointed out in blog posts (at New York magazine and Vox, respectively), there is no possible way Amazon can legitimately be called a monopoly. Lowrey notes that Amazons sales amount to only about 15% of total e-commerce sales. Walmarts e-commerce sales are growing at least as fast as Amazons. Meanwhile, as Yglesias points out, Amazon has to compete with far larger rivals, including not just Walmart, but Target and Home Depot in the brick-and-mortar world, and Google and Apple in the digital universe.

The truth is that American antitrust law is simply not very concerned with the fate of competitors. What it cares about is whether harm is being done to consumers. Walmart has squashed many more small competitors than Amazon ever will, with nary a peep from the antitrust police. Even in the one business Amazon does dominatebooksit earned its market share fair and square, by, among other things, inventing the first truly commercially successful e-reader. Even now, most people turn to Amazon for e-books not because there are no alternatives but because its service is superior.

In confronting what to do about Amazon, Foer writes as his essay nears its conclusion, first we have to realise our own complicity. Weve all been seduced by the deep discounts, the monthly automatic diaper delivery, the free Prime movies, the gift wrapping, the free two-day shipping, the ability to buy shoes or books or pinto beans or a toilet all from the same place.

Our complicity In fact, in its two decades of life, Amazon has redefined customer service in a way that has delighted people and caused them to return to the site again and again. Does Amazon have a dark side Yes, it doesprimarily in the way it has historically treated its warehouse workers. But to say that Amazon has to be stopped because it is giving people what they want is to misunderstand the nature of capitalism.

Lets be honest here: The intelligentsia is focused on Amazon not because it sells pinto beans or toilets, but because it sells books. That is their business. Amazon is changing the book industry in ways that threaten to diminish the role of publishers and traditional ways of publishing. Its battle with Hachette is a battle over control. It is not terribly different from the forces that ultimately disintermediated the music business.

As an author, I am rooting for Hachette. The old systemin which the writer gets an advance, and the publisher markets the final productworks for me, as it does for most writers of serious non-fiction.

But, am I going to stop using Amazon No way. I am betting you wont either.

Joe Nocera