
Amazon: A New Kind of Antitrust Risk - firloop
https://diff.substack.com/p/amazon-a-new-kind-of-antitrust-risk
======
jawns
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.

~~~
BurningFrog
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.

~~~
jawns
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
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.

------
cowpig
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?

~~~
ericmay
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?

~~~
TurkTurkleton
The difference is that when you go to Kroger you search the shelves with your
own eyeballs. When you go to Amazon, their opaque algorithm does the searching
for you, and it could be (and probably is) prioritizing Amazon brands or
"Amazon's choice" over other brands. I suppose an argument could be made about
the layout of store shelves serving a similar purpose to the prioritization
inherent in search engine algorithms, but I don't think it's a perfect
parallel since the shopper arguably has more agency in determining what
products they see and when in a meatspace store versus online.

~~~
jasode
_> The difference is that when you go to Kroger you search the shelves with
your own eyeballs. [...] I suppose an argument could be made about the layout
of store shelves serving a similar purpose to the prioritization [...] the
shopper arguably has more agency in determining what products they see and
when in a meatspace store_

For example of Kroger or any other retail store, the shopper doesn't have full
visibility of buying options because the _curation_ also happens before any
product gets stocked on the shelf. E.g. the hidden retail-corporate-buyer-and-
vendor relationships. Kroger example[1]. Costco example[2].

Because shoppers are not sitting in grocery chain's corporate headquarters to
see what products the company rejects/prioritizes, they will still be
influenced by self-interest of the retailer. Those are private negotiations of
vendor contracts that influences what shows up on shelves so they can be as
opaque as Amazon's recommendations algorithms. If Kroger wants to remove Kraft
Macaroni & Cheese from the shelves and just promote their own-store-brand
_Kroger_ Macaroni & Cheese[3], the shopper doesn't really have any more
agency.

[1] [https://www.thekrogerco.com/vendors-suppliers/become-a-
suppl...](https://www.thekrogerco.com/vendors-suppliers/become-a-supplier/)

[2] [https://www.costco.com/vendor-
inquiries.html](https://www.costco.com/vendor-inquiries.html)

[3] [https://www.kroger.com/p/kroger-original-macaroni-
cheese/000...](https://www.kroger.com/p/kroger-original-macaroni-
cheese/0001111085151)

~~~
TurkTurkleton
Those are excellent points that I had not considered (or even been aware of).
Still, though, while the set of brands and products available at a brick-and-
mortar store is predetermined in a way that the customer has little to no
influence over, it's at least much more _visible_ if I go into Kroger one week
and there's a full selection of different brands of mac & cheese, and then
come back the next week and it's all Kroger brand with no sign of any other
brand; whereas if I go to Amazon and search for, say, AA batteries, or
Lightning cables, and all I see is AmazonBasics batteries and AmazonBasics
Lightning cables, is that because Amazon stopped stocking Energizer batteries
and Anker cables entirely, or because Amazon forced them to a later page of
results to bolster sales of the AmazonBasics brand?

------
rogerkirkness
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.

------
lukejduncan
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.

------
antb123
[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
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.

