Through a huge predatory pricing scheme, Jeff Bezos has transformed every aspect of our gift-giving experience.
The tradition of holiday shopping has long been an economic boon to businesses across the country. Sales soar, setting hearts aglow both behind the till and beside the Christmas tree. Classic scenes of snowy streets and warmly lit storefronts come to mind, with mitten-clad families perusing shops while enjoying steaming mugs of hot chocolate.
Yet recently there’s been a new salesman coming door-to-door with holiday shopping offers. Stooped low under the burden of unpaid taxes and smirking as he ports a briefcase jammed with cheap Chinese-made gadgets, the mysterious bald fellow seems to already know what you want and offers amazing discounts. A dutiful drone buzzes alongside him, ready to dispense fresh new items at its master’s command.
The man’s name? Jeff Bezos. His game? Amazon, the most valuable company on planet Earth and the second-largest private employer in the United States after Walmart.
Around half of Americans surveyed this year said they are planning to buy their holiday gifts from Amazon and three quarters said they compare prices with Amazon before buying elsewhere. Approximately half of all the money spent online by Americans is estimated to have gone to Amazon products and services over the past few years. The company sells more toys, books, clothing, and electronics than any other business and its Amazon Prime service has more than half of all American households under its umbrella. There is evidence to suggest that Amazon intentionally delays shipping times for those who don’t have Prime. And once customers do sign up, they rarely shop online elsewhere, leaving third parties a stark choice: close up shop or sell according to Amazon’s rules and fees.
Of course, there’s no law saying holiday shoppers are required to patronize Amazon. Nonetheless, most Americans continue to log on and load up on holiday gifts just like they did last year. This year’s “Cyber Monday” saw the biggest sales in Amazon’s history, as the company announced that it had shipped out “hundreds of millions” of products. These kinds of massive sales figures are the new normal for Amazon, as its predatory pricing scheme starts paying sky-high dividends. By holding Prime Day in the summer, Amazon also forces the Christmas and holiday shopping cycle to begin half a year early.
Of the more than 350 million products sold on Amazon, only around 12 million are sold directly by them; many others are sold by third parties. Amazon is not primarily interested in being the biggest player in the market; rather, it wants to become the market. With increasing numbers of people searching for items to buy on Amazon directly rather than through a search engine, the site has moved closer to just that kind of dominance.
Transforming from a small internet start-up in the mid-1990s that ran on almost no profit for two decades into the booming behemoth it has become today, the Seattle-based giant is a true blue American success story. In fact, it’s such a success story that there are serious concerns that it has become economically exploitative. Amazon artfully dodges corporate taxes and keeps expanding its reach into every nook and cranny of our lives (hello there, Alexa). By selling at a loss and then raising prices—cushioned by the enormous profits from its Amazon Web Services (AWS)—Amazon forces other companies to ride or die.
Although Amazon is not a legally defined monopoly according to the Department of Justice’s cautious parameters, it falls right in line with any other historical monopoly, in that it stifles competition and significantly shapes the contours of its own market. In other words, it is a monopoly. President Trump appears to agree, having referred previously to the company’s “huge antitrust problem,” although ironically Amazon has been one of the biggest beneficiaries of Trump’s corporate tax cuts. As the company begins gobbling up more of the market, traditional antitrust precedent may need to be expanded in order to take it on and protect consumers and workers. It may also be necessary to crack down on the profusion of counterfeit products and scams that use Amazon to hawk their wares.
There’s a credible argument to be made that Amazon is also a monopsony, referring to an economic scenario in which one market-dominating buyer can artificially set prices to sellers because it is also their primary customer. This phenomenon can be seen in situations like Amazon’s heavy influence on courier companies like FedEx, which might well be sleeping with the fishes without Bezos’ business coming their way (and in fact, they could be history in any case, since their business is being supplanted by Amazon’s private fleet of aircraft and bevy of drones and trucks). As the job provider par excellence, Amazon also creates various neo-feudalist fiefdoms in communities where it provides the vast majority of jobs, allowing it to push employee wages to the bottom of the barrel. Meanwhile the company has hundreds of employees working in artificial intelligence as it continues to phase in more advanced automation technology and expand its drone delivery services.
There are dozens of companies Amazon could well crush in just the near future, including auto parts stores, pharmacies, bookstores, food delivery services, courier services like UPS and FedEx, office supply stores, fabric stores, and various online platforms for gaming and streaming.
As figures on the left like Bernie Sanders and Elizabeth Warren have pointed out, Amazon is getting away with way too much. Sanders wants Amazon to pay its fair share of taxes, while Warren wants to break them up. There has been significant criticism of Amazon on the right as well, by commentators like Fox News host Tucker Carlson, who has slammed the company for leeching off of the American economic system to the detriment of workers and communities.
None of this is subtle: Amazon hurts workers and small business. It hurts workers by creating a one-stop employment environment that leaves employees taking the scraps from Jeff Bezos’ table. Amazon contract workers have sued the company, alleging it paid them less than minimum wage, while allegations of harsh worker conditions are rampant. Amazon workers might not be living in cardboard boxes (no guarantee) but they’re certainly packing them with your orders for a depressingly low amount of compensation under major pressure. Amazon frequently uses “seasonal” contract labor and “permatemps,” who are hired temporarily despite working full-time, so as to avoid paying benefits or giving raises.
Amazon pays low wages—often below industry standards—and had already indirectly caused the loss of 149,000 American retail jobs as of 2016, as well as 22,000 businesses. Same-day delivery has pushed Amazon’s contract workers into such desperation that there have been numerous fatal crashes and pile-ups. Other drivers have had to urinate in their own vans in order to deliver packages on time.
Amazon’s control also cuts into the experiences that surround holiday gift giving and browsing. Gift-buying is supposed to be fun, part of a day out with the family or a nice stroll downtown. Now it’s become a stressful exercise in trying to click on all the right items while typing in a credit card number hunched in front of a glaring screen. Amazon is constantly gathering data on its consumers and using it to target them. It’s been criticized for “surge pricing” where it raises prices algorithmically.
Limiting Amazon via antitrust law hasn’t been tried yet, but there is no reason to think that lobbyists will have their way forever, particularly when a credible argument exists that Amazon has in fact provably and specifically broken antitrust law by disguising predatory pricing through revenue declaration loopholes.
It’s time for legislators to act both to prevent Amazon from further excesses and to set a precedent. This Christmas, after eating a delicious turkey from Whole Foods (oops), we can hope that Casa Amazon also receives a special, glittering gift under the tree: antitrust action. Merry Christmas, Mr. Bezos.
Paul Brian is a freelance journalist. He has reported for the BBC, Reuters, and Foreign Policy, and contributed to The Week, The Federalist, and others. You can follow him on Twitter @paulrbrian or visit his website www.paulrbrian.com.
This article was supported by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the authors.