There continues to be significant analysis of and reaction to the decision by the Federal Trade Commission (FTC) and the attorneys general of 17 states to file a sweeping antitrust lawsuit against Amazon, charging the company with business practices that abuse the third part sellers on its Marketplace, forcing them to pay high fees for services that result in higher prices for consumers.
• Axios offers the following:
“The Federal Trade Commission’s new lawsuit against Amazon — like similar recent and historic antitrust litigation against other tech giants — faces a tough uphill climb because it takes a lot of certainty before the U.S. government will hogtie a U.S. corporation.
“Why it matters: Much of the public, along with the media, shares a visceral sense that tech giants like Amazon, Google, Apple, Facebook and Microsoft are way too powerful and ought to be knocked down a few pegs — but, for better or worse, you don’t win an antitrust lawsuit based on gut feelings.”
Axios writes that the FTC “has to prove that Amazon is a monopoly in specific markets. The FTC’s lawsuit defines two markets in which Amazon has a “durable monopoly”: the ‘online superstore market’ and the ‘online marketplace services market.’
“Then it has to prove that Amazon used its monopoly powers to harm consumers and competitors. The FTC lays out detailed claims that, for instance, Amazon’s ‘exclusionary anti-discounting conduct’ artificially boosts prices and its rules for sellers to ‘coerce’ them into using its fulfillment services.
“These charges can sound persuasive in the pages of the FTC’s 172-page lawsuit filing. But Amazon is about to unleash all the lawyerly energy that a trillion-dollar corporation can afford to buy.
“Its lawyers are likely to question every assumption, definition and number in those 172 pages — which is why antitrust trials are notorious for their length and their lack of drama.”
• From the Wall Street Journal:
“Amazon certainly makes a tempting target, especially for those who claim big tech has gotten too big. The company that started as an online bookseller in the mid-90s now generates more than $538 billion in annual revenue. That is more than any other public company in the world except Walmart, according to data from S&P Global Market Intelligence. It has gotten here by amassing a huge base of buyers and sellers and an equally massive delivery network consisting of its own planes, trucks and nearly 1,300 distribution facilities in the U.S. alone, according to the latest data from logistics consultant MWPVL.
“That scale has naturally earned Amazon more than its share of irate customers, sellers and rivals, and some of the company’s actions certainly have been questionable. But Amazon as a monopolist doesn’t square with the fact that the company still accounts for less than a third of total e-commerce sales in the U.S. over the last four quarters, according to the government’s latest retail sales data.
“And even that huge distribution footprint doesn’t exactly allow Amazon to just set prices; Amazon commands the lowest operating margins among its big tech peers, and the company’s retail operations have lost money in seven of the last eight quarters. Overbuilding of its fulfillment network actually caused Amazon to burn cash over the last two years.”
• The Atlantic has a piece entitled “The Best Thing About Amazon Was Never Going to Last.”
Writer Brian Barrett observes that lately, “hopping on Amazon has become an exercise in frustration, and asks the question, “What happened?”
“The company no longer excels at the thing it’s supposed to be best at: shopping. Its unparalleled convenience and cost helped turn it into an e-commerce juggernaut, one that now faces an antitrust lawsuit from the Federal Trade Commission over alleged anticompetitive practices. Now around every corner lies a brand you’ve never heard of, selling a product you’re not sure about. Good deals on name brands are harder to come by. Amazon’s dominance has also transformed it into a different kind of company. Along the way, the famously customer-obsessed company has lost track of what its customers actually want.”
Barrett goes on:
“The decline of Amazon is closely tied not just to its size but to how it has chosen to grow. Amazon is now less of a store than a mall, or maybe a sprawling bazaar. Last year, nearly 60 percent of units sold on Amazon came from third-party sellers rather than from Amazon itself. Want to set up a booth? There’s a nominal monthly fee to reserve the space. From there, though, the charges add up quickly, according to a report from the ecommerce-intelligence firm Marketplace Pulse.
“Amazon takes a cut of every transaction, typically about 15 percent. For front-and-center placement, you’d better pay for one of those sponsored slots. According to the FTC, advertised products are 46 times more likely to get clicks. Call it another 15 percent of revenue. Oh, and if you want to qualify for Prime—and if you want any shot of making a sale, you do want to qualify for Prime—you’ll need to use Amazon to fulfill your orders. That’s another 20 to 35 percent off the top. All of a sudden, half of your revenue is in Amazon’s coffers.”
And he concludes:
“Of course this is where Amazon wound up. The company spent years sacrificing profit for scale, until it had so many customers that sellers couldn’t ignore it. Now that it extracts billions each month from those sellers, it can afford to ignore those customers—or at least prioritize them less. Amazon gets paid by all of its vendors, no matter which products go in our cart.”
• TechCrunch had a good story about Amazon’s “Project Nessie,” which is mentioned in the FTC filing, though details were largely redacted:
“What is it, and could it possibly be as alarming as the unredacted sections make it sound?
“The project, product or process is referred to more than a dozen times in the complaint filed by the FTC. And it’s one of those situations where the redactions probably make it sound scarier than it actually is.
“Probably.
“The first reference comes on page 6: Amazon has also [redacted] through a [redacted] operation called ‘Project Nessie.’ [redacted] Amazon’s Project Nessie has already extracted over [redacted] from American households.
“What is it extracting? Money? Data? Something quantifiable, or else the document would not say ‘over.’ Though … the context does not suggest anything physical or private, like video or biometrics.”
One other interesting part of the TechCrunch analysis:
“Project Nessie is an algorithm [redacted]. Aware that this scheme belies its public claim that it ‘seek[s] to be Earth’s most customer-centric company’.”
A turn of phrase that TechCrunch judges to be “distressing.”
• The Teamsters released the following statement:
“The tide is turning in favor of working people,” said Teamsters General President Sean M. O’Brien. “With today’s lawsuit, the Federal Trade Commission and a bipartisan group of state attorneys general have said ‘enough is enough.’ As more Amazon workers stand up around the country and the Teamsters fight to hold Amazon accountable for its shameful treatment of working people, we are ready to assist antitrust enforcers in ending Amazon’s corrupt business practices … Amazon will be held accountable for its corporate crimes. The International Brotherhood of Teamsters proudly supports all Amazon workers, and we stand with lawmakers and regulators who are brave enough to put working people before corporate power.”
KC’s View:
Two quick points.
First, I agree with the TechCrunch assessment – if Project Nessie indeed is something that undercuts Amazon’s customer-first ethos, it is distressing. I want to know more.
And I think The Atlantic piece is illuminating in how it parses Amazon’s evolution, and comes to the conclusion that is customers have been “prioritized less.” As an early adopter and dedicated Amazon customer, I feel that way.
This opens a window for anyone competing with Amazon. In ways large and small, be customer-centric. Relentlessly.
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