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Is Amazon really an antitrust worry?

April 24, 2018 - 05:47 -- Admin

That was the topic of a panel I was involved in at the Chicago Booth Annual Antitrust Conference last week. One thing you get from a Chicago panel is a diverse range of opinions. The panel was motivated by an article in the Yale Law Journal by Lina Khan written when she was a student and, having heard her speak now, she has ‘future politician’ written all over her. Khan throws the book at Amazon far more than any economist would which, of course, is why, for the most part, I don’t agree with her stance.

But before getting to that, let me point you to this concise explanation of why digital platforms tend to become concentrated provided by Ben Thompson (of Stratechery)

Ben was on the Amazon panel as well. The point is that digital platforms can be viewed as solving the ‘new’ hard problem that arises when digital technology shatters existing ways of doing things. In effect, Amazon is aggregating a variety of services from search to pricing to logistics and distribution of online content, to solve the problem of making online shopping easier, cheaper and safer. That is why most of us tend to be fans of Amazon’s existence. But just being a fan doesn’t mean we don’t want more competition.

My view on Amazon is similar to my view on other antitrust matters in this space. A static perspective rarely gives rise to an antitrust concern while a dynamic perspective could. The problem is that there is a great deal of uncertainty in that regard which makes pre-emptive enforcement a challenge. Here is my articulation of those views.

Back to Khan. She identifies many areas where Amazon has, in her opinion, violated antitrust law. The tough part in her argument is that Amazon rarely has what would be regarded as a monopoly. Online sales are still 9% of the US retail and Amazon has half of these overall but in individual verticals it varies. So you need to be willing to define markets narrowly to see Amazon in a bad light. She does, however, document some instances which do not look great at a first pass. In the end, Khan and many others in the conference believed that the problem lay at the foot of the consumer-centric tests for antitrust that are followed world-wide. They want a broader notion of harm that includes harm to labour, small business disruption and even threats to democracy.

On this I disagreed vigorously. At this point in the video, I went into a tirade (listen through my discussion of Amazon’s ‘war on shopping’). My point was that other countries — other than the US — had done just fine using traditional, economically grounded antitrust practices to deal with these sorts of issues and the US has pretty much chosen to be lax on this. I pointed out that Amazon had been quite open — with AWS and third party sellers — to potential competitors which makes it really easy to detect bad practices when they arise. Their current open behaviour means that it is easy to see when they go astray. You just have to want to do that when it happens.

Amazon is tricky. They are big. Competitive pressure on them comes from all over the place. And they have technological advantages. But using antitrust to discipline them is not an unfathonable problem. It can be done. The only thing is that you have to wait until they actually get the market dominance that people believe they currently have.