The Consequences of Amazon Becoming a Monopoly

The e-commerce company could crush competitors in every industry

11 September 2017

Barnes and Noble announced in 2014 that it would shut down a third of its bookstores during the subsequent decade, and it already had closed its flagship store in New York City that January. Even though it attempted to keep up with its largest competitor by creating the Nook e-reader to compete in the digital market, Amazon, with its Kindle, swept up sales in e-books as well.

It was a sad time for those of us who loved visiting the brick-and-mortar store to discover new books and skim the magazines, but I don’t think we thought too much about what Amazon would conquer next. It has since taken on supermarkets by expanding its AmazonFresh grocery delivery service as well as acquiring Whole Foods. And Amazon is now in the car dealership business with plans to start selling automobiles in the United Kingdom through its website.

Many people I know don’t seem to be too alarmed by the idea that Amazon is becoming a one-stop shop for, well, everything. They like the convenience, fast delivery, and availability of products that can’t be found in most stores. But what happens when Amazon starts to force companies in every industry to close their doors? Where is the competition? Do we want one company to have so much power over what we buy and how much we pay?

A POWERFUL ENTITY

Digg created a chart showing how the rise of Amazon is leaving U.S. retail chains in the dust. Amazon’s market value as of 30 December was almost US $356 billion, more than the combined value of Best Buy, JCPenney, Kohl’s, Nordstrom, Sears, Target, and Walmart: about $298 billion. Those seven primarily brick-and-mortar retailers’ market value has decreased since 2006 as Amazon’s has risen 1,934 percent—a $338 billion gain in one decade.

According to a Gizmodo article, Amazon has the power to crush a company just by filing for a trademark. In July it requested a meal-kit trademark that covers “prepared food kits…ready for cooking and assembly as a meal,” which describes the service Blue Apron and its competitors provide. Blue Apron, which went public in June, had forecasted its initial stock share to be $15 to $17 but lowered its expectations following news about the Whole Foods acquisition. After Amazon’s trademark filing, the Blue Apron shares fell below $7. The recent announcement that Whole Foods would slash some prices on 28 August, the first day with its new owner, caused supermarket stocks to tumble. Walmart, which gets about 53 percent of its sales from groceries and household cleaning products, saw its market value drop $11 billion that day.

The Gizmodo article states: “We hope you like Amazon, because it’s all that will be left one of these days.”

A CALL FOR INTERVENTION

Monopolies are illegal in the United States. The country’s antitrust laws were designed to ensure fair competition.

The federal government forced AT&T Corp. to split into separate companies in 1982. AT&T at the time was the sole provider of telephone service throughout most of the country—which meant it had full control of pricing and quality of service. After the breakup, AT&T was allowed to continue providing long-distance service, while seven regional Bell operating companies were formed to provide local service. 

A June op-ed column in The New York Times written by Lina M. Khan, a legal fellow and author of “Amazon’s Antitrust Paradox” in the Yale Law Journal, suggested Amazon is in violation of antitrust laws. The article states Amazon has captured 43 percent of all Internet retail sales in the United States, reaping $63 billion in revenue last year. That is more than the next 10 largest online retailers combined. Amazon has been able to avoid government scrutiny by keeping prices low, Khan wrote. In fact, Amazon cut prices of some Whole Foods’ products by as much as 43 percent on the first day of its acquisition.

Amazon could become the first trillion-dollar company. And with that kind of money, CEO Jeff Bezos, who already owns The Washington Post and Blue Origin, a space tourism company, likely would take over more industries.

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