Amazon: Antitrust on the horizon?
Does Amazon do more harm than good? Or vice-versa? The question is heavily debated in many circles, including among people who write and publish books. On the one hand, they need Amazon because of its dominant role in the book market. Many self-published authors get most or all of their sales through e-books sold on Amazon (and, increasingly, those authors earn more than traditionally-published writers). But Amazon’s business practices favor book buyers over authors and publishers, who have a harder time making a living. (Only a small percentage of authors can support themselves by writing books.)
Last year, about 70% of Amazon’s revenue came from retail (online stores and third-party sellers), but historically, Jeff Bezos prioritized growth over profitability and operated retail with very tight margins, so it rarely made much money. Bezos also prioritized customers over employees and vendors (and even shareholders), operating on a simple theory that customers always want faster and cheaper. That basically explains why it’s tough to beat Amazon if you want to buy something (like a book), but it’s often much less satisfying if you’re trying to sell something.
The company posted net income of $2.9 billion in the third quarter of 2022 (down from $3.2 billion a year earlier), and retail posted a net loss. Web services, its cloud business, brought in only 12.5% of revenue but almost all of the profits. Amazon is the dominant player in the cloud business, but not a monopolist-it’s competing with other big players like Google, Microsoft, IBM and Alibaba. Amazon can get better margins in cloud than retail because, even though business customers care about price, they often care even more about reliability, quality, and service.
Lina Khan, the current chair of the Federal Trade Commission, is expected to initiate an anti-trust suit against Amazon that may test the limits of antitrust doctrine. While she was a student at Yale Law, she published an influential article arguing that traditional anti-trust law has focused mostly on harm to customers, but Amazon’s anti-competitive practices do their damage thru platform and intermediary effects that undermine competition. (https://www.yalelawjournal.org/pdf/e.710.Khan.805_zuvfyyeh.pdf) If the FTC does sue, it will be a titanic legal battle.