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The New Republic has a dramatic cover story out this week by Frank Foer with the simple title "Amazon Must Be Stopped." The specific argument of the piece stretches together a few threads including a curious nostalgia for the traditional book publishing industry, a critique of the consumer-focused trend in post-1980 antitrust jurisprudence, and a swipe at Peter Thiel's techno-utopianism. But at its core is a very simple but fundamentally mistaken contention about Amazon, namely that "the company has achieved a level of dominance that merits the application of a very old label: monopoly."
The simple fact of the matter, however, is that Amazon doesn't have any kind of monopoly.
In the sale of physical objects it faces fierce competition from the likes of Walmart (whose market capitalization is still worth about $100 billion more than Amazon's), Target, Home Depot, Ikea, the Gap, and other major retail chains. In the sale of digital goods it faces fierce competition from Apple and Google. It is true that in some of these markets Amazon has a rather dominant market share. But having a lot of the market is not the same as having a monopoly. A monopoly needs to involve a lack of choice and some kind of barrier to entry. Everyone gets their e-books from Amazon because they're just as cheap as Apple's e-books, but they work on a much broader range of devices. But if Amazon started offering an inferior e-book product to Apple's, then customers could and would switch.
One important hint about Amazon's non-monopoly status can be found in its quarterly financial reports. That's where you find out about a company's profits. In its most recent quarter, for example, Amazon lost $126 million. Losing money is pretty typical for Amazon, which is not really a profitable company. If you'd like to know more about that, I published 5,000 words on the subject in January. But suffice it to say that "low and often non-existent profits" and "monopoly" are not really concepts that go together.
Competitors hate Amazon because retail was an ultra-competitive low-margin game before Jeff Bezos ever came to town. To delve into this field and make it even more competitive and even lower-margin seems somewhere between unseemly and insane — but it's the reverse of a monopoly.
The shame of it is that an excellent argument can be made that the shiny new world of high technology really could use a tougher stare from the anti-trust cops. The country has been suffering for years due to government-created monopolies known as software patents. There's been some extremely good news on this front lately, but more could be done.
Then at the other end of the spectrum, the entire wonderland of apps and streams is built atop a rickety infrastructure of broadband wires and radio spectrum. The companies that own this infrastructure — Verizon, AT&T, Comcast, Sprint, T-Mobile, etc. — operate in markets with limited competition and little scope for entry. Just as you would expect to see from monopolists, these companies really do earn juicy profit margins and you can see them throwing off fat dividends while slow-walking the rollout of cutting-edge fiber optics. Even the old-fashioned monopoly problem of what to do with electrical utilities is bedeviling us anew in an era of rising solar power. Fixing these issues with real monopolies in genuinely uncompetitive markets isn't easy, either conceptually or politically, but urgency is demanded.
But Amazon is just the latest in a long chain of retail industry innovators — from the Sears catalog to the A&P to Walmart — who've shaken things up and discomfited rivals in an industry that remains, to its core, deeply competitive.
