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http://www.canada24news.com/technology/amazon-is-a-giant-but-bigness-isnt-a-crime/143627-news
Amazon Is a Giant. But Bigness Isn't a Crime
  • 2018-09-21 9:42:02 PM
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Amazon Is a Giant. But Bigness Isn't a Crime

By John D. Stollthe wall street journal

It’s valued at $1 trillion and run by the world’s richest man. Critics — ranging from rising legal stars to President Donald Trump — have suggested it uses its enormous scale to unfairly crush competition. Is it time for a breakup at Amazon?

In the past week alone, the question has come up more than once. On Monday, in a note to clients, Citi Research suggested that Amazon split into two companies to avoid antitrust scrutiny. Two days later, European Union antitrust authorities said they’d opened a preliminary investigation into the company’s treatment of other merchants that sell products using its platform.

Amazon has grown into a behemoth that dominates online retail and has the edge in cloud computing, in some cases undercutting rivals by offering lower prices at the expense of profitability. But has it broken the rules on the way to the top? And would a breakup really leave Amazon or its competitors or its customers better off?

“We don’t punish companies simply because they are big,” says University of Michigan law professor Daniel Crane. “We look at conduct.” Most antitrust experts say that antitrust enforcement since the 1970s has primarily focused on making sure customers don’t get ripped off and it’s hard to find proof that Amazon is doing that.

Many in the field point to the late Supreme Court Justice Antonin Scalia’s opinion in the 2004 case of Verizon v. Trinko. It examined the question of whether Verizon was required, under antitrust law, to provide competitors wholesale access to its telephone network.

“The mere possession of monopoly power, and the concomitant charging of monopoly prices is not only not unlawful; it is an important element of the free market system,” Justice Scalia wrote.

In this view, there is no crime in being monopolist; the crime is in abusing that power. According to Justice Scalia, a healthy monopoly “induces risk taking that produces innovation and economic growth.”

Consumers might agree. Lunch meat has been cheaper at Whole Foods since Amazon acquired it, for instance. Walmart Inc., the world’s largest retailer, is rethinking its business to better serve its customers in response to Amazon’s emergence. And the price of cloud computing is getting less expensive as more and more companies chip away at Amazon Web Services.

Still, some in the legal and regulatory community worry that existing antitrust laws haven’t anticipated the outsize influence of tech companies like Amazon. They question whether existing antitrust resources are sufficient to keep up with fast-moving changes in American business.

Once upon a time, American antitrust followed the “curse of bigness” doctrine coined by Supreme Court Justice Louis Brandeis. As fewer companies make up a bigger part of the stock market, gobble up more market share in several industries or employ a disproportionate percentage of the population, a new wave of scholars are reigniting Justice Brandeis’s concerns about placing too much power with a handful of corporations or banks.

“Fighting bigness and excessive concentration has been lost somewhere,” Timothy Wu, a Columbia law professor said. Mr. Wu is worried that mega companies like Amazon threaten to elbow out smaller competitors with good ideas but insufficient capital. “We need to decide what kind of economy we want to be,” he said.

Mr. Crane isn’t so sure, arguing that it’s unclear whether regulators have enough expertise in the technology to effectively intervene in tech companies’ business. “Antitrust needs to deal with fast moving industries with a light touch because it’s very hard for companies to monopolize innovation,” he said.

Amazon is a small player when it comes to physical stores, which still sell upwards of 90% of consumer goods. But it dominates online retail, representing about 45% of U.S. e-commerce business in 2017, according to Euromonitor International. And critics argue that the company’s access to wide swaths of consumer data gives it an unfair advantage when it comes to pricing and other business practices.

Messrs Crane and Wu were among a large group of attorneys, economists, trade commissioners and professors slated to address a Federal Trade Commission consumer-protection hearing in Washington last week. The hearing, and similar workshops at the Department of Justice, were designed to examine antitrust practices and tools in the internet economy.

Their session was cancelled due to Hurricane Florence concerns. Janet McDavid, an antitrust attorney with the international law firm Hogan Lovells, was on a panel that actually did meet earlier in the week, however, and she said that while antitrust enforcers should be careful to not overstep their mandate, people need confidence that “there is a cop on the beat.”

“I am not someone who believes markets always checks themselves,” Ms. McDavid said. “Sometimes they don’t.”

Amazon Chief Executive Jeff Bezos, speaking at an event held by the Economic Club of Washington D.C. last week, said he expects scrutiny. “All big institutions of any kind are going to be and should be examined, scrutinized, inspected,” he said. He did, however, ask that those businesses aren’t universally vilified or painted with a broad brush, simply because they are gigantic.

Mr. Bezos said the world would be worse off without multinationals with deep pockets, and offered some examples: Do you like your iPhone? Thank Silicon Valley’s biggest player, Apple Inc. Like riding on state-of-the-art airplanes? Thank Boeing Co.

“There are certain things only big companies can do,” he said.

He said his company is nimble enough to adjust even if it is reined in by new antitrust actions.

“Under all regulatory frameworks that I can imagine, customers are still going to want low prices, they’re still going to want fast delivery, they’re still going to want big selection” Mr. Bezos said.

  • Amazon Is a Giant. But Bigness Isn't a Crime
  • Amazon Is a Giant. But Bigness Isn't a Crime
  • Amazon Is a Giant. But Bigness Isn't a Crime

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