Amazon’s growing Monopoly Power
For many retailers, the last three months of the year are traditionally known as the Golden Quarter, when non-food shops make most of their profits. However, with brick-and-mortar shops forced to close their doors at a time when they are full of stock, this year’s Golden Quarter only appears promising for Amazon. The online retailer is set to emerge as one of few winners from the U.K. government’s decision on Saturday to impose a four-week national lockdown and the recent restrictions announced in France and Germany.
With the surge of customers buying their groceries and holiday gifts on Amazon, the online retailer has moved to recruit over 400,000 workers and earned $6.3 billion in the recent quarter, its second consecutive record profit. For the fourth quarter, Amazon predicts net sales of $112 billion to $121 billion. That would mark the company’s first over $100 billion and another consecutive record profit.
With all this success, Amazon has been in the spotlight of workplace and political scrutiny. After a 16-month investigation into competitive practices by today’s tech giants, Amazon, Apple, Facebook and Google, the U.S. House Judiciary Subcommittee on Antitrust found that the four businesses control a monopoly power that must be reined in by Congress and enforcers.
The report alleges that Amazon has monopoly power over the bulk of its third-party sellers and many of its suppliers. The report additionally alleged that Amazon’s market share of U.S. online retail sales is estimated at approximately 50% or more.
The report recommended that Amazon be required to split apart its core e-commerce website from the third-party marketplace where independent merchants sell their products, and from the Amazon Web Services cloud-computing service.
Lawmakers stated that Amazon’s dual role of selling its own products on its website and running a marketplace for third-party merchants “creates an inherent conflict of interest” that incentives Amazon to exploit its access to competing merchants’ data. For instance, Amazon has set barriers to entry for other voice-enabled device manufacturers by pricing its own Alexa-enabled products below market cost.
Although Amazon describes their third-party sellers as “partners”, these supposed partners have described an environment of “bullying”, wherein sellers are fearful of the financial threat that can brought about by an account suspension or product de-listing.
Amazon has disputed the report’s findings, stating that their recommendations may have the overarching effect of pushing millions of independent retailers out of Amazon’s online retail hub, thereby depriving these small businesses of one of the quickest and most profitable platforms available to reach customers. For consumers, the result would be less variety of product and higher prices. Instead of enhancing competition, these recommendations would likely reduce it.
Sources –
https://uk.reuters.com/article/uk-amazon-com-results/amazon-sees-pandemic-boosting-holiday-sales-and-investment-in-delivery-idUKKBN27E3D6
https://www.bbc.co.uk/news/business-54443188
https://www.cnbc.com/2020/10/06/amazon-bullies-partners-and-vendors-says-antitrust-subcommittee.html
https://www.cnbc.com/2020/10/06/house-democrats-say-facebook-amazon-alphabet-apple-enjoy-monopoly-power.html
