Big Tech’s Monopoly Creep - How Amazon, Apple, Facebook, Google Use Their Platforms To Crush All Competition
Posted by freedomforall 3 years, 7 months ago to Business
Excerpt:
"The 2020 House report on competition in digital markets was damning in its content but feeble in its consequences, and the reason may be found within the report. At some point a particularly abusive tactic of Amazon is noted. Jeff Bezos, the Amazon oligarch, is shocked, as Captain Renault in the movie Casablanca, that such an abusive practice has been deployed by his company. “That is unacceptable” Bezos declares, “and I will look into that, and we’ll get back to your office with that.” Then the congressional report indicates that “to date, however, Amazon has not followed up with the Subcommittee to provide additional information.” Pooh-poohing Congress is possible when you know that your monopoly is relatively safe, and that the investigation will more likely end up as a performative political dance around the issue.
The Amazon abuse in question was about counterfeit PopSockets products sold on Amazon. The founder of PopSockets, David Barnett, “testified that ‘Amazon was aware that large quantities’ of counterfeit PopSockets products were selling on its platform, but that Amazon allowed the problem to continue until PopSockets agreed to spend nearly two million dollars on Amazon marketing services.” In a free market economy, Amazon would have readily apologized to PopSockets and got on with cracking down on the illegal products. But when 63 percent of the online searches for products start on Amazon, then PopSockets has to give in to what even Tony Soprano would call extortion. Basically, Bezos’s Amazon wanted a piece of the business if PopSockets wanted the problem to go away.
This, by the way, was not an isolated incident. The subcommittee had found that, in general, Amazon used the counterfeit products on its platform as leverage in order to force businesses to sell on its platform. Internally, those businesses were classified as “holdouts.” Even a large corporation like Nike had to cave in. Wall Street Journal reported that “Nike agreed to start selling some products directly to Amazon in exchange for stricter policing of counterfeits and restrictions on unsanctioned sales, according to a person familiar with the deal.”
Of course, leveraging its sales of counterfeits is only one of the ways that Amazon forces businesses across America to bend to its will. Amazon uses the data from the sales made by those businesses in order to discover opportunities and consumer trends for its private label, Amazon Basics. A former Amazon employee testified that his peers “were pulling private data on Amazon seller activity, so they could figure out market opportunity, etc. Totally not legitimate, but no one monitored or seemed to care.” Besides, a lot of data from third party sellers could be used in accordance with Amazon policies because significant loopholes exist in those policies.
Lina Khan, recently appointed to the Federal Trade Commission, has documented the case of Quidsi, once “one of the world’s fastest growing e-commerce companies.” Quidsi was very successful selling many different products through its subsidiaries, like Diapers.com. Amazon wanted to buy Quidsi back in 2009 but the founders of the company declined. It was then that Amazon used its size, reach, and financial heft to start a price war against Quidsi.
Quidsi executives saw that Amazon’s pricing bots—software “that carefully monitors other companies’ prices and adjusts Amazon’s to match”—were tracking Diapers.com and would immediately slash Amazon’s prices in response to Quidsi’s changes. In September 2010, Amazon rolled out Amazon Mom, a new service that offered a year’s worth of free two-day Prime shipping (which usually cost $79 a year). Customers could also secure an additional 30% discount on diapers by signing up for monthly deliveries as part of a service known as “Subscribe and Save.”
It was not long before Quidsi was sold to Amazon for $545 million.
According to the congressional report, Amazon had identified Quidsi as its “#1 short term competitor” and “was willing to bleed over $200 million in losses in diapers in one month.” Since the acquisition of Quidsi, Amazon has significantly reduced the discounts and the benefits of the Amazon Mom service.
Eliminating competition through acquisition is a strategy that all of Big Tech follows. In a 2012 email to the then CFO of Facebook, Mark Zuckerberg pondered “how much we should be willing to pay to acquire mobile app companies like Instagram and Path that are building networks that are competitive to our own.” Adding that “the businesses are nascent but the networks are established, the brands are already meaningful and if they grow to a large scale they could be very disruptive to us.” In a later email he further expatiated on how these acquisitions could provide competition protection for a company like Facebook."
"The 2020 House report on competition in digital markets was damning in its content but feeble in its consequences, and the reason may be found within the report. At some point a particularly abusive tactic of Amazon is noted. Jeff Bezos, the Amazon oligarch, is shocked, as Captain Renault in the movie Casablanca, that such an abusive practice has been deployed by his company. “That is unacceptable” Bezos declares, “and I will look into that, and we’ll get back to your office with that.” Then the congressional report indicates that “to date, however, Amazon has not followed up with the Subcommittee to provide additional information.” Pooh-poohing Congress is possible when you know that your monopoly is relatively safe, and that the investigation will more likely end up as a performative political dance around the issue.
The Amazon abuse in question was about counterfeit PopSockets products sold on Amazon. The founder of PopSockets, David Barnett, “testified that ‘Amazon was aware that large quantities’ of counterfeit PopSockets products were selling on its platform, but that Amazon allowed the problem to continue until PopSockets agreed to spend nearly two million dollars on Amazon marketing services.” In a free market economy, Amazon would have readily apologized to PopSockets and got on with cracking down on the illegal products. But when 63 percent of the online searches for products start on Amazon, then PopSockets has to give in to what even Tony Soprano would call extortion. Basically, Bezos’s Amazon wanted a piece of the business if PopSockets wanted the problem to go away.
This, by the way, was not an isolated incident. The subcommittee had found that, in general, Amazon used the counterfeit products on its platform as leverage in order to force businesses to sell on its platform. Internally, those businesses were classified as “holdouts.” Even a large corporation like Nike had to cave in. Wall Street Journal reported that “Nike agreed to start selling some products directly to Amazon in exchange for stricter policing of counterfeits and restrictions on unsanctioned sales, according to a person familiar with the deal.”
Of course, leveraging its sales of counterfeits is only one of the ways that Amazon forces businesses across America to bend to its will. Amazon uses the data from the sales made by those businesses in order to discover opportunities and consumer trends for its private label, Amazon Basics. A former Amazon employee testified that his peers “were pulling private data on Amazon seller activity, so they could figure out market opportunity, etc. Totally not legitimate, but no one monitored or seemed to care.” Besides, a lot of data from third party sellers could be used in accordance with Amazon policies because significant loopholes exist in those policies.
Lina Khan, recently appointed to the Federal Trade Commission, has documented the case of Quidsi, once “one of the world’s fastest growing e-commerce companies.” Quidsi was very successful selling many different products through its subsidiaries, like Diapers.com. Amazon wanted to buy Quidsi back in 2009 but the founders of the company declined. It was then that Amazon used its size, reach, and financial heft to start a price war against Quidsi.
Quidsi executives saw that Amazon’s pricing bots—software “that carefully monitors other companies’ prices and adjusts Amazon’s to match”—were tracking Diapers.com and would immediately slash Amazon’s prices in response to Quidsi’s changes. In September 2010, Amazon rolled out Amazon Mom, a new service that offered a year’s worth of free two-day Prime shipping (which usually cost $79 a year). Customers could also secure an additional 30% discount on diapers by signing up for monthly deliveries as part of a service known as “Subscribe and Save.”
It was not long before Quidsi was sold to Amazon for $545 million.
According to the congressional report, Amazon had identified Quidsi as its “#1 short term competitor” and “was willing to bleed over $200 million in losses in diapers in one month.” Since the acquisition of Quidsi, Amazon has significantly reduced the discounts and the benefits of the Amazon Mom service.
Eliminating competition through acquisition is a strategy that all of Big Tech follows. In a 2012 email to the then CFO of Facebook, Mark Zuckerberg pondered “how much we should be willing to pay to acquire mobile app companies like Instagram and Path that are building networks that are competitive to our own.” Adding that “the businesses are nascent but the networks are established, the brands are already meaningful and if they grow to a large scale they could be very disruptive to us.” In a later email he further expatiated on how these acquisitions could provide competition protection for a company like Facebook."
