Gongol.com Archives: September 2023

September 30, 2023

Will the FTC get to Amazon before the market?

It isn't hard to stipulate a few things about Amazon: Its rise from online bookstore to "everything store" has been epic, its economic impact has been transformative, and its competitive position in what the Federal Trade Commission calls the "online superstore market" is truly titanic. ■ Whether the company engages in illegal monopolistic practices, as the FTC and 17 state attorneys general allege, is not so easy to stipulate. It's entirely possible, and the facts of the case should be weighed by the scales of Lady Justice. ■ But just as we shouldn't jump to conclusions about the merits of the case, we shouldn't jump to conclusions about the appropriate remedies for those conditions, either. Naturally, people's minds drift towards breakup and heavy regulation as possible "solutions" to monopolistic behavior. Those are the tools with which the general public tends to be most familiar. ■ What Amazon does is complex, though. Phenomenally so. And in a time when physical retailers are closing down for many reasons, the very presence of a reliable "online superstore" may ultimately do more social good than any cost it imposes. Having the full inventory of an Amazon warehouse accessible from any smartphone -- even in a retail desert -- is a powerful force for economic equality. ■ There's no obvious regulatory scheme for what Amazon does that would be guaranteed to do more good than harm. And breakups often work out in massively unanticipated ways (just look at what happened to AT&T). The government could split Amazon in half, and there's no small risk that the resulting companies might not evolve into new monopolists, each in a different market. ■ Someone will ultimately come along to challenge the Amazon model in a sustainably powerful way. The best route would almost certainly be to focus not on offering everything from every seller, but to offer a guaranteed high-quality, modestly-priced private-label product for a large spectrum of goods. ■ Search costs can be very real, and consumers may well lack the patience to conduct two separate searches (say, one on Amazon-I, and one on Amazon-II) for every purchase. But they might well be ready to comparison shop with a rival online superstore that offers a good private label for everything -- think Costco's Kirkland brand, or the entire business model of the Aldi grocery chain. ■ If history is any guide, the market will probably usurp Amazon long before the FTC will. Just ask Nokia or the development team for Microsoft Internet Explorer. Or, from the superstore world, the teams at Sears and Montgomery Ward. It's hard to stay on top of any mountain forever.