Is Amazon a Monopoly?

In its first few years, Amazon barely made any profit and reinvested billions back into the company and kept growing. That is how it achieved such a big share of its market of 40% of e-commerce sales in the US. 40% is still a very big amount yet, according to the Sherman Act of 1890, if a firm does not have more than fifty percent of the sales of a particular product or service within a certain geographic area, then the courts do not usually find monopoly power.

However, there have been multiple reports of Amazon’s uncompetitive behavior. Firstly, employees that used to work there highlighted the extent to which it unfairly gathers data from 3rd parties. This is a practice that is usually justified with the use of website cookies yet it is still considered unethical. An antitrust probe has already been opened into Amazon data usage practices which alleges that Amazon is using data from the independent merchants it hosts to compete against them for the benefit of their in-house sales. Secondly, investigations by authorities recently found how it exploits its dominant position by charging high fees to sellers and even penalizing them if they sell their merchandise at lower prices elsewhere. Nevertheless, it is difficult to find direct evidence that would justify such a case against it. Moreover, Its size and its ability to withstand losses allow it to use a strategy called predatory pricing. That is, prices are below cost to drive out competitors to enjoy a dominant place in the market. This is considered illegal and is punished by law, yet a predatory pricing case hasn’t been passed in decades because lower prices are considered better for consumers.

Especially in today’s context where the market for internet companies is naturally “winner takes all”, a strategy for acquiring as many users as possible is its main tool for growth. This is also the case in which predatory pricing becomes rational. Therefore, some say Amazon can’t be a monopoly because it is offering lower prices to consumers. This answers the main question in antitrust cases: how are consumers affected?. Furthermore, Amazon is really diversified, being a book publisher, an online retailer, a content producer, and having one of the largest cloud computing servers. This allows it to use its dominance in its online space without having a large concentration of a market only in one specific area, thus being less likely to be considered as a monopoly. This is the main reason why many analysts consider it is not a monopoly. Amazon has not got market power in one particular product or geographical area, but it is diversified. In addition, it has created a brand name, loyalty, low prices, free shipping perks, and it is convenience. In short, it provides real benefits to consumers. Apart from that, on a larger scale, it is contributing to deflationary forces while allowing competition to enter the market (Walmart, Alibaba, and Flipkart are only some instances of competitors who have grown exponentially in the last few years).

In conclusion, right now Amazon cannot be easily classified as a monopoly, even though, in the future, Congress could pass new laws that set a new, stricter monopoly threshold. For example, Amazon’s acquisition of Whole Foods in 2017 already raised eyebrows among US lawmakers.



Is Amazon a true monopoly or does the Bezos behemoth not qualify? | Business and Economy | Al Jazeera

431 views0 comments