For Amazon, The Regulatory Tide Is Turning

The issue of an unchecked Amazon appears to be bipartisan
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In its short 24-year rise to retail hegemony, Amazon has dodged a number of potential regulatory bullets.

Chief among them was federal e-commerce tax legislation, designed to “level the playing field” for terrestrial stores by allowing states to collect tax on out-of-town transactions. Amazon saw the writing on the wall early on, and rather than fight a losing rear-guard action, became proactive on the issue by hammering out interim tax amnesty agreements on a state-by-state basis that were linked to its warehouse expansion plans.

Amazon also drew public ire during the first retail shakeouts of the early 2000s — before other culprits like the Great Recession and lack of investment and innovation contributed to legacy chains crumbling beneath their own weight.

See also: Amazon’s Steve Downer Gets Vocal About Voice Control

But there’s a new mood in the nation, wrought by a hyperbolic president and a Big Tech backlash loosened by Facebook malfeasance, that could spell trouble for Amazon in the months and years ahead.

Love him or otherwise, there’s no question that President Trump has a knack for focusing attention on his pet issues, and one of his favorite targets is Amazon founder Jeff Bezos. Whether it’s his wealth, ownership of the dogged Washington Post, or sincere antitrust concerns that irk him, Trump hasn’t hid his antipathy for the world’s richest person, whether by tweet or in conversation.

According to TheStreet, Trump tweeted 26 broadsides against Amazon and Bezos (or, most recently, “Jeff Bozo”) between December 2015 and January 2019, variously disparaging both for evading taxes, hurting retailers and treating the U.S. Postal Service as its “Delivery Boy.”

In a March 2018 piece, Axios cited five sources who discussed Amazon with the president. “He’s obsessed with Amazon,” one source told the news site, “obsessed.” Said another: “He’s wondered aloud if there may be any way to go after Amazon with antitrust or competition law” — sparked, the sources said, by conversations with wealthy real estate friends who claim Amazon is snuffing out shopping malls and physical retail.

The subject came up again the following month during a press gaggle aboard Air Force One:

Reporter: “Are you going to actually take some action to change the law that would affect Amazon?”

Trump: “Well, Amazon is just not on an even playing field. … But we’re going to see what happens. The playing field has to be level for everybody. That’s very important.”

Reporter: “Would you like to make changes to make that level playing field?”

Trump: “Well, I’m going to study it and we’re going to take a look. We’re going to take a very serious look at that. But I want, as long — hey, it’s very important for me. It’s got to be an even playing field for everybody.”

Watch: Amazon To Close All Pop-Up Stores In The U.S.

Days later, Makan Delrahim, an assistant attorney general who heads the Justice Department’s antitrust division, addressed a University of Chicago conference on the subject of antitrust enforcement in the digital era. “As enforcers,” he said, “we should be open and receptive to empirical evidence that companies in digital markets may be engaging in predatory pricing or other exclusionary conduct to drive out competition and cause long-run harm to consumers.”

Delrahim also cited a now renowned Yale Law Journal treatise, “Amazon’s Antitrust Paradox,” written three years ago by then law student Lina Khan. In it, Khan argues that the traditional criteria for determining antitrust activity — price gouging — is antiquated in the era of technology platforms like Amazon, which is willing to sell goods at a loss while building infrastructure that can dominate wide swaths of the economy, including distribution and logistics.

Comparing Amazon’s fulfillment network to the powerful railroad industry of the Gilded Age, Khan wrote that “the thousands of retailers and independent businesses that must ride Amazon’s rails to reach market are increasingly dependent on their biggest competitor.”

Currently an academic fellow at Columbia Law School, and before that the director of legal policy at the Open Markets Institute, Khan has since become a champion for tighter reins on the e-commerce giant. Last summer she joined the office of Federal Trade Commissioner Rohit Chopra as a legal fellow as the agency ramped up its oversight of tech companies, and in February the FTC went on to create a Technology Task Force under its Bureau of Competition.

See also: The Growing World Of Amazon Consultants

“Technology markets, which are rapidly evolving and touch so many other sectors of the economy, raise distinct challenges for antitrust enforcement,” said Bureau director Bruce Hoffman. “By centralizing our expertise and attention, the new task force will be able to focus on these markets exclusively.”

As Trump told “Axios on HBO” in November, “I leave it to others, but I do have a lot of people talking about monopoly when they mention those three [Google, Facebook and Amazon] in particular. … We are looking at [antitrust] very seriously.”

While the president may have some internal axe to grind, the issue of an unchecked Amazon appears to be bipartisan. Last month crusader Khan brought her antitrust fervor to the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law, where she now serves as counsel. The subcommittee is chaired by Rep. David Cicilline, a Democrat from Rhode Island, who in 2017 questioned Amazon’s proposed acquisition of Whole Foods, citing concerns that “The transaction will also increase Amazon’s online dominance, enabling it to prioritize its products and services over competitors.”

Taking a page from Kahn’s Amazon thesis, Cicilline reiterated the railroad analogy while discussing his plans for Big Tech in a January opinion piece on Bloomberg. “We have to look at the existing antitrust architecture,” he told columnist Joe Nocera. “Most of it was designed at the time of large railroad monopolies. It was a very different economy. I think it is well past time that we update and modernize our antitrust standards.”

He continued, “Maybe people don’t know all the words — monopsony and antitrust and market power — but they know the system is rigged. Part of the task of this committee is to explain to people why this stuff matters. This is impacting your life. This can give you access to lots of products in the market, to lower prices…”

And though it’s still early, an unbridled Amazon could also be a talking point, if not a legislative outcome, of the 2020 presidential race. As Massachusetts senator and Democratic hopeful Elizabeth Warren wrote last month on Medium, “Amazon crushes small companies by copying the goods they sell on the Amazon Marketplace and then selling its own branded version.” Her remedy: designate Amazon Marketplace and other third-party mega-platforms as “platform utilities,” and force their owners to spin them off.

Watch: Warren's Plan To Break Up Large Tech Companies

Warren would also seek to “unwind anti-competitive mergers,” including Amazon’s acquisitions of Whole Foods and Zappos.

The argument wasn’t lost on Minnesota senator and presidential contender Amy Klobuchar, who’s coming out with a book on antitrust regulation and ways to make the discussion more palatable during an election cycle. “I think the public is going to get more and more aware of this issue because of the presidential debates and what’s happening,” she said on a Recode podcast at last month’s SXSW festival. “You figure out what are the ... major anti-competitive problems, and then you come up with a plan to break up or to move something out, if there’s a piece of it that is anti-competitive.”

See also: Amazon's Long Game

But Klobuchar’s approach also appears more measured. “You want competition, right? You want this innovation that Amazon brought into the market,” she continued. “You just don’t want them controlling everything under them, that’s a monopsony. Whole Foods is another example of that. You want to be able to have pushback so that you guarantee that you’re not stifling the innovation, but innovation is there. That is always how we have worked in America.”

Whether we see a slimmer, trimmer Amazon Lite in the next decade, stripped of its reseller marketplace, grocery division or Cloud computing business, remains to be seen. But despite increased scrutiny from the left, the right and points in between, Bezos & Co. have been in hot water before, and turned it into consommé.

See also: Selling Through Amazon: What Retailers Need To Know

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