Break Up Amazon? There’s No Point
What precisely would we achieve by breaking up Amazon? Not even those who are sympathetic to the idea can figure it out.
Let’s look at Farhad Manjoo’s strange but accidentally good article in the New York Times. Like Elizabeth Warren, Donald Trump, and so many others, he is quite sure that Amazon needs to be broken up or otherwise somehow restrained. Why? Because it is big. Never mind the reason it got big and grows bigger all the time: because it is serving the consumer with excellence. Manjoo is of the school of thought that government has to do something for whatever reason.
But because he has column inches to fill, he explains that he is having a hard time figuring out what would be gained by the intervention he favors, simply because he actually loves Amazon as a company. Seriously. He regrets that the company is so good at what it does that the rationale for busting it up seems rather elusive.
Something like: Everyone says I should hate you, but instead I love you, and hate you for that reason.
He writes that Amazon “is a genie of consumerist wishes, and it keeps growing more irresistible.” It is a “retail paradise.” “The company’s online store has always been convenient and plentiful, but in the last year, Amazon significantly increased the speed at which it delivers products, with many items delivered overnight to its Prime members.” Further, “As a fervent Amazon customer, I love that its platform keeps getting more convenient.”
Why is this a problem? Because “it might be growing increasingly difficult to persuade people that stringent regulation — and especially a breakup — will be a good thing.” You can’t even argue that its size is hurting competition because, he says, “even as Amazon gets bigger, it still faces relentless competition in the retail business, and is therefore not slowing in any obvious way to act like a lumbering monopoly of yore.”
After all, thanks to Amazon, “it’s possible to get nearly anything you want, very quickly, for not much money, just about anywhere in the country, and probably to return it for free for just about any reason. And because Wal-Mart, Target, independent booksellers and others are all working furiously to match or exceed Amazon’s convenience, Amazon’s innovations are rippling across the retail industry.”
Again, why is this bad? Because the “more entrenched Amazon gets, the tougher the political case for breaking the company up becomes….”
After finishing the column, it struck me that he made an almost-perfect case for why it should not be broken up. Oddly, he doesn’t see it that way. He is literally warning his readers that Amazon’s incredible successes at being a model company create serious political impediments to making the case for intervention, which he somehow accepts as a matter of doctrine, simply because it is big. There is no other reason.
As Warren says:
We need to stop this generation of big tech companies from throwing around their political power to shape the rules in their favor and throwing around their economic power to snuff out or buy up every potential competitor. That’s why my administration will make big, structural changes to the tech sector to promote more competition — including breaking up Amazon, Facebook, and Google.
Once upon a time, Washington prioritized strong antitrust enforcement that helped to increase consumer choice, keep doors open for new competitors, help small businesses grow, and make our economy and our democracy fairer and stronger.
Several problems here. Amazon has plenty of competition, which is precisely why they keep having to improve. From a consumer welfare point of view, there is no argument to make. It’s true that Amazon puts pressure on brick-and-mortar, but keeping doors open only means protecting the right of smaller companies to charge higher prices to consumers, which is a form of exploitation.
The underlying theoretical problem, as Max Gulker has emphasized, is that the longing to break up big tech can take no recourse in the old antitrust models. It’s impossible to document consumer exploitation when prices are relentlessly falling and service is constantly getting better. Especially with the advent of the attention economy, in which companies beg for you to consume their product for free, it’s hard to market government planning as serving the common man against big corporations.
As a result, the proponents of antitrust in today’s world end up relying on intuition and resentment alone. If it is big, break it up. But as Gulker further emphasizes, the proposed solution ends up empowering something even bigger and more powerful still, namely federal regulators who are in a position to act as arbiters and designers of industrial structure.
The whole record of that approach has been a case study in regulatory capture. It is usually the case that antitrust actions by government have been instigated behind the scenes by a less-successful competitor that is failing to keep up with the times and thus turns to the state to break up the competition. If you want to talk about corruption and threats to fairness, here is a great case in point.
As to Amazon’s complaint that the Trump administration denied it a $50 billion cloud computing contract out of spite, it’s probably valid. At the same time, Amazon should not regret the rejection. That contract would have been exhibit A in the public campaign to decry the company as a tax-fund crony corporation, which it emphatically is not.
Antitrust of the sort dreamed about by left and right today dates from an era of confidence in scientific management of industrial structure through government power. The record is of unrelenting failure.
Even in the case of big tech, recall that the antitrust lawsuit against Microsoft began in 1992. By the time it was settled in 2002, the industry had entirely changed, and the issue that began the litigation (the browser wars and the supposed operating system monopoly) had almost become a joke.
The same fate awaits new plans to break up tech giants. If we want a more competitive market, the only means to achieve is through deregulation so that markets can work their magic, giving us an ever more beautiful consumer paradise.