WEBVTT - Should Amazon Be Considered a Monopoly?

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<v Speaker 1>Welcome to brain Stuff from How Stuff Works, Hey, brain

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<v Speaker 1>Stuff Lauren Bogelbaum Here, economists and policymakers have a huge

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<v Speaker 1>question about Amazon. How big is too big? The five

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<v Speaker 1>and sixty billion dollar company first made its name selling

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<v Speaker 1>books online, but it is rapidly morphed into an everything

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<v Speaker 1>store with his hands in just about every retail sector

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<v Speaker 1>in America. There's no question that Amazon dominates e commerce.

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<v Speaker 1>In its online sales were six times greater than those

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<v Speaker 1>of Walmart, Target, Best Buy, Nordstrom, Home Depot, Macy's, Cole's,

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<v Speaker 1>and Costco combined. But as Amazon's incredible success bad for

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<v Speaker 1>consumers and the economy, we spoke with Lina Khan, director

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<v Speaker 1>of Legal policy at the Open Markets Institute, a think

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<v Speaker 1>tank that warns about the dangers of monopolies. They believe

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<v Speaker 1>that Amazon represents a new kind of monopoly for the

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<v Speaker 1>digital economy. The problem is not only that Amazon commands

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<v Speaker 1>such a huge share of all online sales, but that

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<v Speaker 1>so much of the rest of the digital economy is

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<v Speaker 1>dependent on Amazon's technology platform. Com compares Amazon to a

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<v Speaker 1>nineteenth century railroad company that decides which oil drillers and

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<v Speaker 1>wheat farmers can ship on its tracks and at what cost.

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<v Speaker 1>Because of Amazon's e commerce dominance, smaller retailers feel compelled

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<v Speaker 1>to sell on Amazon's third party marketplace platform. Amazon has

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<v Speaker 1>been accused of using its market position to bully book

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<v Speaker 1>publishers over prices and to introduce its own cheaper products

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<v Speaker 1>when a third party retailer has a hot seller. We

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<v Speaker 1>also spoke with John Rossman, a former Amazon executive and

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<v Speaker 1>managing director at the Seattle consulting firm Alvarez and Marcel.

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<v Speaker 1>He doesn't see Amazon's behavior as monopolistic, just a classic

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<v Speaker 1>example of coopetition, a combination of competition and cooperation. He said,

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<v Speaker 1>you're competing with Amazon, you're partnering with Amazon. You're using

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<v Speaker 1>their services yourself, so your customer of them as an organization,

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<v Speaker 1>You've got a very complex relationship. The problem with accusing

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<v Speaker 1>Amazon of being a monopoly is that it doesn't quite

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<v Speaker 1>fit with the prevailing definition of monopoly, which has been

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<v Speaker 1>used by courts and the Federal Trade Commission since the

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<v Speaker 1>nineteen seventies. Mark Scriber of the Competitive Enterprise Institute, a

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<v Speaker 1>free market libertarian think tank, says the issue isn't bigness,

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<v Speaker 1>but consumer welfare in general. A company can grow as

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<v Speaker 1>much as it wants and control as much of the

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<v Speaker 1>market as it wants, as long as prices don't go

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<v Speaker 1>up and consumers don't suffer. You can make the opposite

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<v Speaker 1>case about Amazon. The online retailer is so wildly popular

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<v Speaker 1>with American consumers a one in four US adults that's

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<v Speaker 1>sixty three million people are Amazon Prime members, precisely because

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<v Speaker 1>of its low prices and mostly free shipping. But Cohn

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<v Speaker 1>and others would argue that the consumer welfare focus of

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<v Speaker 1>antitrust law is outdated and misplaced. Yes, consumers love low prices,

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<v Speaker 1>but at what cost. More and more market power and

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<v Speaker 1>influence is being consolidated in the hands of one company.

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<v Speaker 1>With Amazon's practice of buying up competitors like Zappos dot

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<v Speaker 1>Com and Diapers dot Com and expanding into new markets.

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<v Speaker 1>For example, when Amazon acquired Whole Foods in seventeen with

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<v Speaker 1>plans to disrupt the grocery industry, its grip on the

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<v Speaker 1>economy is only likely to tighten. But again, does Amazon's

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<v Speaker 1>rapid expansion and increasing market dominance mean that it's doing

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<v Speaker 1>anything illegal? Scriber says there's no evidence that Amazon is

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<v Speaker 1>using its market power to engage in anti competitive practices

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<v Speaker 1>right now. Instead, Amazon's critics are always warning about what

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<v Speaker 1>might happen in the future, like leverage Whole Foods four

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<v Speaker 1>and fifty locations to push out competition in the grocery

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<v Speaker 1>delivery business. And despite its size, Amazon currently only makes

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<v Speaker 1>up three point six percent of annual retail revenue in

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<v Speaker 1>the United States. Walmart is still much larger. Scriptner said

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<v Speaker 1>that isn't how anti trust law works. There isn't an

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<v Speaker 1>antitrust pre crime. There has to be actual anti competitive

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<v Speaker 1>conduct that occurred for someone to be convicted. But what

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<v Speaker 1>about updating the anti trust laws as con has called

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<v Speaker 1>for to reflect the danger posed by a single technology

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<v Speaker 1>company not only acting as a gatekeeper to the digital economy,

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<v Speaker 1>but expanding its reach into the physical world. Kurt Hessler,

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<v Speaker 1>a former economist with the Carter Administration and a lecturer

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<v Speaker 1>in anti trust law at the u c l A

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<v Speaker 1>School of Law, says that Amazon's business model is unprecedented

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<v Speaker 1>and we simply don't know enough about them to rewrite

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<v Speaker 1>the anti trust law us. Hessler said economists don't know

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<v Speaker 1>enough about how all this works and where it's going

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<v Speaker 1>and how fast it can change to be able to

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<v Speaker 1>change the whole legal landscape intelligently anyway. Any general principles

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<v Speaker 1>that are established in Amazon's case will be applied across

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<v Speaker 1>the whole digital economy, and nobody knows what sort of

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<v Speaker 1>effects those would have. Today's episode was written by Dave

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<v Speaker 1>Ruse and produced by Tristan McNeil. For more on this

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<v Speaker 1>and lots of other tricky legal topics, visit our home planet,

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<v Speaker 1>how stuff Works dot com.