Speaker 1: Welcome to brain Stuff from How Stuff Works, Hey, brain
Speaker 1: Stuff Lauren Bogelbaum Here, economists and policymakers have a huge
Speaker 1: question about Amazon. How big is too big? The five
Speaker 1: and sixty billion dollar company first made its name selling
Speaker 1: books online, but it is rapidly morphed into an everything
Speaker 1: store with his hands in just about every retail sector
Speaker 1: in America. There's no question that Amazon dominates e commerce.
Speaker 1: In its online sales were six times greater than those
Speaker 1: of Walmart, Target, Best Buy, Nordstrom, Home Depot, Macy's, Cole's,
Speaker 1: and Costco combined. But as Amazon's incredible success bad for
Speaker 1: consumers and the economy, we spoke with Lina Khan, director
Speaker 1: of Legal policy at the Open Markets Institute, a think
Speaker 1: tank that warns about the dangers of monopolies. They believe
Speaker 1: that Amazon represents a new kind of monopoly for the
Speaker 1: digital economy. The problem is not only that Amazon commands
Speaker 1: such a huge share of all online sales, but that
Speaker 1: so much of the rest of the digital economy is
Speaker 1: dependent on Amazon's technology platform. Com compares Amazon to a
Speaker 1: nineteenth century railroad company that decides which oil drillers and
Speaker 1: wheat farmers can ship on its tracks and at what cost.
Speaker 1: Because of Amazon's e commerce dominance, smaller retailers feel compelled
Speaker 1: to sell on Amazon's third party marketplace platform. Amazon has
Speaker 1: been accused of using its market position to bully book
Speaker 1: publishers over prices and to introduce its own cheaper products
Speaker 1: when a third party retailer has a hot seller. We
Speaker 1: also spoke with John Rossman, a former Amazon executive and
Speaker 1: managing director at the Seattle consulting firm Alvarez and Marcel.
Speaker 1: He doesn't see Amazon's behavior as monopolistic, just a classic
Speaker 1: example of coopetition, a combination of competition and cooperation. He said,
Speaker 1: you're competing with Amazon, you're partnering with Amazon. You're using
Speaker 1: their services yourself, so your customer of them as an organization,
Speaker 1: You've got a very complex relationship. The problem with accusing
Speaker 1: Amazon of being a monopoly is that it doesn't quite
Speaker 1: fit with the prevailing definition of monopoly, which has been
Speaker 1: used by courts and the Federal Trade Commission since the
Speaker 1: nineteen seventies. Mark Scriber of the Competitive Enterprise Institute, a
Speaker 1: free market libertarian think tank, says the issue isn't bigness,
Speaker 1: but consumer welfare in general. A company can grow as
Speaker 1: much as it wants and control as much of the
Speaker 1: market as it wants, as long as prices don't go
Speaker 1: up and consumers don't suffer. You can make the opposite
Speaker 1: case about Amazon. The online retailer is so wildly popular
Speaker 1: with American consumers a one in four US adults that's
Speaker 1: sixty three million people are Amazon Prime members, precisely because
Speaker 1: of its low prices and mostly free shipping. But Cohn
Speaker 1: and others would argue that the consumer welfare focus of
Speaker 1: antitrust law is outdated and misplaced. Yes, consumers love low prices,
Speaker 1: but at what cost. More and more market power and
Speaker 1: influence is being consolidated in the hands of one company.
Speaker 1: With Amazon's practice of buying up competitors like Zappos dot
Speaker 1: Com and Diapers dot Com and expanding into new markets.
Speaker 1: For example, when Amazon acquired Whole Foods in seventeen with
Speaker 1: plans to disrupt the grocery industry, its grip on the
Speaker 1: economy is only likely to tighten. But again, does Amazon's
Speaker 1: rapid expansion and increasing market dominance mean that it's doing
Speaker 1: anything illegal? Scriber says there's no evidence that Amazon is
Speaker 1: using its market power to engage in anti competitive practices
Speaker 1: right now. Instead, Amazon's critics are always warning about what
Speaker 1: might happen in the future, like leverage Whole Foods four
Speaker 1: and fifty locations to push out competition in the grocery
Speaker 1: delivery business. And despite its size, Amazon currently only makes
Speaker 1: up three point six percent of annual retail revenue in
Speaker 1: the United States. Walmart is still much larger. Scriptner said
Speaker 1: that isn't how anti trust law works. There isn't an
Speaker 1: antitrust pre crime. There has to be actual anti competitive
Speaker 1: conduct that occurred for someone to be convicted. But what
Speaker 1: about updating the anti trust laws as con has called
Speaker 1: for to reflect the danger posed by a single technology
Speaker 1: company not only acting as a gatekeeper to the digital economy,
Speaker 1: but expanding its reach into the physical world. Kurt Hessler,
Speaker 1: a former economist with the Carter Administration and a lecturer
Speaker 1: in anti trust law at the u c l A
Speaker 1: School of Law, says that Amazon's business model is unprecedented
Speaker 1: and we simply don't know enough about them to rewrite
Speaker 1: the anti trust law us. Hessler said economists don't know
Speaker 1: enough about how all this works and where it's going
Speaker 1: and how fast it can change to be able to
Speaker 1: change the whole legal landscape intelligently anyway. Any general principles
Speaker 1: that are established in Amazon's case will be applied across
Speaker 1: the whole digital economy, and nobody knows what sort of
Speaker 1: effects those would have. Today's episode was written by Dave
Speaker 1: Ruse and produced by Tristan McNeil. For more on this
Speaker 1: and lots of other tricky legal topics, visit our home planet,
Speaker 1: how stuff Works dot com.