“Amazon on Friday announced plans to acquire Whole Foods, the high-end grocer. If approved by antitrust enforcers, the $13.7 billion deal would give Amazon control of more than 400 stores, an extensive supply chain and a new source of consumer data.Amazon will argue to federal authorities, most likely the Federal Trade Commission, that the deal should be blessed because the combined entity’s share of the American grocery market will be less than 5 percent.
But antitrust officials would be naïve to view this deal as simply about groceries. Buying Whole Foods will enable Amazon to leverage and amplify the extraordinary power it enjoys in online markets and delivery, making an even greater share of commerce part of its fief.
The company has established its level of dominance because of the failings of our current antitrust laws. To understand why, you first need to understand the scope of Amazon’s power. It has captured 43 percent of all internet retail sales in the United States, with half of all online shopping searches starting on Amazon. In 2016, it had over $63 billion in revenue from online sales in the United States — or more than the next 10 top online retailers combined. It controls 74 percent of e-book sales, is the largest seller of clothes online and is set to soon become the biggest apparel retailer in the country.”
“In building this vast empire, Amazon chased growth over paying dividends, pricing key goods and services below cost to chase out competitors. It invested heavily to buy out innovators like Diapers.com after waging price wars. (Amazon followed its acquisition by raising prices.)”
Yes, the diapers.com story was well described in Bloomberg Businessweek, and was a horrible story of abuse and destruction of competition through market dominance. Amazon forced the two women who started and owned diapers.com to sell or loose everything. Amazon discounted everything that they sold, below cost to shut them down. Facing bancruptcy, they swallowed their pride and sold. This is how Amazon got to owning 43% of all sales on the internet in the US. In a better world, our anti trust department would break up Amazon now, starting with divisions like Diapers.com that were aquired illegally or immorally, and have hurt consumers.
The US Govt should allow Amazon to buy Whole Foods, or any one else for that matter, only if they are willing to divest themselves of Diapers.com, and other .com’s that were aquired through pressure and market power.
Simon M Dallas 8 minutes ago
Two local bookstores (one of which was in a mall) within walking distance to me are now gone and I’m forced to drive into the wealthier part of town if I want to spend a leisurely Saturday or Sunday browsing in a bookstore as I used to do. I suspect this has been happening all over the country now for several decades and people wonder why retail stores and malls are having trouble staying in business. Amazon has driven away much of the walk-in and walk-thru traffic that used to be there.
1 Recommended by ME David Lindsay
I am not anti-Amazon but I am pro-local economy, which means I use Amazon only when I have to, i.e., when stores in my town do not carry what I need. Amazon works because it gives people what they think they, and often do, need. If people understood that their local economies– their home values, their schools, they availability of summer jobs for their kids, a variety of local restaurants, the opportunity to spend less time driving, preservation of farmland, and the like that make up a good quality of life — turned on going to the stores in their neighborhood rather than online or big boxes, then Amazon and Walmart would not loom as such threats.
Good luck with anti-trust enforcement, by the way. When’s the last time the DOJ’s anti-trust division did anything in a timely manner–before hundreds of businesses were wiped out– that made a difference in consumers’ lives?
Thank you to Ms. Khan for writing this and the NYT for publishing it. Amazon is a real threat to our economy. Right now, consumers live under the short-sighted and misguided misapprehension that Amazon benefits us. However, given its practice of raising prices in the absence of competition, competition which it has quashed with predatory pricing among other nefarious practices, it should be obvious that it is just a matter of time before it engages in price gouging. Congress, FTC, and DOJ need to intervene before it is too late, but again, if past behavior is any indication, they will fail to do so.