just wanted to say, I learn more reading your newsletter than from any other writer I've discovered in ages (started reading your work after a nudge from Greenwald/Taibbi); keep up the great work!
It's not at all obvious that offering products for sale and fulfilling sales are two separate lines of business. That's like saying a grocery store can't offer home delivery. In fact, a great deal of the reason why Amazon succeeded is because of superior fulfillment. Amazon Prime was a success because it removed shipping costs as friction; the buyer sees one price and that - plus sales tax - is the final price. No inflated shipping costs, handling charges, and other gouges that were the hallmarks of mail order sales before Amazon. One might reasonably see Amazon's cloud services as a separate business, but not order fulfillment.
"That's like saying a grocery store can't offer home delivery."
You seem to be missing that Amazon is still primarily an online mall, not a retailer per se.
This is more comparable to a mall owner requiring mall shops to use its home delivery service or the mall will hide the shops behind shops owned by the mall owner which sell the same products. And oh yeah, the mall owns the major piece of zoned shopping real estate in the town, forcing independents to set up shop on the outskirts. And hey, if your business is successful in the mall the mall will open up a mall-owned competitor that isn't required to pay for the mall-owned home delivery service.
Wildly stretched analogy aside, no it isn't more comparable. In the first place, Amazon isn't "primarily" a mall owner. Amazon operated for a dozen years before allowing third party sellers, and third parties account for only 55% of its total sales, starting from zero in 2006. Yes, third party sales have been good for Amazon, but they have been good for third party sellers, too.
Third party sellers aren't required to pay for Amazon delivery. Many fulfill their own orders, using Amazon for order-taking and payment. Since you mentioned that bit of misinformation twice, you may want to check your facts.
Amazon doesn't own any part of the Internet. There is no zoning keeping independents from setting up shop. In fact, many Amazon sellers also sell direct. They just don't attract the visibility and volume that Amazon brings them.
Yes, Amazon has store brands. Like Walmart, Kroger, Safeway, and every other large retailer. Macy's has over 18 house brands. You bet store brands compete with other products. Another effect they have is to lower the cost to the consumer. I confess I've bought Happy Belly Whipping Cream for $1.99/pint rather than Clover for $4.99/pint.
Everyone has a different set of facts to draw conclusions from. I'm more hoping you'll read facts you weren't aware of than the arguments utilizing these facts.
A couple of facts: At least some selling agreements with Amazon require sellers to not set a lower price on their own store than they do on their Amazon store. Unless there is no alternative the Amazon 'buy box' is preferentially populated by sellers who use 'fulfilled by Amazon', not necessarily the seller with the lowest price.
Another excellent letter - your weekly edition has gone to the top of my „must read“ pile and always feel like a lesson in applied capitalism and history in one.
The SCOTUS isn't really pro-monopoly, and its NCAA ruling shouldn't be that surprising. The NCAA is not a monopoly in this case, so much as a labor market monopsonist. The "restraint of trade" aspect is so obvious, no consumer benefit criterion comes into play. Neither the NCAA nor the players are final consumers in any case.
For the breakup bill, is there a "sold separately" clause. I would say that if Amazon vertically integrated, and only sold marketplace, Prime, and Fulfillment as a bundle, that would be OK. A "sold separately" clause would mean that they couldn't offer their own products on the same platform (i.e. the platform is only a 3rd-party marketplace) which would prevent them from selling against marketplace participants, and as it's a bundle you wouldn't be able to play games with preferences for different parts of the platform - everyone would have every part. Essentially, it disallows semi-vertical integration. This is a big part of the platform strategy, going back to "embrace, extend". You first establish a control point that intermediates 2 parts of an ecosystem, preferably with multiple users on both sides (consumers and sellers, system component providers and OEMs, etc). Then you integrate the components into the core platform - "grow share of wallet". This is the standard industry playbook.
Thanks Matt for staying on top of this. Really, almost nothing is more critical to this economy and our freedom than reducing the monopolistic power of these companies. Bit Tech is not the ONLY industry as you well know that needs to be addressed.
I think that exposing the political leadership cleavages is the key. The devil is in the details and if the government is not 'thinking like a criminal" (awesome reference in the article) then they are not going to be winning the battle against Erics team.
Can you do more to expose who on the left and right are on the right side of this argument and are they gaining in power or reclining in power?
I support anti-trust legislation but it seems like it will be a slow grind. What if the monopolies wanted to break themselves up? I suggest a progressive corporate tax rate in addition to anti-trust legislation, we need to fight the oligarchy on multiple fronts.
Get rid of the corporate flat tax and bring in a progressive corporate tax scheme, like we already have for personal income taxes - the biggest and most profitable corporations would pay at a higher RATE. For example the top corporate rate might be 50%, the next lower bracket would be 40% etc etc down to the smallest businesses rate of 15% for tiny one person businesses. No more flat tax - it is a stupid idea for personal income taxes and was a stupid idea for corporations, and yet that is what we have right now.
Big monopolies would break themselves into smaller units in order to descend into lower tax brackets, under a progressive tax structure. They would break themselves up even more quickly and efficiently than the government could do it, because nothing motivates corporations more than greed. Another benefit of a progressive corporate tax is that smaller businesses which are more competitive and generate more jobs and are more innovative would pay a lower rate than the monopolies which are currently crushing them out of existence.
A minimum global corporate tax (to eliminate tax havens) combined with a progressive corporate tax rate would restore the free market and get big business to pay their fair share. They have had their taxes cut too much, they need to pay more.
Interesting ideas. Need to deal with shared ownership / separate company structures though, as well as overlapping boards of directors. Anti-cartel laws may be sufficient, or they may need to be strengthened.
Corporations find it easy to merge and takeovers are very common. The reverse should be just as easy. Corporations sell off pieces of themselves all the time, they have figured out easy ways to do things like that.
There are existing laws which prevent separate companies from cooperating too closely but they can be strengthened and enforced more as you say.
I'd prefer corporations break themselves up (through changes in tax structure like a progressive corporate tax) but if they won't, it should be done to them. Its needs to be done one way or the other, but it will be faster and more efficient if they do it to themselves.
This is an interesting idea but, like so many things, I suspect it's better in theory than practice. For starters, I can't imagine a global tax would ever happen, and all it would take would be one or two countries that don't participate for companies to incorporate there and avoid the taxes. There are, of course, ways to deal with that somewhat, but the bottom line is companies, and their high-paid lawyers and accountants, are always going to find ways around paying more taxes. That's also why a progressive tax rate may not make as much difference as you think/hope, because they would find ways to reduce it significantly, and probably whatever increase they do end up paying as a less than ideal, but acceptable, cost of maintaining their dominance.
Also, keep in mind that companies often sell pieces of themselves, but this is usually because those pieces are just not profitable (enough) or not because it's better for the company or the piece it sells, but for the execs who get a big fat check from the deal. In other words, just because it can be done, and often is, doesn't mean the results are typically good. Allowing companies to do this themselves, even if by force through increased tax rates, will only result in them doing it in a way that results in the best result for their profits, not what's best for the companies that are split off or for the consumers and employees. The whole reason we're in this mess is because of greed, so thinking greed is the solution doesn't seem like a wise approach, at least not without still having a fair amount of involvement and intervention otherwise to help "guide" the breakup decisions.
I don't know the history of progressive corporate taxes or if it's been tried before, but it seems to me like a simple, obvious and efficient way to break up monopolies. If they don't break themselves up they can pay sky-high taxes until they are broken up by anti-monopoly legislation which should be passed eventually. The rates for different brackets can be tuned to get the desired "self-destruct" effect. There should be no escape from monopoly regulations, except to stop being a monopoly IMHO.
In other news, the Second Circuit just trashed what had been a significant FTC victory against 1-800-Contacts. Even if we have a dozen competing search engines, if competitors can agree (or be coerced to agree) not to do competitive keyword advertising on any of them, consumers will continue to lose out.
Historically, anti-trust actions are only brought after they are pointless because market forces are already in the process of destroying the existing monopoly. Government action is a following indicator, not a leading indicator.
This action doesn't show that government is finally moving. Rather, it shows that these "monopolies" are already in the process of being destroyed. Facebook was already debilitated as its massive user base slowly dies off and is not being replaced. But, that's a minor problem compared to the elephant in the room: blockchain.
The nascent blockchain technologies have already begun the process of destroying the social media giants. Youtube, for instance, is even now being replaced by LIBR. The best blockchains are decentralized, not owned by any particular individual or entity. The new government activity merely signals what tech watchers know. The social media giants are already dead. They just don't know it.
Steve - I think you are projecting out your HOPES and desired rather than dealing with the evidence.
Block Chain is having a real impact on business and it is a growing technology. Is it going to disrupt Social Media? I think that the link is nascent at best.
Matt - I wish you would write on the terribly COMMUNIST activities by the TX Railroad Commission & other State Agencies if not designed to, certainly practicing separation of Texans from their USC-protected rights to trials by jury of peers.
TX had 128 citizens die of the BIG FREEZE of MAR2021 and Gov Abbott lied about the causes wrongly blaming ERCOT when in fact it is just these MONOPOLY Gas Pipelines like my situation that illegally shutin my well for 12 months violating SWR 3.73b which simply states: "No pipeline may disconnect from a producer without having first applied for authority from TX RRC adn secondly having recieved same; except, should a producer in writing agree to disconnection".
NONE of hte requirements of SWR73b were met. The facts were not in dispute. AND YET, ALJ Chico dismissed my case after refusing to penalize Eastman Gas Company for violating SWR73b by shutting in my well for 12 mos. Her reasoning was that literally 22 hrs b4 the hearing, they agreed to restore service.
This is a long-employed tactic by pipelines to "Force Down" bad contracts upon producers. It leaves the producer with the only choices of: 1) accept a bad contract, or 2) have your well shutin until you decide to accept a bad contract or lose your leases for non-production!
Additional, as seen this past MAR2021, it kills Texans due to inability to receive the much-needed natural gas during bitterly cold weather.
Our TX RRC is corrupt. Our TX Govt - largely Rethuglicans for the entirety of my 35 Yrs as Prof Engr practicing in the state - is corrupt. Our Rethuglican Gov, AG, DAs, Courts and Legislature apparently can't be bothered with justice when profits for monopolists are at stake.
Wish you could help b4 we small, private producers are BKd in favour of TBTJWS PUBLIC E&Ps and Monopoly Pipelines' profits and more Texans needlessly die purely for the greed, avarice and hubris of complicit Govt Actors. The Docket # b4 TX RRC was OG-20-00005143.
Thanks in advance - D. Mark Loyd, Pres of Imagery Exploration, Inc.
It's stupid to lump all these firms together. Amazon and Google are by far the biggest offenders, whereas Apple works within its own ecosystem and is not a monopoly. Are Apple's rules sometimes capricious, distasteful, or even douchey? Probably. But nobody is forcing anyone to do business with them.
Meanwhile, the ever-expanding TicketMaster monopoly goes unpunished, despite being a textbook example of a consumer-harming monopolistic entity.
David- Your argument is not compelling. NONE of these companies, including Apple have a pure monopoly. That is the point. They all have NEAR monopolies. Apple's Ap Networks is as close to a pure monopoly as it gets...
The fact that it can't be broken up but the justice department is evidence of antiquated law written long before the internet and its new business models existed.
Apple is just as guilty as the rest of monopoly power. But i do agree they are much better with privacy than Amazon or Google,.
just wanted to say, I learn more reading your newsletter than from any other writer I've discovered in ages (started reading your work after a nudge from Greenwald/Taibbi); keep up the great work!
Thanks!
It's not at all obvious that offering products for sale and fulfilling sales are two separate lines of business. That's like saying a grocery store can't offer home delivery. In fact, a great deal of the reason why Amazon succeeded is because of superior fulfillment. Amazon Prime was a success because it removed shipping costs as friction; the buyer sees one price and that - plus sales tax - is the final price. No inflated shipping costs, handling charges, and other gouges that were the hallmarks of mail order sales before Amazon. One might reasonably see Amazon's cloud services as a separate business, but not order fulfillment.
"That's like saying a grocery store can't offer home delivery."
You seem to be missing that Amazon is still primarily an online mall, not a retailer per se.
This is more comparable to a mall owner requiring mall shops to use its home delivery service or the mall will hide the shops behind shops owned by the mall owner which sell the same products. And oh yeah, the mall owns the major piece of zoned shopping real estate in the town, forcing independents to set up shop on the outskirts. And hey, if your business is successful in the mall the mall will open up a mall-owned competitor that isn't required to pay for the mall-owned home delivery service.
Wildly stretched analogy aside, no it isn't more comparable. In the first place, Amazon isn't "primarily" a mall owner. Amazon operated for a dozen years before allowing third party sellers, and third parties account for only 55% of its total sales, starting from zero in 2006. Yes, third party sales have been good for Amazon, but they have been good for third party sellers, too.
Third party sellers aren't required to pay for Amazon delivery. Many fulfill their own orders, using Amazon for order-taking and payment. Since you mentioned that bit of misinformation twice, you may want to check your facts.
Amazon doesn't own any part of the Internet. There is no zoning keeping independents from setting up shop. In fact, many Amazon sellers also sell direct. They just don't attract the visibility and volume that Amazon brings them.
Yes, Amazon has store brands. Like Walmart, Kroger, Safeway, and every other large retailer. Macy's has over 18 house brands. You bet store brands compete with other products. Another effect they have is to lower the cost to the consumer. I confess I've bought Happy Belly Whipping Cream for $1.99/pint rather than Clover for $4.99/pint.
You need to read more of Matt's articles on Amazon, as well as perusing the comments of those articles.
You mean I'm not fully indoctrinated? Not sure I want to be, but understanding an opposing argument is always a good thing. Point taken.
Everyone has a different set of facts to draw conclusions from. I'm more hoping you'll read facts you weren't aware of than the arguments utilizing these facts.
A couple of facts: At least some selling agreements with Amazon require sellers to not set a lower price on their own store than they do on their Amazon store. Unless there is no alternative the Amazon 'buy box' is preferentially populated by sellers who use 'fulfilled by Amazon', not necessarily the seller with the lowest price.
Another excellent letter - your weekly edition has gone to the top of my „must read“ pile and always feel like a lesson in applied capitalism and history in one.
The SCOTUS isn't really pro-monopoly, and its NCAA ruling shouldn't be that surprising. The NCAA is not a monopoly in this case, so much as a labor market monopsonist. The "restraint of trade" aspect is so obvious, no consumer benefit criterion comes into play. Neither the NCAA nor the players are final consumers in any case.
For the breakup bill, is there a "sold separately" clause. I would say that if Amazon vertically integrated, and only sold marketplace, Prime, and Fulfillment as a bundle, that would be OK. A "sold separately" clause would mean that they couldn't offer their own products on the same platform (i.e. the platform is only a 3rd-party marketplace) which would prevent them from selling against marketplace participants, and as it's a bundle you wouldn't be able to play games with preferences for different parts of the platform - everyone would have every part. Essentially, it disallows semi-vertical integration. This is a big part of the platform strategy, going back to "embrace, extend". You first establish a control point that intermediates 2 parts of an ecosystem, preferably with multiple users on both sides (consumers and sellers, system component providers and OEMs, etc). Then you integrate the components into the core platform - "grow share of wallet". This is the standard industry playbook.
Thanks Matt for staying on top of this. Really, almost nothing is more critical to this economy and our freedom than reducing the monopolistic power of these companies. Bit Tech is not the ONLY industry as you well know that needs to be addressed.
I think that exposing the political leadership cleavages is the key. The devil is in the details and if the government is not 'thinking like a criminal" (awesome reference in the article) then they are not going to be winning the battle against Erics team.
Can you do more to expose who on the left and right are on the right side of this argument and are they gaining in power or reclining in power?
I support anti-trust legislation but it seems like it will be a slow grind. What if the monopolies wanted to break themselves up? I suggest a progressive corporate tax rate in addition to anti-trust legislation, we need to fight the oligarchy on multiple fronts.
Get rid of the corporate flat tax and bring in a progressive corporate tax scheme, like we already have for personal income taxes - the biggest and most profitable corporations would pay at a higher RATE. For example the top corporate rate might be 50%, the next lower bracket would be 40% etc etc down to the smallest businesses rate of 15% for tiny one person businesses. No more flat tax - it is a stupid idea for personal income taxes and was a stupid idea for corporations, and yet that is what we have right now.
Big monopolies would break themselves into smaller units in order to descend into lower tax brackets, under a progressive tax structure. They would break themselves up even more quickly and efficiently than the government could do it, because nothing motivates corporations more than greed. Another benefit of a progressive corporate tax is that smaller businesses which are more competitive and generate more jobs and are more innovative would pay a lower rate than the monopolies which are currently crushing them out of existence.
A minimum global corporate tax (to eliminate tax havens) combined with a progressive corporate tax rate would restore the free market and get big business to pay their fair share. They have had their taxes cut too much, they need to pay more.
Interesting ideas. Need to deal with shared ownership / separate company structures though, as well as overlapping boards of directors. Anti-cartel laws may be sufficient, or they may need to be strengthened.
Corporations find it easy to merge and takeovers are very common. The reverse should be just as easy. Corporations sell off pieces of themselves all the time, they have figured out easy ways to do things like that.
There are existing laws which prevent separate companies from cooperating too closely but they can be strengthened and enforced more as you say.
I'd prefer corporations break themselves up (through changes in tax structure like a progressive corporate tax) but if they won't, it should be done to them. Its needs to be done one way or the other, but it will be faster and more efficient if they do it to themselves.
This is an interesting idea but, like so many things, I suspect it's better in theory than practice. For starters, I can't imagine a global tax would ever happen, and all it would take would be one or two countries that don't participate for companies to incorporate there and avoid the taxes. There are, of course, ways to deal with that somewhat, but the bottom line is companies, and their high-paid lawyers and accountants, are always going to find ways around paying more taxes. That's also why a progressive tax rate may not make as much difference as you think/hope, because they would find ways to reduce it significantly, and probably whatever increase they do end up paying as a less than ideal, but acceptable, cost of maintaining their dominance.
Also, keep in mind that companies often sell pieces of themselves, but this is usually because those pieces are just not profitable (enough) or not because it's better for the company or the piece it sells, but for the execs who get a big fat check from the deal. In other words, just because it can be done, and often is, doesn't mean the results are typically good. Allowing companies to do this themselves, even if by force through increased tax rates, will only result in them doing it in a way that results in the best result for their profits, not what's best for the companies that are split off or for the consumers and employees. The whole reason we're in this mess is because of greed, so thinking greed is the solution doesn't seem like a wise approach, at least not without still having a fair amount of involvement and intervention otherwise to help "guide" the breakup decisions.
Wasn't something like that tried by the conglomerates? Or was that to try to escape anti-monopoly regulations?
I don't know the history of progressive corporate taxes or if it's been tried before, but it seems to me like a simple, obvious and efficient way to break up monopolies. If they don't break themselves up they can pay sky-high taxes until they are broken up by anti-monopoly legislation which should be passed eventually. The rates for different brackets can be tuned to get the desired "self-destruct" effect. There should be no escape from monopoly regulations, except to stop being a monopoly IMHO.
There must be prison time and stiff fines included.
In other news, the Second Circuit just trashed what had been a significant FTC victory against 1-800-Contacts. Even if we have a dozen competing search engines, if competitors can agree (or be coerced to agree) not to do competitive keyword advertising on any of them, consumers will continue to lose out.
Historically, anti-trust actions are only brought after they are pointless because market forces are already in the process of destroying the existing monopoly. Government action is a following indicator, not a leading indicator.
This action doesn't show that government is finally moving. Rather, it shows that these "monopolies" are already in the process of being destroyed. Facebook was already debilitated as its massive user base slowly dies off and is not being replaced. But, that's a minor problem compared to the elephant in the room: blockchain.
The nascent blockchain technologies have already begun the process of destroying the social media giants. Youtube, for instance, is even now being replaced by LIBR. The best blockchains are decentralized, not owned by any particular individual or entity. The new government activity merely signals what tech watchers know. The social media giants are already dead. They just don't know it.
Steve - I think you are projecting out your HOPES and desired rather than dealing with the evidence.
Block Chain is having a real impact on business and it is a growing technology. Is it going to disrupt Social Media? I think that the link is nascent at best.
Matt - I wish you would write on the terribly COMMUNIST activities by the TX Railroad Commission & other State Agencies if not designed to, certainly practicing separation of Texans from their USC-protected rights to trials by jury of peers.
TX had 128 citizens die of the BIG FREEZE of MAR2021 and Gov Abbott lied about the causes wrongly blaming ERCOT when in fact it is just these MONOPOLY Gas Pipelines like my situation that illegally shutin my well for 12 months violating SWR 3.73b which simply states: "No pipeline may disconnect from a producer without having first applied for authority from TX RRC adn secondly having recieved same; except, should a producer in writing agree to disconnection".
NONE of hte requirements of SWR73b were met. The facts were not in dispute. AND YET, ALJ Chico dismissed my case after refusing to penalize Eastman Gas Company for violating SWR73b by shutting in my well for 12 mos. Her reasoning was that literally 22 hrs b4 the hearing, they agreed to restore service.
This is a long-employed tactic by pipelines to "Force Down" bad contracts upon producers. It leaves the producer with the only choices of: 1) accept a bad contract, or 2) have your well shutin until you decide to accept a bad contract or lose your leases for non-production!
Additional, as seen this past MAR2021, it kills Texans due to inability to receive the much-needed natural gas during bitterly cold weather.
Our TX RRC is corrupt. Our TX Govt - largely Rethuglicans for the entirety of my 35 Yrs as Prof Engr practicing in the state - is corrupt. Our Rethuglican Gov, AG, DAs, Courts and Legislature apparently can't be bothered with justice when profits for monopolists are at stake.
Wish you could help b4 we small, private producers are BKd in favour of TBTJWS PUBLIC E&Ps and Monopoly Pipelines' profits and more Texans needlessly die purely for the greed, avarice and hubris of complicit Govt Actors. The Docket # b4 TX RRC was OG-20-00005143.
Thanks in advance - D. Mark Loyd, Pres of Imagery Exploration, Inc.
This seems like a job for organization of the small producers and joint lobbying of your Texas AG's office.
BRAVO - thank you VERY much for this update.
And - something else, of high interest:
IT’S TIME TO BUILD by Marc Andreessen IT'S TIME TO BUILD - Andreessen Horowitz (a16z.com)
https://a16z.com/2020/04/18/its-time-to-build/
It's stupid to lump all these firms together. Amazon and Google are by far the biggest offenders, whereas Apple works within its own ecosystem and is not a monopoly. Are Apple's rules sometimes capricious, distasteful, or even douchey? Probably. But nobody is forcing anyone to do business with them.
Meanwhile, the ever-expanding TicketMaster monopoly goes unpunished, despite being a textbook example of a consumer-harming monopolistic entity.
David- Your argument is not compelling. NONE of these companies, including Apple have a pure monopoly. That is the point. They all have NEAR monopolies. Apple's Ap Networks is as close to a pure monopoly as it gets...
The fact that it can't be broken up but the justice department is evidence of antiquated law written long before the internet and its new business models existed.
Apple is just as guilty as the rest of monopoly power. But i do agree they are much better with privacy than Amazon or Google,.
"Apple's Ap Networks?" What are you talking about? This doesn't even exist. What does Apple "nearly" monopolize?
"The fact that it can't be broken up but the justice department is evidence of antiquated law"
That's not even a sentence. Seriously, you're lashing out at nothing and can't even articulate why.
Matt, are you looking at the KCS/CN rail merger? What is there like one railroad left in this f'n country? The STB is reviewing this thing now. https://theloadstar.com/cn-and-kcs-hopeful-of-merger-green-light-from-us-stb-this-month/
BNSF, CSX, Norfolk Southern, and Union Pacific are still out there. For now.
Thank you! I would still love to see the Stoller deep dive since we have seen a steady consolidation.
So would I.
I don't know a lot about railroad regulation, but I'll see what I can do.
Thanks.