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Will Amazon’s Purchase of Whole Foods Make the Power of Big Tech a Big Political Issue?
The business and consumer implications of the $14 billion Amazon-Whole Foods deal are myriad, both short term (”the boring U.S. grocery business is about to become much more interesting“) and long term (“the decision by Amazon and Walmart to compete for my grocery business … are tiny battles in a war to dominate a changing global economy“).
But there is also a political implication that goes beyond politics. As soon as I heard of the acquisition, I thought of some of Candidate Trump’s comments about Amazon, such as these to Fox News:
This [Washington Post] is owned as a toy by Jeff Bezos, who controls Amazon. Amazon is getting away with murder tax-wise. He’s using the Washington Post for power so that the politicians in Washington don’t tax Amazon like they should be taxed. He’s using the Washington Post … for political purposes to save Amazon in terms of taxes and in terms of antitrust.
He thinks I’ll go after him for antitrust. Because he’s got a huge antitrust problem because he’s controlling so much, Amazon is controlling so much of what they are doing.
Now as it turns out, there is some evidence that “greater political pressure does cause the FTC to challenge more mergers.” Yet I have talked to people who think Trump’s previous comments mean the FTC would be less likely to take action. (And by the way, neither the FTC — which is the key one here — nor the Justice Department’s antitrust division has a permanent boss right now, according to Bloomberg.) Let’s see if the POTUS unleashes a tweetstorm against Amazon. But there could be a bipartisan critique. This from Barry Lynn of left-leaning New America:
Amazon announced today that it wants to buy grocery chain Whole Foods for $13.7 billion in cash. If approved by regulators, the deal would worsen the already severe damage that Amazon is doing to America’s competitive, open market system.
This private corporation already dominates every corner of online commerce, and uses its power to set terms and prices for many of the most important products Americans buy or sell to one another. Now Amazon is exploiting that advantage to take over physical retail.
But this is just part of America’s Amazon Problem. The corporation wields vastly too much power over America’s markets for books and music, and is fast consolidating control over other key flows of information and ideas.
The digital revolution was supposed to make Americans more free. But two decades of bad antitrust enforcement allowed a few giants to consolidate control over whole realms of commerce and communications. It is way past time for the American people to use our government to address the overwhelming concentration of power in the hands of Amazon, and to fully realize the promise of the digital revolution.
Government antitrust enforcers should block this merger. They should also begin a broader investigation into every other anti-competitive practice by Amazon. Congress too must accept its responsibility to address Amazon’s big and growing threat to America’s competitive, open market system, and to the free flow of information and ideas.
This alarmist view of Big Tech — including Facebook, Apple, Alphabet/Google, Microsoft — seems to be growing more common on the left, a view that its huge concentrations of wealth and data mean the platform companies have captured the economy. Check out this tweet from former Obama economist Betsy Stevenson: “Amazon is getting an increasing share of household budgets – they may succeed in their strategy of becoming our national monopolist.”
Yesterday an Axios piece on this issue included this bank analyst quote: “It could ultimately lead to populist calls for redistribution of the increasingly concentrated wealth of Silicon Valley as the gap between tech capital & human capital grows ever-wider.”(Clearly Democrats have brewing political problem here — and the GOP an opportunity — given that Silicon Valley is a big Dem supporter.) Many progressives are already there, combining a call for more redistribution with increased regulation and possible antitrust action toward Big Tech. As WSJ financial editor Dennis Berman joke tweeted:
What will Amazon look like when it is broken apart in 2025?
Commerce
Web Services
Media
Logistics Services
AI
GenomicsWhat am I missing?
— Dennis K. Berman (@dkberman) June 16, 2017
As for me, I will stick with this take of mine from yesterday where I express skepticism that Big Tech is a threat to the democracy and the economy of the United States.
Published in Culture, Economics, Technology
Whenever any story like this comes up involving Amazon, I just remind myself that back at the “turn of the century” (jeez, that always make think the women should be wearing long skirts and bustles!), those in the know were declaring that Amazon was going to go belly up because it was heavily in debt, was not turning a profit, and was facing stiff competition from long-established brick-and-morter stores like Borders and Barnes and Noble. Borders is now out of business; Barnes and Noble is barely hanging on; and Amazon has become a “monster of consumerism” to the Left. Don’t we live in an amazing country at an amazing time in history?
I love how progressives have a problem with monopolies in the public sector, but not the private one. No complaints about Medicare/Medicaid, for example. No complaints about a single payer, no downsides, no problems, only upsides in cost and choice for people.
It can’t be bad in both cases, or good in both cases. The interesting thing about Amazon is that consumers get the things they want, whenever they want them, wherever they want them – and now, of course, that’s a bad thing. Choice is bad. Note that Amazon does not build anything; it is, largely, the delivery vehicle for finished goods and digital material.
I think you have your labels mixed.
As to whether the power of Big Tech will become a political issue . . . it already is. But not everyone acknowledges it.
OK
In 2016, Amazon had 135 Billion in revenue with a net income of 2.371 billion
Or a 1.74% profit margin.
the previous 4 years is alternating years of minor profits and losses generally washing each other out.
Most of their operating income came from AWS.
Amazon’s P/E ratio is 186.46:1.
Its clear that investors expect amazon to be a monopoly. That or we have a south seas trading company situation.
If we assume that markets are even reasonably efficient then yes be worried about monopolistic behavior.
I do. Thanks for the head-slap.
I think the pressure on the FTC to approve more mergers is coming from many companies – not just Amazon. Because there is economic stagnation and very little room to improve a companies top line growth. So in order to find top line growth, they must either buy other companies to boost revenue numbers, or buy back stock to boost earning per share. Both of these solutions reduce employment.
No slap. Just a tap on the shoulder. I knew what you meant, and I fully agree.
More Pethokoukis nonsense:
https://www.economist.com/news/special-report/21707048-small-group-giant-companiessome-old-some-neware-once-again-dominating-global
Is there evidence that Amazon is exercising significant market power? The proof would be above-market prices charged by Amazon. It seems to me that Amazon’s business model is to sell at lower prices.
It also seems to me that Amazon market power is not a serious concern, because of an absence of barriers to entry. Amazon has to compete with Ebay and the on-line arm of many major businesses, from Walmart to Home Depot to Sears.
I would be interested in the results of any empirical studies on the issue.
Investors appear to betting pretty hard on future monopoly profits.
This is an argument against small business, again going to the point that Republicans aren’t really for small business. Neither are the democrats, but at least they have better rhetoric.
I feel for the Small businesses, but it already takes me 40 minutes of driving to hit up the hardware store, so having everything in one place makes errands much easier with 3 kids in tow… or having to be home in time for kids to be out of school. Which goes to the allure of online purchasing.
But Amazon is entering the grocery world. I am already feeling it. My local store has already stopped carrying foods that I regularly purchase, one of which is due to Amazon making a deal with a company to let Amazon be the only carrier.