Summary: Amazon’s monopolization ambitions, strategies, and tying tactics are eerily like Google’s. Both these companies likely have not earned their respective dominances purely on merit, but also via illegal anti-competitive behaviors.
At a minimum, Amazon’s proposed acquisition of WholeFoods warrants an FTC “second request” for information, i.e. a fuller antitrust investigation of whether the acquisition could “substantially lessen competition” in any implicated relevant markets.
Given questions about: Amazon’s alleged deceptive pricing; its alleged non-transparent surge pricing when representing lowest prices, and ISLR’s cataloguing of Amazon Marketplace’s alleged anti-competitive behaviors against Amazon.com’s retail competitors; together create plentiful evidence and concern to warrant a second request for information to ensure this transaction is not anti-competitive.
This piece also spotlights Amazon Prime for antitrust investigation.
It asks the key question if Amazon using the Prime Membership contract as the de facto tie of its online ecommerce demand market power, to extend its market power into its offline physical distribution network, to effectively undermine the physical store model, is analogous to Google using its Android contracts with manufacturers and carriers, as the de facto tie of its online search monopoly power, to extend its market power to the physical world of smartphones, to foreclose competition in search and apps?
Simply, its asks: can contractual tying that extends market power to other markets be illegal monopolization, if it has substantial consumer and innovation benefits? In other words, do monopolization benefits in the short term outweigh monopolization costs long term when there is no more competitive choice to discipline market power?
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Eleven days separated the Amazon-Wholefoods acquisition announcement from the EU ruling Google a search monopoly, that has abused its dominance, and that now must not discriminate.
These unconnected announcements and implications together have created an apparent public inflection point that has quickly crystalized how these two companies are becoming viewed – as popular services of monopolist corporations.
To be fair, Google is an EU-convicted search monopolist, that is charged with illegally monopolizing three additional markets, according to additional pending EU charges against Google.
Amazon is not yet a full monopoly like Google, yet it is a dominant company with considerable online market power and sweeping monopolist ambitions. Evidently, it also is on path to monopolize multiple markets, possibly illegally, and it recently thrust itself wholefoodedly into the antitrust spotlight.
While Google and Amazon are different in many obvious ways, business, market, focus, place, etc., they still are two peas from the same monopolist pod – for antitrust purposes.
As an analyst who has chronicled Google’s antitrust problems via Googleopoly.net, apparently more than anyone, I may have some unique insight for those trying to understand the trending Amazonopolist better. Often, one can accelerate one’s understanding of something complex and unsolved by comparing it with something similar that already has been figured out.
Let me be clear about the two purposes of this piece.
The first purpose is to show that Amazon’s monopolization ambitions, strategies and tactics are eerily like Google’s, meaning these companies have not earned their respective dominances purely on merit, but also via illegal anti-competitive behaviors.
Second, is to add insight and evidence to my initial analysis why this Amazon acquisition warrants an FTC “second request” for information.
Why Amazon and Google are peas from the same monopolist pod.
In 1998, Amazon’s Founder and CEO, Jeff Bezos, was the fourth of four founding investors in Google Inc. for $250,000. Per Ken Auletta’s book “Googled,” Mr. Bezos “fell in love” with Google co-founders, CEO Larry Page and Sergey Brin, because of their user-focused vision.
Same Limitless Monopolist Ambition
Sharing a penchant for publicly branding the grandiose size of their ambitions, in 1994 Bezos named his company Amazon, because it represented the biggest river on earth. Not to be outdone, Page named their company Google, a re-spelling of googol, a 1 with a hundred zeroes after it, which is many times bigger than the number of atoms in the universe.
Bezos and Page were two peas in the same pod in grasping from the beginning that the Internet was a winner-take-all opportunity for whomever could first use Internet technology to aggregate the most users, i.e. aggregate consumer demand, for their functional distribution portal.
Consequently, from their beginnings, their mission statements unabashedly reflect their monopolistic, winner-take-all insights and ambitions.
Bezos’ Amazon Mission statement is: “Our vision is to be earth’s most customer-centric company, to build a place where people can come to find and discover anything they might want to buy online.”
It is a monopoly scale, scope, and reach vision to be the everything store, for everyone, that only Amazon has succeeded in creating so far. Amazon reportedly now offers a mind-boggling, ~500 million products and services, which is ~ten times more than offered by its nearest competitor, Walmart.
Page’s Google mission statement is: “To organize the world’s information and make it universally accessible and useful.” It is a monopoly scale, scope, and reach vision to be the universal information access point for everyone, in every way via 200+ information products.
Amazon and Google also share identical winner-take-all, monopolistic, distribution visions to leverage Internet technology to dominate a core functional Internet distribution channel; they just chose different core Internet distribution functions to dominate: Bezos chose retail-ecommerce and Page chose online information-access.
Why Bezos loved Page and Brin when he first met them, and invested $250k in them even though they had no business plan at the time, is that he apparently saw his own Internet distribution dominance vision in their vision for Google, just pointed at a different core Internet distribution function that did not threaten his vision.
Same Monopolization Strategy
What is so important to understand here is what Bezos and Page are doing is leveraging the same core Internet intermediary platform technology in the same basic way, and using the same basic strategy to monopolize a clearly defined centralized distribution chokepoint, just pointed at opposite sides of the Internet – Amazon at the physical world side to leverage the most products and services versus Page at the virtual world side to leverage the most virtual information of all types.
[Note: the EU in its third Google statement of objections last year already concluded Amazon was not in the Internet search services market, but that Amazon and eBay were in the online “merchant platforms” market definition. This is important for the FTC’s Amazon-Wholefoods review, because if there is a potential market power abuse problem, it is in Amazon’s online intermediary merchant platform function/market, where it may have the most market power to be abused/extended.]
Put another way, Amazon’s Bezos envisioned the Internet winner-take-all, distribution-chokepoint opportunity as aggregating the most scale, scope, and reach of physical (atoms-based) products and services (now ~500m strong) for sale online and delivery offline using an offline retail transaction business model leveraging the winner-take-all, centralizing efficiencies and conveniences of online discovery, review and purchase.
De facto mirroring Bezos’ Amazon, Google’s Page eventually figured out his Internet winner-take-all, distribution-chokepoint opportunity in aggregating the most scale, scope and reach of virtual (bit-based) information of all types,(now the world’s largest corpus of indexed links, information, maps, news, books, video, apps, facts, and art) for online discovery, consumption, and use, and online monetization, leveraging the winner-take-all, centralizing efficiencies and conveniences of online discovery, use, and monetization via advertising auctions.
Cutting to the quick, both Bezos and Page grasped earlier than others that they were in winner-take-all online race to lock up first their chosen online distribution chokepoint for a core Internet intermediary function, i.e. Amazon having the most offline products and services for purchase and delivery -- to attract the most buyers/customers; and Google having online access to the most online information for the most software uses – to attract the most users, aka advertising product.
[Note: Google and Amazon are not alone in figuring out the online winner-take-all distribution-chokepoint alchemy for a core online economic function, just the furthest along in fully accomplishing it. Facebook, Uber, and Airbnb are well on their way to similar winner-take-all distribution-chokepoint alchemy in social sharing, transportation services, and accommodation services respectively. To date, only the EU antitrust authorities for Google have figured out this out-of-control antitrust problem and begun to address it.]
Same Strategies to Game Antitrust Enforcement
Gaming Consumer Benefits & Innovation?
It is clear that Amazon and Google are devotees to the de facto get-out-of-jail-free-card antitrust advice of the seminal 1998 book “Information Rules,” written by DOJ antitrust expert economist Carl Shapiro, and economist Hal Varian, who has been Google’s Chief economist since 2002.
In a nutshell, their effective antitrust-action-avoidance-advice for info-tech companies is always have a plausible justification for any behavior that a judge could see as a 51% benefit to consumers and could perceive as “innovation” that helps consumers, creates efficiencies, or lowers prices.
Hence, Amazon brands itself as “most customer centric company” and Google says its top company value has been: “focus on the user and all else will follow.” Cue halos and adoration for being purposeful, merit-based monopolists that would never think of foreclosing any competition.
Gaming Tying?
They also remain two peas in the same monopolist pod in engaging in classic anti-competitive tying behavior that is dressed up most extravagantly in consumer-benefiting justification – in other words: consumer-benefiting ends, justify the anticompetitive-means.
Google’s tying of its free Android mobile operating system to Google’s dominant search, to extend its search dominance to mobile, by contractually requiring handset manufacturers and carriers, to favor Google search and apps in smartphones, has been charged as an abuse of dominance by the EU last year.
Google has long defended Android and its Android promoting behaviors as pro-consumer and pro-innovation, to justify its contractual tying and its claims of fair use to evade paying Oracle royalties for use of its Java copyrights.
Amazon is effectively leveraging its dominance as Google-Android does, in tying its increasing dominance of online retail purchase demand to its offline Amazon Prime contractual “free delivery” service and bundled bounteous consumer freebies.
How could all these wonderful consumer benefits and conveniences ever be anti-competitive? That’s precisely the type of question that antitrust investigations are designed to answer.
At a minimum, the FTC should make a “second request” of information in the Amazon-Wholefoods proposed acquisition, to investigate if Amazon Prime’s tying of its online ecommerce dominance to its offline delivery distribution network is anti-competitive in any way.
This question is critical to answer, because if Amazon Prime tying will always be viewed as pro-competitive and not anti-competitive if consumers enjoy enough sufficiently valuable consumer freebies, it’s an FTC green-light for Amazon to continue to game the antitrust system, and roll-up and monopolize the other half of online ecommerce that it does not yet have.
Just like Android’s contractual tying has enabled Google to extend its core search dominance into multiple additional markets (per the EU statements of objections), Amazon Prime’s contractual tying is enabling Amazon to extend its core online ecommerce dominance to offline fulfillment, delivery, and other services.
One company (Google) is seeking to monopolize online distribution of online information, just like one company (Amazon) is seeking to monopolize offline distribution of all online ordered products and services.
Gaming the Antitrust Acquisition Review Process?
Consider another way Amazon and Google are two peas from the same monopolist pod – the way they have both gamed the Clayton Act by acquiring market power via special macro data dominance.
Since Google became the leading search engine in 2004, it has leveraged its especially large and comprehensive search index to spot emerging uses, trends and acquisition opportunities. Since it went public, Google has acquired ~200 companies, about 1.25 a month, and only a handful were reviewed by antitrust authorities.
Since Google has the macro market supply and demand data to spot winners before anyone else they have been able to buy companies much earlier without antitrust review than companies could when the 1976 Hart Scott Rodino Act set merger-review-process triggers into law.
Interesting to the two peas in the same monopolist pod theme, Amazon learned this trick at the very beginning via Bezos investment in Google in 1998.
Amazon has acquired 77 companies, and only WholeFoods, if it gets a second request for information from the FTC, will have garnered any serious antitrust attention.
Apparently, Bezos learned a lot from being among the earliest four investors in Google, for $250,000, because the next year Amazon bought Alexa.com for a 100x more, $250,000,000. Tellingly Alexa.com was the leading web traffic data and analysis company at the time; now it tracks web traffic rankings for thirty million sites globally.
This Alexa.com data and capability affords Amazon a with macro data dominance knowledge advantage in retail like that which Google has in online information. This gives Amazon a rare early look at companies Internet supply and demand characteristics in detail, enabling them to acquire companies much earlier than competitors and evade antitrust scrutiny.
Conclusion
If the FTC makes no formal second request for information on Amazon-Wholefoods, it would be a four-paw vertical salute that the Obama FTC’s de facto 2013-2016 antitrust stand-down policy for Google and Internet platforms continues.
As one can see from this piece, Amazon and Google are two peas from the same monopolist pod.
The FTC, DOJ, and the EU antitrust authorities can learn much about Amazon’s monopolization potential by examining the trailblazing online monopolization success of Google’s online platform monopolization strategies.
Forewarned is forearmed.
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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and before the relevant House oversight subcommittee on Google’s privacy problems.
Online Winner-Take-All Platforms Antitrust Series
Part i: Why Did Google & Facebook Stop Competing with Each Other? [8-3-16]
Part ii: Google’s Information is Power, Info-poly Power [9-18-16]
Part iii: What No Bids for Twitter Tell Us about Google-Facebook & Online Advertising [10-21-16]
Part iv: Five Worst Google Antitrust Decisions [11-4-16]
Part 1: America’s Indefensible Media Concentration Double Standard [12-5-16]
Part 2: The Google-Facebook Online Ad Cartel is the Biggest Competition Problem [1-12-17]
Part 3: Twitter & Snap Evidence Confirm Goobook Ad Cartel Crushing Competition [2-15-17]
Part 4: Look What’s Happened Since the FTC Stopped Google Antitrust Enforcement [3-13-17]
Part 5: Google Antitrust Implications of Makan Delrahim as DOJ Antitrust Chief [3-28-17]
Part 6: Trump Administration Implications for Google Antitrust in EU, US & Markets [4-7-17]
Part 7: 6 Reasons Trump DOJ Will Take Lead from FTC in Google Antitrust Enforcement [4-13-17]
Part 8: Google-Russia Antitrust Deal Has Big Implications for EU Cases, Trump DOJ [4-19-17]
Part 9: Google Takeaways from Trump Antitrust Chief’s Senate Confirmation Hearing [5-11-17]
Part 10: New Evidence Google Facebook Ad Cartel Crushing Competition Market Failing [5-18-17]
Part 11: Alphabet-Google Big Takeaways from Trump Antitrust Chief’s Senate Answers [6-1-17]
Part 12: Trump Administration Lets Last Google Government Guardian Go – Michelle Lee [6-9-17]
Part 13: The Internet Association Proves Extreme US Internet Market Concentration [6-15-17]
Part 14: Why Amazon-WholeFoods Will Attract Serious Antitrust Scrutiny [6-16-17]
Part 15: Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]
Part 16: The Trump DOJ “Slam Dunk” Antitrust Case Against Alphabet-Google [6-28-17]
Part 17: How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]
