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Amazon is everywhere. Here’s how the US could break it up

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Of the big four, Amazon has given the clearest picture so far of how it could change its business if bills become law. And the first piece of his empire to go could be his huge third-party market,

Recently, the company suggested that it could be forced to stop operating its market for third-party sellers and go back to the days when it simply sold all products instead. This move could have huge implications for the millions of sellers who trust it to run their business and improve the shopping experience. for consumers accustomed to getting basically everything they want in one place.

Longtime Amazonian observers we don’t know if Amazon would really follow this plan if the legislation is passed, which is probably a long way off, because it could hurt the company’s end result. But the possibility demonstrates the challenges lawmakers face when trying to moderate the power of Amazon and its tech giant colleagues.

“Breaking companies is very, very hard,” said Joel Mitnick, a partner in the antitrust group at the law firm Cadwalader. “Breaking down companies that love consumers is even harder.”

Unraveling Amazon’s network of companies

Amazon was once just a bookseller. Now, a short list of Amazon companies includes their cloud division Amazon Web Services; Whole foods; advertising; games; entertainment and streaming; logistics, warehousing and delivery; smart devices; payment services and, of course, e-commerce.

Some of these divisions have become targets of criticism in recent years. Senator Elizabeth Warren, during her 2020 presidential candidacy, suggested appointing regulators to “develop anti-competitive mergers,” including those of Amazon Purchase of $ 13.7 billion of Whole Foods in 2017.
More recently, Amazon also proposed the acquisition of $ 845 million from the legendary MGM movie studio he confronted Warren i other legislators. The Federal Trade Commission, under the recent appointment of Amazon curator and critic Lina Khan, is configured to review the deal.

And while it hasn’t caught attention yet, regulatory action can also affect Amazon Web Services, the company’s most profitable division, which provides a crucial IT infrastructure for businesses and government agencies around the world, as well as for on Amazon itself.

Some analysts as well a former vice president of Amazon – You previously suggested that Amazon remove AWS as a way to counteract antitrust pressure and fuel business unity growth. In 2019, Andy Jassy, ​​the former head of AWS who recently took over as CEO of Amazon, he laughed at a question from the reporter about the possibility of leaving the cloud business in the near future.

For now, at least, U.S. regulators are focusing on the centerpiece of the Amazon empire: retail.

Completion of the Amazon market

When you search for products on Amazon’s site, many of the items displayed for sale are not sold by Amazon itself, but by millions of external sellers who use the platform to reach hundreds of millions of the company’s customers. But Amazon’s relationship with these third-party vendors has become a major focus point for criticism of the company.

Some have raised concerns about Amazon copy of products from third-party vendors and sell them for cheaper, as you have the scale and resources to do so. For its part, Amazon execs they have argued that this has long been a common strategy for retailers.
During a Hearing at last year’s Congress, Amazon founder Jeff Bezos faced a strong question about whether the company uses data from third-party vendors to support its own private label business. Bezos said Amazon has a policy banning the practice, but admitted, “I can’t guarantee this policy has never been violated.”
The District of Columbia in May sued Amazon, alleging that it prohibits third-party sellers from offering products at lower prices on other websites, which it says helps Amazon maintain dominance. Some sellers have done the same complained on these terms. (Amazon said sellers set their own prices, but reserves the right not to highlight sellers who are not competitively priced).

The Ending Platform Monopolies Act, one of six bills introduced in the House last month, points to Amazon’s relationship with sellers, though it does not directly name the company. The bill would prohibit a dominant technology platform from owning multiple lines of business that create conflicts of interest or could be used to favor its own offerings or frustrate competition, for example, a technology giant that owns a market platform and competes with other companies at the same time.

A complementary bill, the American Innovation and Choice Online Act, would prohibit Amazon from requiring sellers buy other products and services from Amazon as a condition of being on the platform. JoIt would also block Amazon from using sellers ’sales data to promote Amazon-branded products and prevent the tech giant from trying to control how a seller sets their prices.

In a statement after the accounts were released, Amazon’s vice president of public policy, Brian Huseman, suggested that if he was forced to choose a business model, the company could stop supporting independent vendors. of third parties. positioned as a potential detriment to the economy.

“More than half a million small and medium-sized American businesses make a living through the Amazon marketplace, and without access to Amazon customers, it will be much harder for these third-party vendors to raise awareness about their business and get comparable income, ”Huseman said.

According to analysts, highlighting the potential threat to third-party companies is a politically smart argument. “They’re playing with their strongest suit, which is how Amazon makes money for others,” said Tom Forte, an analyst at DA Davidson.

But it’s also a somewhat surprising statement, given how lucrative it is the third-party seller business is for Amazon. As of the end of 2018, independent third-party sellers accounted for nearly 60% of total gross sales of physical goods on Amazon, with $ 160 billion in sales, Bezos wrote in its annual shareholder letter. that year.

“Third-party sellers give us a kick. Bad,” he wrote at the time.

Analysts continue, it still is. Amazon wins a “superior” profit margin from third party sales compared to its own sales, Forte said, because it keeps the prices of its own goods so low. Amazon also earns additional revenue when sellers use their delivery service.

Protection of the delivery empire

By threatening to sacrifice an arm of your business, Amazon may be trying to do so preserve another: the logistics and mass compliance system it has built around the world.

The Final Platform Monopoly Act could require tech giants to “divest business lines (such as Amazon’s compliance), where the power of the platform allows it to favor its own services,” Chris said. Evans, a spokesman for Rep. Pramila Jayapal, co-authorized the bill. Evans cited reports from numerous vendors who felt that “they had no choice but to pay compliance from Amazon to sell their products.”

Amazon wants FTC President Lina Khan to withdraw from all her cases

Yes Amazon only sold its own products, it would be more like any other distributor that has a delivery network to ship products to customers, potentially avoiding a diversion from this section of the business.

“Think about the billions of dollars they’ve invested in capital and the construction jobs they’ve created by building these compliance centers,” said Brian Yarbrough, senior analyst at Edward Jones.

D’Amazon global logistics operation now it includes an air cargo network with dozens of aircraft, a freight forwarding system and a massive fleet of trucks, as well as its numerous compliance centers. Last year, in a hiring period, Amazon continued about 500,000 employees, many of them workers performing their duties, bringing the total employment of the company to more than 1.3 million.

Some of this work could be at risk if bills go up and, as a result, Amazon launches its third-party market.

“I think [regulators] we need to be careful about being too short-sighted here and think about job creation and the size of these companies and the meaning they have for the economy as a whole, ”Yarbrough said.

Amazon’s antitrust battle is likely to take years, as the company is already backing down asking Khan of the FTC to pick him up herself from any Amazon-related case, citing their previous criticisms of the company, and will likely evolve over time.

But the e-commerce giant’s first reaction to the bills hints at us in what parts of your business will Amazon fight for more in an antitrust world.

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