Amazon Needs to Worry About This, Not Taxes

Antitrust Gauntlet

Lost in the kerfuffle of Monday’s Amazon tweet by President Donald Trump was a much bigger nugget of news about the company…

Like a former senior Walmart exec calling for a breakup of Amazon on federal antitrust grounds.

“They’re not making money in retail, and they’re putting retailers out of business,” said Bill Simon, Walmart’s former U.S. CEO, on CNBC in recent days. “It’s anti-competitive, it’s predatory and it’s not right.”

Granted, it’s no big surprise that a rival retail exec might criticize Amazon’s business practices. But they typically do so behind closed doors, or perhaps at a retail industry “insiders only” panel session talkfest.

It’s the first I’ve seen anyone of Simon’s stature say so in such a public way.

In my opinion, it’s a bad sign for Amazon.

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Amazon: Running the Antitrust Gauntlet

I think the exec’s comment shows the level of exasperation when it comes to competing against Amazon. It’s only a matter of time — whether under the Trump administration, or a future president of either party — that the government moves against the company on antitrust grounds.

Why?

As I noted last year: “The stirring of antitrust activity goes hand in hand with overheated markets that only amplify the power of a few companies that become too big, too dominant … in a word, too powerful.”

Keep in mind, last year saw a record 26 major retail bankruptcies in 2017 (chains with more than $50 million in liabilities).

And just in the first quarter this year, we’ve seen five more decent-sized retailers, including Claire’s and Bon-Ton Stores, go under.

As the Bodies Pile Up…

Poorly run? Poorly led? No doubt.

But with every “going out of business” sign, and every “all inventory must be liquidated” banner — it’s a reminder of Amazon’s massive clout in the marketplace.

It also points to the company’s advantage (an unfair advantage, according to some) of owning a “platform” business where everyone else in the retail game, for competitive reasons, needs to list its goods. But of course, in doing so, Amazon sells its own very similar offerings, often for just a little less.

In fact, last year, Yale legal scholar Lina M. Khan identified Amazon’s platform as a likely vector of attack for antitrust regulators.

“The economics of platform markets create incentives for a company to pursue growth over profits,” she writes, “a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational — even as existing doctrine treats it as irrational and therefore implausible.”

Interestingly enough, on March 15, Japan’s antitrust watchdog group raided Amazon’s offices in that country. According to the Japan Times, the raid was based on suspicion of “allegedly violating the antitrust law by having its suppliers shoulder part of the costs to cover discounts the retailer applied on goods.”

Amazon Japan said it was cooperating with the agency’s inspection.

I think it’s highly likely we’ll see a similar headline here in the U.S., sooner or later.

Regards,

Jeff L. Yastine

Editor, Total Wealth Insider

  • Joe Thumper

    yes

  • jrj90620

    Crazy article.Are you a Democrat?Lower prices is the main incentive for a retailer.If Amazon can deliver the best price,that should be a good thing.I’ve read that the U.S. has 10 times more retail space,per capita,than Europe.So,these stores need to go.Amazon is speeding the process.Just like Sears once dominated retail,they are in major decline today.Although it may seem like Amazon will take over the world,that won’t happen,other retailers will find formulas for growth and Amazon will fade.

  • Wayne Rowe

    When I see department stores flooded almost everywhere other than the traditional north,south,east and west shopping malls then you got a bigger problem of over saturating retail.Save money reduce the amount of shopping malls and use mail order like they did with Montgomary ward of the past or have local shopkeeper order things specialty for you.

  • Jollyrajah

    Talk about predatory. How many retailers of all sizes have been swept away by that former exec’s company? Hundreds, perhaps thousands? Where’s his remorse over the choices people once had. Perhaps the shoe, no boot, doesn’t feel as well when one must wear it. Creating nearby stores to every significant retailer to drive them out and then consolidate to regionalized stores seems, IMO, fairly predatory. And, why are you a former exec in lieu of a current one? Not always better for the gander than the goose, eh?

  • Ron

    The case of the pot calling the kettle black.

  • Edward Logsdon

    It is ironic that Walmart is telling us how bad it is for Amazon to put small companies ( many local groceries, hardware, shoe, clothing, etc.) out of business. That has been their model for a long time. Amazon just took it one more step further with a virtual store and fast delivery.

  • james

    Predatory pricing especially when the business model generates little or no profit for years, creates a monopoly. And Amazon is a monopoly — a rightful target for an anti-trust lawsuit.

  • brown7228

    What would you expect I still don’t know of any value that coin represents. If a new company that has
    a bias toward technology and i believe that technology has merit when they issue a coin that the coin I want. I know I have a lot to learn about this new process but that why I am here to learn. To me that coin represents a piece of that business and will increase in value as the company grows. No one can short the value if they don’t own the coin that makes it a real market.

  • brown7228

    It’s Trump’s idiotic plan to control everything and everybody that’s what dictators do. What amazing is the number of people that go along with him and the worst are the evangelical hypocrites. It’s OK to be Godless as long as I can make a buck doing it isn’t that right just ask them.

  • edthegrocer

    Not only the store was destroyed but the entire supply chain. Brokers, wholesalers, and manufacturers. We have moved a very large portion of the supply chain to extremely low wage countries where mostly junk is produced. You might not like Trump but no normal American, Canadian or Mexican worker can compete with $1 an hour. Block or tariff the goods until we make our own stuff again. We live in a different world from $1 an hour.You can also add the small communities within thirty miles of that super center that lost their commercial center and now have to drive twenty miles for affordable groceries.

  • travis690

    I wouldn’t be surprised at all if this action were to occur, and for the exact reasons outlined above.

    Predatory pricing = Pricing to gain sales at the expense of competitors, with no intent of making a profit.

    For years, Amazon has operated with the stated goal of its insiders of gaining market share and bankrupting their competition. On their platform, there have been instances where businesses have listed their products as third-party suppliers, but with a price-match guarantee. Amazon then listed the same product from their own inventory at a price that was only 1 cent above their own wholesale cost, cutting out all the profit for the producer, and forcing the producer to match this price and provide the free shipping to the customer.

    That will be the tactic that will result in antitrust violations.

    As for what the result of the litigation will be? I don’t know.

  • William1968

    Walmart was the company that drove all of the retail stores out of business by offering lower prices on all products. They did that by importing cheaper made stuff from overseas which resulted in a loss of manufacturing jobs in America, and paying their employees pitifully low wages. Now that Amazon is hurting their business (just like they damaged every other business) they want the government to do something. Maybe we do need to shut down Amazon. But we should have shut down Walmart 20 years ago! Walmart can cut prices and compete. The Walton family has kept billions and billions of dollars from the operation of Walmart. Walmart needs to clean up their dirty stores, fill their shelves so that I don’t go there and find them out of the things I want to buy, and pay their employees better.

  • Edward Logsdon

    I too will not shop at Walmart. They have trashed small businesses in many small towns.

  • jrj90620

    If Amazon sells for little profit,why shouldn’t we be happy about that?Can’t believe all the nonsense in this country.Crazy.I’ve read that the U.S. has 10 times more retail space,per capita,than Europe.So,Amazon is hurrying the demise of our overstored country,a little faster.No problem in my mind.Sears once dominated retail.Someone will come along and take share from Amazon.So many people,so short term thinking.

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  • PJ

    an example of the ” black pot calling the skillet black.”