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Comment by chairmanwow1 | Hacker News Reader

What really is the issue? That Amazon is leveraging its success to be successful? It's unfair that Amazon is able to see that a product category is doing well so it invests its own money into manufacturing a product to sell through its site?

Do you really think that if Amazon couldn't use the data from its own site that it wouldn't procure it elsewhere? Before any product is developed there is extensive market research done to get an idea of how much money this product could make.

Anyone can and does do this, why should Amazon be punished that its data collection mechanism is cheaper than others?

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Vertical monopolies are anti-competitive. It works like this:

1. Amazon clones independent manufacturer's product.

2. Amazon strangles manufacturer because they can promote their own product more and have lower overhead because they control the entire chain.

3. Competitor dies.

4. Amazon has no competition on this product.

5. They raise prices and/or lower quality.

6. Consumers pay more for a shittier product.

You forget the other big competitors.

Sun pushed OpenOffice to cut MS's profits from Office

Google and MS are pushing into the Cloud to reduce Amazon's influence

Amazon is creating its own ad network and offering Twitch to reign in Google

Walmart is slowly creating its own global online shopping platform to compete with Amazon

Should Amazon ever have no competitor, monopoly regulations would kick in. But usually, all the other big players will make sure that Amazon has enough competition to not be invincible. It's not fun for small players, but they obviously don't care enough to organize and take their products off Amazon.

Btw, Amazon does not necessarily have less overhead due to Price's law: [1]

>The square root of the number of people in a domain do 50% of the work.

Should Amazon expand into every business, they would be so huge that all their efficiencies and more would be eaten up by the overhead.

[1]https://brainlid.org/general/2017/11/28/price-law.html

Price's law is of questionable empirical validity, it's more like a useful guideline/urban legend. On the other hand, there is substantial economic research demonstrating the harms of monopolies, including vertical ones.

I'm a bit confused. Are you claiming that because of Price's law, Amazon doesn't actually benefit from it's monopoly position?

Almost. I think that Amazon cannot hold a monopoly position in all markets because its size would be so big that a smaller competitor could compete.

As a consequence, there will be an optimal size where Amazon is serving many markets, most likely the most profitable ones, thus massively benefiting [ * ], but they leave every other market open.

Depending on the future, this is not necessarily a bad position because low interest rates could seed plenty of startups which means that competitors could operate below break even points.

The question is: will Amazon ever reach that position or will its competitors make sure that all its profitable markets will dry up and its growth will be limited?

[*] Actually, not Amazon is profiting because the value of that dominant position would be priced into Amazon shares in advance. Amazon would just execute its dominant position that its investors had foreseen.

We run a DTC automotive retail website that has both white-label products and vendor products and have product development and manufacturing capability in house. We also sell through multiple channels like wholesale customers, marketplaces, (including Amazon when it makes sense), and a 2 retail stores. Are you saying that we need to dramatically change our business model and can only either be a manufacturer or sell other peoples products because this model is unethical?

Vertical monopolisation is a mixed bag actually. Vertically integrated companies profit more with lower prices in the downstream market than a purely downstream product company because they make profit at both stages. Antitrust law is far kinder to vertical mergers than horizontal mergers.

> 5. They raise prices and/or lower quality.

> 6. Consumers pay more for a shittier product.

Or a competing product emerges with a lower price and/or better quality. Step 6 would only happen if competing products are not allowed to be sold on Amazon. And even if Amazon does that, I would assume that if the delta in price and quality is big enough people would switch to buying the product on Shopify, eBay, or any other platform the manufacturer can use to sell.

The fallacy in this all too pervasive argument is assuming that once a competitor dies or is bought out, there is no more competition from now until judgement day.

This is flat out silly and has never been observed. Monopolies cannot significantly raise their prices, or competitors instantly appear.

Why wouldn't 7. be: a competitor easily enters the market because they can just make the good and charge a markup that's somewhere between what amazon is charging and 0 and still make a profit and get all the business?

If what you said about amazon having less overhead prevents the above hypothetical from happening, then what's the problem? It's apparently more efficient for Amazon to supply this good and that's what an omnipotent benevolent economic dictator would choose anyways.

>What really is the issue? That Amazon is leveraging its success to be successful?

The issue is that over the long term, Amazon is lowering the ROI on innovating and taking risks in the consumer goods space. It's able to do this because of its dominance as a marketplace.

Where it gets grey is when stakeholders privately invest or start companies that sell on the platform. Amazon chose to do it upfront with Amazon Basics but there’s nothing stopping them from creating house brands/labels even at arms length to give the impression that it’s not Amazon.

> there’s nothing stopping them from creating house brands/labels even at arms length to give the impression that it’s not Amazon

They already did this years ago. Amazon has 80+ private-label brands.

https://www.businessinsider.com/amazon-owns-these-brands-lis...

It is not illegal to have a monopoly; but it is illegal to use a monopoly you have in one area to get an unfair advantage in another.

Amazon may or may not legally be a retail monopoly - I do not know the answer. But your question can be rephrased for any monopoly and the answer would be “monopolies should be punished for leveraging their monopoly power in other markets, because that ruins the market for everyone else.”

Free markets and democracies are good at a lot of things, but self preservation is not one of them - therefore you need anti-freedom laws.

> It is not illegal to have a monopoly; but it is illegal to use a monopoly you have in one area to get an unfair advantage in another.

This is a very common misconception in the United States. It’s how a lot of defenders of antitrust law want antitrust law to work, but it is not how antitrust law does work.

This Supreme Court case explicitly establishes that antitrust laws can be used against companies which obtain a high market share simply by anticipating future demand and responding effectively and efficiently.

https://en.wikipedia.org/wiki/United_States_v._Alcoa

a. That isn't a supreme court case

b. This 1945 precedent is not the standard that most modern antitrust (post-Bell breakup) cases are held to.

Antitrust law in the U.S. is currently based on the dubious "consumer welfare standard".

https://en.wikipedia.org/wiki/The_Antitrust_Paradox

> antitrust laws can be used against companies which obtain a high market share simply by anticipating future demand and responding effectively and efficiently.

This would make sense as a feature. If you subscribe to the view that competitive pressure is the source of progress, then you never want any company to actually win. Like a donkey chasing a carrot on a stick, you want companies to endlessly run towards market dominance, but never actually get there - because once they do, they stop contributing to progress.

How so? The point in this example is that they company was contributing to progress.

Technically not a supreme court case, but kind of close enough.

Also I think there's 0 chance that wouldn't be overturned if tested today.

> What really is the issue?

This issue us that Amazon also dictates what you are allowed to sell your product for elsewhere. It would be one thing if they just used your own data and created a competing product, but the fact you cannot sell your product cheaper elsewhere is the issue.

Sorry, maybe I'm too tired to understand this, but why can't you do that exactly?

The FTC says it's illegal:

Anticompetitive practices include activities like price fixing, group boycotts, and exclusionary exclusive dealing contracts or trade association rules, and are generally grouped into two types: agreements between competitors, also referred to as horizontal conduct.

Thanks! I meant how would Amazon prevent it at all. (But maybe they would just sue you. But ... can't you just create a separate company to conduct off-Amazon business?)

This Yale Law Journal note is a decent start for this conversation: https://www.yalelawjournal.org/note/amazons-antitrust-parado...

The issue is that Amazon is lying to Congress.

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