{"id":1557,"date":"2014-10-01T17:11:29","date_gmt":"2014-10-02T00:11:29","guid":{"rendered":"http:\/\/www.artsjournal.com\/worth\/?p=1557"},"modified":"2014-10-10T09:43:40","modified_gmt":"2014-10-10T16:43:40","slug":"is-amazon-com-a-monopoly","status":"publish","type":"post","link":"https:\/\/www.artsjournal.com\/worth\/2014\/10\/is-amazon-com-a-monopoly\/","title":{"rendered":"Is Amazon.com a monopoly? (updated October 10)"},"content":{"rendered":"

\"don't<\/a>In a comment on my previous post<\/a>, on Amazon and what I saw as overheated rhetoric regarding censorship, BobG wrote:<\/p>\n

Arguing over a definition of censorship is avoiding the actual issue. Amazon IS making it difficult to get certain books (that\u2019s their announced strategy) and they are poised to become the single biggest (if not the only) source for books in the U.S. If Amazon becomes the primary supplier of books as well as the conduit through which we get books (and hence the ability to prevent us from getting books), that gives them an inordinate amount of power. The important point of the protest is the call for the government to investigate Amazon as a monopoly.<\/p>\n

Prof. Rushton: Please tell us your thoughts about Amazon and monopoly! That I think will be very very interesting.<\/p><\/blockquote>\n

Well, I have written more than disproportionately about the Amazon business. But since you ask…<\/p>\n

Let me start with a simple example, and then I will work down to the specific case of Amazon. Imagine a small town that has just one Indian restaurant, a monopoly. In general, no one will think a law or regulations of the restaurant are needed in this case; sometimes, there is only enough demand for one seller to make any kind of living from the business. What would<\/em> get the authorities upset? One situation would be where the owner of the Indian restaurant secretly conspired with other restaurant owners in the town to agree to keep prices on all meals higher than would be the case if they simply went about their business in a competitive way. There are many cases of combines of firms being charged by the Dept of Justice for exactly this tactic. A second situation would be if the owner of the Indian restaurant undertook activities that were clearly designed to prevent any new<\/em> Indian restaurant from opening up. In truth, the economy is full of legal<\/em> means by which firms can seek to do this, for example: lobbying the government to require that new firms meet very onerous licensing and safety requirements (chosen to be ones that the existing firm finds easy to meet); or investing in excess capacity, building such a huge restaurant (more than really makes sense) that any potential entrepreneur knows that the existing firm will be willing to engage in a long, protracted battle to protect market share and the major investment, should a new firm arrive on the scene. But there are also illegal means; most of the ‘business-side’ story of The Sopranos<\/em> followed exactly this question of protecting market share.<\/p>\n

The cases above have something in common: the yardstick by which the damage of the monopoly is measured will be how it harms consumers<\/em>. Conspiring to keep prices above competitive levels has an obvious, adverse impact on consumers. So do policies that prevent entrepreneurs from establishing new businesses. That there is just one Indian restaurant in town is not enough to establish a monopoly problem<\/em>. It has to be shown that the firm is doing something preventing what would be a better outcome for consumers from occurring (like lower prices, or new entrants into the field).<\/p>\n

There are examples from the cultural industries. Publishers were recently pursued for trying to conspire to maintain high prices for e-books, which is clearly harmful to consumers. For the second type of example I turn to cinema: the Supreme Court Paramount<\/em> decision<\/a> of 1947 held that movie studios had to divest themselves of the theatres they owned, and a significant part of the reasoning was that such an arrangement of the makers of films also owning the first-run cinemas made it very difficult for other distributors of films, or owners of theatres, to gain a foothold, to the detriment of the consumer (not everyone agrees with that economic reasoning, but that was the ruling).<\/p>\n

So why has there not been any federal action against Amazon? I’m not a lawyer, so take this as a layperson’s opinion.<\/p>\n

First, in its dispute with publishers, Amazon is on the side of lower<\/em> prices. Some people might think this is just a very sneaky strategy to gain complete control over the entire publishing industry and then raise<\/em> prices at some future date, but there just isn’t a lot of evidence to back that up right now. Given that Amazon has very consistently given consumers lower prices for books than they used to face, and is in disputes trying to keep it that way, I don’t think there is much cause for action on monopoly grounds of conspiring to raise prices.<\/p>\n

Second, is Amazon undertaking questionable practices to prevent competition? Not that I can see. Consider the book chosen in the New York Times<\/em> story<\/a> on Amazon blocking sales of certain books, Daniel Schulman’s Sons of Wichita<\/em>. At Barnes and Noble I can get a discounted hardcover<\/a>, I can pre-order the paperback<\/a>, \u00a0or I can get it on their Nook reader<\/a> for $14.99. I can buy a hardcopy through Powell’s<\/a>, or get an electronic copy through iTunes<\/a> for $11.99. At Amazon.com, I can get the Kindle edition immediately<\/a> for $14.99, or can buy a new hardcover<\/a> – with delayed shipping of one to three weeks, a sticking point, yes – \u00a0or I can on Amazon’s site buy discounted hardcovers from 70<\/em>\u00a0(!) different third parties, all offering fast shipping. There just isn’t much evidence here that consumers are being prevented from accessing the book through other sellers.<\/p>\n

Finally, let’s put aside this one book and look at the big picture – does Amazon make it impossible for a rival firm to displace them? Not through any means that harm consumers; quite the opposite. Amazon’s success comes through its web design, customer service, amazing logistics, inventory and prices. Simply put: they are the biggest book seller in the world not because there are not alternatives – there are alternative internet sellers, ebook sellers, and bricks-and-mortar stores. They are the biggest because consumers like to shop there. I repeat what I have written more than once on this blog: I think Amazon’s strategy against Hachette, of delaying shipments of hard copies of books, is unwise, as it will lose much customer support it has taken so long to build. But it doesn’t amount to monopoly, or censorship, or the death of literature in America.<\/p>\n

And so, very long answer for you BobG; I hope you find this helpful.<\/p>\n

UPDATE: Franklin Foer at The New Republic<\/em> thinks Amazon is very much a monopoly<\/a>. Not much new here that I can see, and my response to him would simply be what I have written above. I don’t buy everything that comes from the ‘Chicago School’ of Law & Economics, but that said, I don’t get this recent criticism, at the heart of Foer’s piece, that judging the harm of a firm’s market power by how it impacts consumers is some radical Reaganite idea. It isn’t. Amazon is great for consumers, Foer admits, and he really doesn’t know where to go from there to get to his ‘there oughtta be a law’ conclusion. Matt Yglesias responds to Foer here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

In a comment on my previous post, on Amazon and what I saw as overheated rhetoric regarding censorship, BobG wrote: Arguing over a definition of censorship is avoiding the actual issue. Amazon IS making it difficult to get certain books (that\u2019s their announced strategy) and they are poised to become the single biggest (if not […]<\/p>\n","protected":false},"author":3,"featured_media":1564,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26],"tags":[],"class_list":{"0":"post-1557","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-issues","8":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/jail-card-monopoly.jpg","jetpack_shortlink":"https:\/\/wp.me\/p3dIW5-p7","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1548,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/09\/this-is-not-censorship\/","url_meta":{"origin":1557,"position":0},"title":"This is not censorship (updated, again)","author":"Michael Rushton","date":"September 30, 2014","format":false,"excerpt":"The New York Times reports on authors forming a group to back publisher Hachette in its quest to have Amazon.com charge consumers higher prices for books. A literary agent is quoted: \u201cIt\u2019s very clear to me, and to those I represent, that what Amazon is doing is very detrimental to\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"this is censored","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/09\/dream-of-ding-village.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1617,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/10\/amazon-and-monopoly-encore\/","url_meta":{"origin":1557,"position":1},"title":"Amazon and monopoly: encore (updated)","author":"Michael Rushton","date":"October 14, 2014","format":false,"excerpt":"The debate that won't die. I've posted on whether Amazon is a monopoly (it isn't) here and here. Today Joe Nocera joins Matt Yglesias and Annie Lowrey in his critique of Franklin Foer's New Republic article that tries to claim dangerous monopoly powers at Amazon. Artsjournal.com blog neighbor Scott Timberg\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"still don't need it","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/jail-card-monopoly.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/jail-card-monopoly.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/jail-card-monopoly.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/jail-card-monopoly.jpg?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":965,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/07\/amazon-and-the-independents\/","url_meta":{"origin":1557,"position":2},"title":"Amazon and the independents","author":"Michael Rushton","date":"July 30, 2013","format":false,"excerpt":"Two stories linked by artsjournal.com today about Amazon: gigaom.com (?) on how Amazon is further cutting prices on hardbacks, and the American Booksellers Association upset that President Obama held a major speech on jobs at an Amazon warehouse. Observations: First, while I possess no special insights into what goes on\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"can I help you find something?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/07\/youve_got_mail_063udz92-300x168.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1050,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/02\/is-amazon-good-for-readers\/","url_meta":{"origin":1557,"position":3},"title":"Is Amazon good for readers?","author":"Michael Rushton","date":"February 14, 2014","format":false,"excerpt":"I enjoyed George Packer's New Yorker article on Amazon, and recommend it. ArtsJournal's link to the story has the heading \"Is Amazon good for books? Not just publishers, but books themselves?\" The New Yorker's own sub-heading is \"Amazon is good for customers. But is it good for books?\" I find\u2026","rel":"","context":"With 2 comments","block_context":{"text":"With 2 comments","link":"https:\/\/www.artsjournal.com\/worth\/2014\/02\/is-amazon-good-for-readers\/#comments"},"img":{"alt_text":"good for this reader","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/02\/amazon-warehouse-2.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/02\/amazon-warehouse-2.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/02\/amazon-warehouse-2.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/02\/amazon-warehouse-2.jpg?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":1418,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/07\/summer-books-brad-stones-the-everything-store\/","url_meta":{"origin":1557,"position":4},"title":"Summer books: Brad Stone’s ‘The Everything Store’","author":"Michael Rushton","date":"July 17, 2014","format":false,"excerpt":"In the past few months there are few businesses that have come in for such vilification as Amazon.com - including in many of the stories and blogs here at artsjournal.com - and so Brad Stone's book, subtitled 'Jeff Bezos and the Age of Amazon', is timely, to say the least.\u2026","rel":"","context":"With 3 comments","block_context":{"text":"With 3 comments","link":"https:\/\/www.artsjournal.com\/worth\/2014\/07\/summer-books-brad-stones-the-everything-store\/#comments"},"img":{"alt_text":"a difficult case","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/07\/everything-store-193x300.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1458,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/08\/amazon-and-orwell-and-penguins\/","url_meta":{"origin":1557,"position":5},"title":"Amazon and Orwell and Penguins (Updated)","author":"Michael Rushton","date":"August 12, 2014","format":false,"excerpt":"By now most everyone who follows artsjournal.com and the Amazon dispute has heard of its strange use of George Orwell in its (shockingly mishandled) dispute with the publishing sector. The New York Times reports: The freshest part of Amazon\u2019s call to arms was the history lesson. It recounted how the\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"weapons of mass destruction?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/08\/penguin-books.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/08\/penguin-books.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/08\/penguin-books.jpg?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/1557","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/comments?post=1557"}],"version-history":[{"count":5,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/1557\/revisions"}],"predecessor-version":[{"id":1589,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/1557\/revisions\/1589"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media\/1564"}],"wp:attachment":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media?parent=1557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/categories?post=1557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/tags?post=1557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}