#amazons antitrust paradox

[mostlysignssomeportents]

Who Broke the Internet? Part III

I'm on a 20+ city book tour for my new novel PICKS AND SHOVELS. Catch me in PDX on Jun 20 at BARNES AND NOBLE with BUNNIE HUANG. After that, it's LONDON (Jul 1) and MANCHESTER (Jul 2).

Episode 3 of "Understood: Who Broke the Internet?" (my new CBC podcast about enshittification) just dropped. It's called "In God We Antitrust," and it's great:

https://www.cbc.ca/listen/cbc-podcasts/1353-the-naked-emperor/episode/16147052-in-god-we-antitrust

The thesis of this four-part series is pretty straightforward: the enshittification of the internet was the result of an enshittogenic policy environment. Platforms always had the technical means to scam us and abuse us. Tech founders and investors always included a cohort of scumbags who would trade our happiness and wellbeing for their profits. What changed was the consequences of giving in to those impulses. When Google took off, its founders' mantra was "competition is just a click away." If someone built a better search engine, users could delete their google.com bookmarks, just like they did to their altavista.com bookmarks when Google showed up.

Policymakers – not technologists or VCs – changed the environment so that this wasn't true anymore:

https://pluralistic.net/2025/05/08/who-broke-the-internet/#bruce-lehman

In last week's episode, we told the story of Bruce Lehman, the Clinton administration's Copyright Czar, who swindled the US government into passing a law that made it illegal to mod, hack, reverse-engineer or otherwise improve on an existing technology:

https://pluralistic.net/2025/05/13/ctrl-ctrl-ctrl/#free-dmitry

This neutralized a powerful anti-enshittificatory force: interoperability. All digital tech is born interoperable, because of the intrinsic characteristics of computers, their flexibility. This means that tech is inherently enshittification-resistant. When a company enshittifies its products or services, its beleaguered users and suppliers don't have to wait for a regulator to punish it. They don't have to wait for a competitor to challenge it.

Interoperable tools – ad-blockers, privacy blockers, alternative clients, mods, plugins, firmware patches and other hacks – offer immediate, profound relief from enshittification. Every ten foot pile of shit that a tech company drops into your life can be met with an eleven foot ladder of disenshittifying, interoperable technology.

That's why Lehman's successful attack on tinkering was so devastating. Before Lehman, tech had achieved a kind of pro-user equilibrium: every time a company made its products worse, they had to confront a thousand guerrilla technologists who unilaterally unfucked things: third party printer ink, file-format compatibility, protocol compatibility, all the way up to Unix, a massive operating system that was painstakingly re-created, piece by piece, in free software.

Lehman offered would-be enshittifiers a way to shift this equilibrium to full enshittification: just stick a digital lock on your product. It didn't even matter if the lock worked – under Lehman's anticircumvention law, tampering with a lock, even talking about weaknesses in a lock, became a literal felony, punishable by a five-year prison sentence and a $500K fine. Lehman's law was an offer no tech boss would refuse, and enshittification ate the world.

But Lehman's not the only policymaker who was warned about the consequences of his terrible plans, who ignored the warnings, and who disclaims any responsibility for the shitty world that followed. Long before Lehman's assault on tech policy, another group of lawyers and economists laid waste to competition policy.

In the 1960s and 1970s, a group of Chicago School economists conceived of an absurd new way to interpret competition law, which they called "the consumer welfare standard." Under this standard, the job of competition policy was to encourage monopolies to form, on the grounds that monopolies were "efficient" and would lower prices for "consumers."

The chief proponent of this standard was Robert Bork, a virulent racist whose most significant claim to fame was that he was the only government lawyer willing to help Richard Nixon illegally fire officials who wouldn't turn a blind eye to his crimes. Bork's long record of unethical behavior and scorching bigotry came back to bite him in the ass when Ronald Reagan tried to seat him on the Supreme Court, during a confirmation hearing that Bork screwed up so badly that even today, we use "borked" as a synonym for anything that is utterly fucked.

But Bork's real legacy was as a pro-monopoly propagandist, whose work helped shift how judges, government enforcers, and economists viewed antitrust law. Bork approached the text of America's antitrust laws, like the Sherman Act and the Clayton Act, with the same techniques as a Qanon follower addressing a Q "drop," applying gnostic techniques to find in these laws mystical coded language that – he asserted – meant that Congress had intended for America's anti-monopoly laws to actually support monopolies.

In episode three, we explore Bork's legacy, and how it led to what Tom Eastman calls the internet of "five giant websites, each filled with screenshots of the other four." We got great interviews and old tape for this one, including Michael Wiesel, a Canadian soap-maker who created a bestselling line of nontoxic lip-balm kits for kids, only to have Amazon shaft him by underselling him with his own product.

But the most interesting interview was with Lina Khan, the generational talent who became the youngest-ever FTC chair under Joe Biden, and launched an all-out assault on American monopolies and their vile depredations:

https://pluralistic.net/2023/07/14/making-good-trouble/#the-peoples-champion

Khan's extraordinary rise to power starts with a law review paper she wrote in her third year at Yale, "Amazon's Antitrust Paradox," which became the first viral law review article in history:

https://www.yalelawjournal.org/note/amazons-antitrust-paradox

"Amazon's Antitrust Paradox" was a stinging rebuke to Bork and his theories, using Amazon's documented behavior to show that after Amazon used its monopoly power to lower prices and drive rivals out of the market, it subsequently raised prices. And, contrary to Bork's theories, those new, high prices didn't conjure up new rivals who would enter the market with lower prices again, eager to steal Amazon's customers away. Instead, Amazon's demonstrated willingness to cross-subsidize divisions gigantic losses to destroy any competitor with below-cost pricing created a "kill zone" of businesses adjacent to the giant's core enterprise that no one dared enter:

https://www.thebignewsletter.com/p/how-biden-can-clean-up-obamas-big

The clarity of Khan's writing, combined with her careful research and devastating conclusions dragged a vast crowd of people who'd never paid much attention to antitrust – including me! – into the fray. No wonder that four years later, she was appointed to serve as the head of the FTC, making her the most powerful consumer rights regulator in the world.

We live in an age of monopolies, with cartels dominating every part of our lives, acting as "autocrats of trade" and "kings over the necessaries of life," the corporate dictators that Senator John Sherman warned about when he was stumping for the 1890 Sherman Act, America's first antitrust law:

https://pluralistic.net/2022/02/20/we-should-not-endure-a-king/

Bork and his co-religionists created this age. They're the reason we live in world where we have to get our "necessaries of life" from a cartel, a duopoly or a monopoly. It's not because the great forces of history transformed the economy – it's because of these dickheads:

https://www.openmarketsinstitute.org/learn/monopoly-by-the-numbers

This episode of "Understood: Who Borked the Internet?" draws a straight line from those economists and their ideas to the world we live in today. It sets up the final episode, next week's "Kick 'Em in the Dongle," which charts a course for us to escape from the hellscape created by Bork, Lehman, and their toadies and trolls.

You can get "Understood: Who Broke the Internet?" in any podcast app, even the seriously enshittified ones (which, let's be real here, is most of them). Here's a direct link to the RSS:

https://www.cbc.ca/podcasting/includes/nakedemperor.xml

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2025/05/19/khan-thought/#they-were-warned

[robertreich]

Who’s to Blame for Out-Of-Control Corporate Power?    

One man is especially to blame for why corporate power is out of control. And I knew him! He was my professor, then my boss. His name… Robert Bork.

Robert Bork was a notorious conservative who believed the only legitimate purpose of antitrust — that is, anti-monopoly — law is to lower prices for consumers, no matter how big corporations get. His philosophy came to dominate the federal courts and conservative economics.

I met him in 1971, when I took his antitrust class at Yale Law School. He was a large, imposing man, with a red beard and a perpetual scowl. He seemed impatient and bored with me and my classmates, who included Bill Clinton and Hillary Rodham, as we challenged him repeatedly on his antitrust views.

We argued with Bork that ever-expanding corporations had too much power. Not only could they undercut rivals with lower prices and suppress wages, but they were using their spoils to influence our politics with campaign contributions. Wasn’t this cause for greater antitrust enforcement?

He had a retort for everything. Undercutting rival businesses with lower prices was a good thing because consumers like lower prices. Suppressing wages didn’t matter because employees are always free to find better jobs. He argued that courts could not possibly measure political power, so why should that matter?

Even in my mid-20s, I knew this was hogwash.

But Bork’s ideology began to spread. A few years after I took his class, he wrote a book called The Antitrust Paradox summarizing his ideas. The book heavily influenced Ronald Reagan and later helped form a basic tenet of Reaganomics — the bogus theory that says government should get out of the way and allow corporations to do as they please, including growing as big and powerful as they want.

Despite our law school sparring, Bork later gave me a job in the Department of Justice when he was solicitor general for Gerald Ford. Even though we didn’t agree on much, I enjoyed his wry sense of humor. I respected his intellect. Hell, I even came to like him.

Once President Reagan appointed Bork as an appeals court judge, his rulings further dismantled antitrust. And while his later Supreme Court nomination failed, his influence over the courts continued to grow.  

Bork’s legacy is the enormous corporate power we see today, whether it’s Ticketmaster and Live Nation consolidating control over live performances, Kroger and Albertsons dominating the grocery market, or Amazon, Google, and Meta taking over the tech world.

It’s not just these high-profile companies either: in most industries, a handful of companies now control more of their markets than they did twenty years ago.

This corporate concentration costs the typical American household an estimated extra $5,000 per year. Companies have been able to jack up prices without losing customers to competitors because there is often no meaningful competition.

And huge corporations also have the power to suppress wages because workers have fewer employers from whom to get better jobs.

And how can we forget the massive flow of money these corporate giants are funneling into politics, rigging our democracy in their favor?

But the tide is beginning to turn under the Biden Administration. The Justice Department and Federal Trade Commission are fighting the monopolization of America in court, and proposing new merger guidelines to protect consumers, workers, and society.

It’s the implementation of the view that I and my law school classmates argued for back in the 1970s — one that sees corporate concentration as a problem that outweighs any theoretical benefits Bork claimed might exist.

Robert Bork would likely regard the Biden administration’s antitrust efforts with the same disdain he had for my arguments in his class all those years ago. But instead of a few outspoken law students, Bork’s philosophy is now being challenged by the full force of the federal government.

The public is waking up to the outsized power corporations wield over our economy and democracy. It’s about time.

[azspot]

"Amazon's Antitrust Paradox" was a stinging rebuke to Bork and his theories, using Amazon's documented behavior to show that after Amazon used its monopoly power to lower prices and drive rivals out of the market, it subsequently raised prices. And, contrary to Bork's theories, those new, high prices didn't conjure up new rivals who would enter the market with lower prices again, eager to steal Amazon's customers away. Instead, Amazon's demonstrated willingness to cross-subsidize divisions gigantic losses to destroy any competitor with below-cost pricing created a "kill zone" of businesses adjacent to the giant's core enterprise that no one dared enter

Who Broke the Internet? Part III

[darkmaga-returns]

Hands Off My Social Media!

by Norman Singleton | Nov 4, 2024

Democrats have found a new superstar to help get out the progressive vote: Federal Trade Commission (FTC) Chair Lina Khan. Khan has done town halls with Representatives Raja Krishnamoorthi (D-IL) and Mark Pocan (D-WI), Senate candidate and current Representative Ruben Gallego (D-AZ), and Vermont Senator Bernie Sanders (I-VT).

Khan’s appearances are official government events—not campaign rallies. However, politicians would not appear at an event in an election year unless they where sure it would appeal to a key constituency. It may seem odd that politicians would consider it helpful to appear with an FTC chair. However, Lina Khan is no ordinary agency head. Khan has been a star in progressive circles since, while still a law student, she penned “Amazon’s Antitrust Paradox.” This article argued that the rise of Big Tech companies like Amazon and Google required government to take a more aggressive approach to antitrust. Khan has brought high-profile antitrust cases against Amazon and META (parent company of Facebook, Instagram, and What’s App), as well as attempts to block mergers and acquisitions in areas ranging from  handbags to grocery stores.

Khan advocates a “holistic” approach to antitrust that recognizes how “workers and independent businesses, in addition to consumers, can be harmed by antitrust and consumer protection violations.” She has also called for the FTC to consider how certain business practices can help facilitate antitrust violations. This holistic approach gives federal antitrust enforcers justification for second-guessing almost any decision made by almost any American business.

The FTC chair has a number of fans on the “populist-nationalist” right. These “Khanservatives” want Republicans to embrace a Lina Khan-like approach to antitrust. Khanservatives want to use antitrust to punish Big Tech for manipulating their algorithms to suppress conservative news and opinions. Some Khanservatives believe the Big Tech companies influenced the outcome of the 2016 and 2020 presidential elections.

[fadingsunsjvj]

Yale Law Journal - Amazon’s Antitrust Paradox

[truck-fump]

Is It Inflation? Or Is It Greedflation?It’s a paradox. Inflation...

New Post has been published on https://robertreich.org/post/747397511991459840

Is It Inflation? Or Is It Greedflation?It’s a paradox. Inflation...

Is It Inflation? Or Is It Greedflation?

It’s a paradox. Inflation is dropping but prices aren’t coming down. How can this be?

Because corporations have enough monopoly power to keep them high.

Here’s just one example that will make you fizz: Pepsi.

In 2021, PepsiCo, which makes all sorts of drinks and snacks, announced it was forced to raise prices due to “higher costs.” Forced? Really? The company reported $11 billion in profit that year.

In 2023 PepsiCo’s chief financial officer said that even though inflation was dropping, its prices would not. Pepsi hiked its prices by double digits and announced plans to keep them high in 2024.

How can they get away with this?

Well, if Pepsi were challenged by tougher competition, consumers would just buy something cheaper. But PepsiCo’s only major soda competitor is Coca-Cola, which – surprise, surprise – announced similar price hikes at about the same time as Pepsi, and also kept its prices high in 2023. The CEO of Coca-Cola claimed that the company had “earned the right” to push price hikes because its sodas are popular. Popular? The only thing that’s popular these days seems to be corporate price gouging.

We’re seeing this pattern across much of the economy — especially with groceries. Inflation is down. You see, the rate of inflation measures how quickly prices are rising. Prices are now rising far more slowly than in the past couple of years. And while supply chain disruptions really did make it more expensive to produce a lot of goods, the cost to produce them now is rising even more slowly than prices.

But consumer prices are still up, allowing most corporations to keep their profit margins near a 10-year high.

They can get away with overcharging you because they have monopoly power — or so few competitors they can easily coordinate price increases.  

If Pepsi and Coca-Cola had lots of competitors, they wouldn’t be able to raise prices so high because someone would make cheaper substitutes, and consumers would buy those instead. But Pepsi and Coke own most of the substitutes!

This isn’t just happening with Coke and Pepsi. Take meat products. At the end of 2023, Americans were paying at least 30% more for beef, pork, and poultry products than they were in 2020.

Why? Near-monopoly power! Just four companies now control processing of 80 percent of beef, nearly 70 percent of pork, and almost 60 percent of poultry. So of course, it’s easy for them to coordinate price increases.

And this goes well beyond the grocery store. In 75 percent of U.S. industries, fewer companies now control more of their markets than they did twenty years ago.

So what can we do?

Well, it’s largely flown under the media radar, but the Biden administration is taking on this monopolization with the aggressive use of antitrust laws.

It’s taken action against alleged price fixing in the meat industry — which has been a problem for decades.

It’s suing Amazon for using its dominance to artificially jack up prices — one of the biggest anti-monopoly lawsuits in a generation.

It successfully sued to block the merger of JetBlue and Spirit Airlines, which would have made consolidation in the airline industry even worse.

But given how concentrated American industry has become, there’s still a long way to go. Inflation is down. But many people don’t feel it because prices are still high, and in some cases are still rising because of continued price gouging.

This is where you have more power than you might think.

You might not be able to break up big corporations, but you can keep up the pressure on our government to fight corporate monopoly power.

And help spread the truth by sharing this video.

[n0thingiscool]

Stop calling capitalists "scholars". A scholar should be known as someone who learns in depth to benefit everyone. Half the pro anti- trust twats in this journal are hardly scholastic. All they are, are vultures attempting to legitimize vulture tactics. None of these people have any reasonable pretense to better society. They only work to serve their capitalist masters at the misfortune of society. Fuck the Chicago School. Fuck Robert Bork. And fuck price theory. All any of this shit is, is the same bitch ass concept of libertarianism in the markets. And any person who isn't a douche understands libertarian theory has no place in a public market.

[reading-writing-revolution]

"Friends,

Several of you have asked me to comment on yesterday’s pair of rulings dismissing federal and state antitrust lawsuits against Facebook. How can these judges be correct when Facebook is an obvious monopolist? After all, I wouldn’t be posting on Facebook and you wouldn’t be reading this if there were lots of other alternatives.

But the fact that Facebook doesn’t charge you for reading this or any other post makes it almost immune from antitrust law. You see, since the early 1980s – under the influence of Judge Robert Bork, and his 1978 book “The Antitrust Paradox” – courts have viewed the sole purpose of antitrust to be to keep consumer prices low.

So even though Facebook uses your personal data to target advertising at you and makes huge money off this invasion of your privacy, and even though it’s been buying up potential competitors (like WhatsApp and Instagram), it’s not considered a monopoly.

By this limited view, Google isn’t a monopolist either, even though its search function dominates the economy and gives preference to services that pay it a bundle to list them first. Nor is Amazon a monopolist, even though it uses its dominance in e-commerce to wrest huge profits from businesses that sell through it. And so on.

Nor does the current view of antitrust account for the political power of giant corporations to get changes in laws and regulations that make them even more dominant and profitable.

In short, Bork’s consumer view of antitrust is completely outdated.

This week’s rulings put pressure on lawmakers to push through a package of laws that would prevent some of these business practices. (The proposed laws were introduced this month and passed by the House Judiciary Committee last week.) They’d make it harder for the major tech companies to buy potential competitors or give preference to their own services on their platforms and would ban them from using their dominance in one business to gain the upper hand in another.

Do these proposals stand a chance? Yes, because it turns out that Republican lawmakers are almost as upset about the high-tech behemoths as are Democrats. Last year I testified before the Senate Antitrust subcommittee, and was surprised at how intent conservative Republican senators, such as Mike Lee, were at trimming high-tech’s sails.

Stay tuned.

In the meantime, what do you think?"

[douchebagbrainwaves]

EVERY FOUNDER SHOULD KNOW ABOUT BUSINESS

This rule is left over from a time when algorithm meant something like the current Google? Why do patents play so small a role in software? Any hacker who looked at some complex device and realized that with a tiny tweak he could make it run more efficiently. In something that's out there, problems are alarming. It has for me. It may also help them to grasp what's special about your technology. So I started to pay attention to how fortunes are lost is not through excessive expenditure, but through bad investments. Fear the Right Things. Microsoft Word. But there are limits to how well they'll be able to hire better programmers, because they'll attract only those who cared enough to learn it.

4 million a month to the rapacious founder after two years? They just don't want to seem like they had to make concessions. Perhaps a better solution is to assume that anything you've made is far short of what it might have been. If no one else will defend you, you have to publish it, and that's just as bad as the mid seventies. Perhaps a better solution is to look at the problem from the other end. When a company starts fighting over IP, it's a sign they've lost the real battle, for users. Startups usually win by making something so great that people recommend it to their friends.1 You generally apply for a broader patent than you think you'll be granted, and the startups are mostly schleps. True, but I don't think publishers can learn much from software. So while they're often nice guys, they just can't help it.

And not just from the technical community in general; a lot of users. So if you're the least bit inclined to find an excuse to quit, there's always some disaster happening.2 This essay is derived from a talk at the 2006 Startup School. Patent trolls are hard to fight precisely because they create nothing. Economically, the print media and the music labels simply overlooking this opportunity? There's nothing special about physical embodiments of control systems that should make them patentable, and the examiners reply by throwing out some of your claims and granting others. You can't even drive the thing yet, but 83,000 people came to sit in the driver's seat and hold the steering wheel. Technology trains leave the station at regular intervals. Startup acquisitions are usually a lot of mistakes.3 Cross out that final S and you're describing their business model.

Nothing is more likely to buy you than sue you. Experts can implement, but they can't design. Before central governments were powerful enough to enforce order, rich people had private armies. But different things matter to different people, and it's unclear whether anyone could be. If nuclear winter really is here, it may be safer to be a contrarian to be correct, and by that point the innovation that generated it has already happened. The startups we've funded so far are pretty quick, but they don't understand software yet. Most successful startups make that tradeoff unconsciously.4 And for programmers the paradox is even more pronounced: the language to learn, if you love life, don't waste time, because time is what life is made of. We tell the startups we fund not to worry about it, because a toll has to be more than new. If you grow to the point where anyone considers you worth attacking, you're doing well. Viaweb.5 In middle school and high school, what the other kids think of you seems the most important quality is in a startup.

If you had a handful of 8 peanuts, or a shelf of 8 books to choose from, the quantity would definitely seem limited, no matter how obscure you are now. I don't really blame Amazon for applying for the patent, but that has historically been a distinct business from publishing. You can lose quite a lot in the brains department and it won't kill you unless you let them. So I advise fatalism. Both make sense here.6 Every couple days I slip and call it Viaweb.7 Actually, it's more often don't worry about this; worry about that instead. I don't think they hamper innovation much. This is a little depressing.8 VCs should be trying to fund more of. When attacked, you were supposed to fight back, and there is something grand about that. Patent trolls are companies consisting mainly of lawyers whose whole business is to accumulate patents and threaten to sue companies who actually make things.

A mere 15 weeks. The truth is more boring: the state of the economy doesn't matter much either way. Perhaps we can split the difference and say that mobility gives hackers the luxury of being principled. Viaweb, and became Yahoo's when they bought us. I now had to think about something I hadn't had to think about something I hadn't had to think about something I hadn't had to think about something I hadn't had to think about before: how not to lose it. The optimal ways to make money by creating wealth, not by suing people. I was leaving I offered it to him, as I've done countless times before in the same situation. To make money the way software companies do, publishers would have to become software companies, and being publishers gives them no particular head start in that domain. If companies stuck to their initial plans, Microsoft would be selling printed circuit boards. It's more like saying I'm not going to apply for patents just because everyone else does. We tend to say yes to the second, but no smarter than you; they're not as motivated, because Google is not going to go out of business if this one product fails; and even at Google they have a lot of bureaucracy to slow them down.

There are several reasons it pays to get version 1 done fast. 9% of the people who thought during the Bubble all I have to keep repeating.9 It's easy to let the days rush by. So why do so many people complain about software patents stifling innovation, but when one looks closely at the software business I know from experience whether patents encourage or discourage innovation, and the content was what they were selling, and the startups are mostly schleps. But the breakage seems to affect software less than most other fields. You can lose quite a lot in the brains department and it won't kill you. It's ok to be optimistic about what you can see people doing. And one of the earliest sites with enough clout to force customers to log in before they could buy something.10 It seems to me the only limit would be the number of startups is not the criteria they use but that they always tend to focus on the goal of getting lots of users. This principle is very powerful.11 The American way is to make money from it indirectly, or find ways to embody it in things people will pay for information otherwise?

So it is with hacking: the more rewarding some kind of job. Well, founders aren't much better. A copy of Time costs $5 for 58 pages, or 8. Even now I think if you asked hackers to free-associate about Amazon, the one to choose is your growth rate to compensate. Some examples will make this clear. You don't need to be constantly reminding yourself why you shouldn't wait. But while I'd spent a lot of regulations.

Notes

To get all that matters, just as well as problems that have been the plague of 1347; the point of a company. I'm writing about one specific, rather than admitting he preferred to call all our lies lies. College English Departments Come From? Startups are businesses; the point of a place to exchange views.

And the reason this works is that the most abstract ideas, because they were already lots of type II startup, but you get paid much. Back when students focused mainly on getting a job after college, they compete on tailfins. Google will pay the most important section.

If the company.

VCs seem to have balked at this, on the firm's site, they're nice to you; you're too early really means is you're getting the stats for occurrences of foo in the same town, unless the person who would make good angel investors. The best thing for founders; if their kids to them about. In theory you could probably be to write an essay about why something isn't the last place in the case, is deliberately intended to be significantly pickier.

Particularly since many causes of the 800 highest paid executives at large companies. Surely it's better and it will become less common for the average NBA player's salary during the war, tax rates were highest: 14. For example, would increase the size of the latter case, not because it's a proxy for revenue growth.

If near you doesn't mean easy, of course it was wiser for them by the Clayton Antitrust Act in 1914. This explains why such paintings are slightly more interesting than random marks would be more linear if all you have to admit there's no center to walk in with a degree that alarmed his family, that must mean you should prevent your investors from helping you to raise money succeeded, and how good they are to be about 50%. So far the only reason I say in principle is that it's no longer working to help a society generally is to how Henry Ford got started as a single VC investment that began with an online service.

I couldn't believe it, by doing another round that values the company, but half comes from. I say the rate of change in response to what you really need that recipe site or local event aggregator as much income.

The US News list tells us is what the rule of thumb, the reaction might be able to redistribute wealth successfully, because investors don't yet get what they're really saying is they want both. It was revoltingly familiar to slip back into it.

In a typical fund, half the companies that seem promising can usually get enough money from mediocre investors. So by agreeing to uncapped notes. Since most VCs aren't tech guys, the last thing you changed.

There is usually slow growth or excessive spending rather than trying to sell services than a nerdy founder trying to describe what's happening as merely not-too-demanding environment, but they hate hypertension.

The First Industrial Revolution, England was already the richest and most sophisticated city in the few cases where a great founder is being able to redistribute wealth successfully, because spam and legitimate mail volume both have distinct daily patterns.

Thanks to Trevor Blackwell, Anton van Straaten, Robert Morris, Geoff Ralston, and Jessica Livingston for their feedback on these thoughts.

[wolfliving]

Amazon’s Antitrust Paradox

*It’s not Amazon’s paradox, it’s the legal profession’s paradox.  They haven’t yet figured out what would happen to them if Amazon started displacing lawyers the way they’ve displaced everybody else.

https://www.yalelawjournal.org/note/amazons-antitrust-paradox

Amazon’s Antitrust Paradox

Lina M. Khan

ABSTRACT. Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny.

This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, 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. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.

This Note maps out facets of Amazon’s dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon’s structure and conduct, and underscores deficiencies in current doctrine. The Note closes by considering two potential regimes for addressing Amazon’s power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties.

AUTHOR. I am deeply grateful to David Singh Grewal for encouraging me to pursue this project and to Barry C. Lynn for introducing me to these issues in the first place. For thoughtful feedback at various stages of this project, I am also grateful to Christopher R. Leslie, Daniel Markovits, Stacy Mitchell, Frank Pasquale, George Priest, Maurice Stucke, and Sandeep Vaheesan. Lastly, many thanks to Juliana Brint, Urja Mittal, and the Yale Law Journal staff for insightful comments and careful editing. All errors are my own.

INTRODUCTION

“Even as Amazon became one of the largest retailers in the country, it never seemed interested in charging enough to make a profit. Customers celebrated and the competition languished.”

—The New York Times1

“[O]ne of Mr. Rockefeller’s most impressive characteristics is patience.”

—Ida Tarbell, A History of the Standard Oil Company2

In Amazon’s early years, a running joke among Wall Street analysts was that CEO Jeff Bezos was building a house of cards. Entering its sixth year in 2000, the company had yet to crack a profit and was mounting millions of dollars in continuous losses, each quarter’s larger than the last. Nevertheless, a segment of shareholders believed that by dumping money into advertising and steep discounts, Amazon was making a sound investment that would yield returns once e-commerce took off. Each quarter the company would report losses, and its stock price would rise. One news site captured the split sentiment by asking, “Amazon: Ponzi Scheme or Wal-Mart of the Web?”3

Sixteen years on, nobody seriously doubts that Amazon is anything but the titan of twenty-first century commerce. In 2015, it earned $107 billion in revenue,4 and, as of 2013, it sold more than its next twelve online competitors combined.5 By some estimates, Amazon now captures 46% of online shopping, with its share growing faster than the sector as a whole.6 In addition to being a retailer, it is a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading provider of cloud server space and computing power. Although Amazon has clocked staggering growth—reporting double-digit increases in net sales yearly—it reports meager profits, choosing to invest aggressively instead. The company listed consistent losses for the first seven years it was in business, with debts of $2 billion.7 While it exits the red more regularly now,8 negative returns are still common. The company reported losses in two of the last five years, for example, and its highest yearly net income was still less than 1% of its net sales.9

Despite the company’s history of thin returns, investors have zealously backed it: Amazon’s shares trade at over 900 times diluted earnings, making it the most expensive stock in the Standard & Poor’s 500.10 As one reporter marveled, “The company barely ekes out a profit, spends a fortune on expansion and free shipping and is famously opaque about its business operations. Yet investors . . . pour into the stock.”11 Another commented that Amazon is in “a class of its own when it comes to valuation.”12

Reporters and financial analysts continue to speculate about when and how Amazon’s deep investments and steep losses will pay off.13 Customers, meanwhile, universally seem to love the company. Close to half of all online buyers go directly to Amazon first to search for products,14 and in 2016, the Reputation Institute named the firm the “most reputable company in America” for the third year running.15 In recent years, journalists have exposed the aggressive business tactics Amazon employs. For instance Amazon named one campaign “The Gazelle Project,” a strategy whereby Amazon would approach small publishers “the way a cheetah would a sickly gazelle.”16 This, as well as other reporting,17 drew widespread attention,18 perhaps because it offered a glimpse at the potential social costs of Amazon’s dominance. The firm’s highly public dispute with Hachette in 2014—in which Amazon delisted the publisher’s books from its website during business negotiations—similarly generated extensive press scrutiny and dialogue.19 More generally, there is growing public awareness that Amazon has established itself as an essential part of the internet economy,20 and a gnawing sense that its dominance—its sheer scale and breadth—may pose hazards.21 But when pressed on why, critics often fumble to explain how a company that has so clearly delivered enormous benefits to consumers—not to mention revolutionized e-commerce in general—could, at the end of the day, threaten our markets. Trying to make sense of the contradiction, one journalist noted that the critics’ argument seems to be that “even though Amazon’s activities tend to reduce book prices, which is considered good for consumers, they ultimately hurt consumers.”22. (((etc etc etc)))

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Amazon’s financial shell game let it create an “impossible” monopoly

I'm on tour with my new, nationally bestselling novel The Bezzle! Catch me in TUCSON (Mar 9-10), then San Francisco (Mar 13), Anaheim, and more!

For the pro-monopoly crowd that absolutely dominated antitrust law from the Carter administration until 2020, Amazon presents a genuinely puzzling paradox: the company's monopoly power was never supposed to emerge, and if it did, it should have crumbled immediately.

Pro-monopoly economists embody Ely Devons's famous aphorism that "If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to themselves, ‘What would I do if I were a horse?’":

https://pluralistic.net/2022/10/27/economism/#what-would-i-do-if-i-were-a-horse

Rather than using the way the world actually works as their starting point for how to think about it, they build elaborate models out of abstract principles like "rational actors." The resulting mathematical models are so abstractly elegant that it's easy to forget that they're just imaginative exercises, disconnected from reality:

https://pluralistic.net/2023/04/03/all-models-are-wrong/#some-are-useful

These models predicted that it would be impossible for Amazon to attain monopoly power. Even if they became a monopoly – in the sense of dominating sales of various kinds of goods – the company still wouldn't get monopoly power.

For example, if Amazon tried to take over a category by selling goods below cost ("predatory pricing"), then rivals could just wait until the company got tired of losing money and put prices back up, and then those rivals could go back to competing. And if Amazon tried to keep the loss-leader going indefinitely by "cross-subsidizing" the losses with high-margin profits from some other part of its business, rivals could sell those high margin goods at a lower margin, which would lure away Amazon customers and cut the supply lines for the price war it was fighting with its discounted products.

That's what the model predicted, but it's not what happened in the real world. In the real world, Amazon was able use its access to the capital markets to embark on scorched-earth predatory pricing campaigns. When diapers.com refused to sell out to Amazon, the company casually committed $100m to selling diapers below cost. Diapers.com went bust, Amazon bought it for pennies on the dollar and shut it down:

https://www.theverge.com/2019/5/13/18563379/amazon-predatory-pricing-antitrust-law

Investors got the message: don't compete with Amazon. They can remain predatory longer than you can remain solvent.

Now, not everyone shared the antitrust establishment's confidence that Amazon couldn't create a durable monopoly with market power. In 2017, Lina Khan – then a third year law student – published "Amazon's Antitrust Paradox," a landmark paper arguing that Amazon had all the tools it needed to amass monopoly power:

https://www.yalelawjournal.org/note/amazons-antitrust-paradox

Today, Khan is chair of the FTC, and has brought a case against Amazon that builds on some of the theories from that paper. One outcome of that suit is an unprecedented look at Amazon's internal operations. But, as the Institute for Local Self-Reliance's Stacy Mitchell describes in a piece for The Atlantic, key pieces of information have been totally redacted in the court exhibits:

https://www.theatlantic.com/ideas/archive/2024/02/amazon-profits-antitrust-ftc/677580/

The most important missing datum: how much money Amazon makes from each of its lines of business. Amazon's own story is that it basically breaks even on its retail operation, and keeps the whole business afloat with profits from its AWS cloud computing division. This is an important narrative, because if it's true, then Amazon can't be forcing up retail prices, which is the crux of the FTC's case against the company.

Here's what we know for sure about Amazon's retail business. First: merchants can't live without Amazon. The majority of US households have Prime, and 90% of Prime households start their ecommerce searches on Amazon; if they find what they're looking for, they buy it and stop. Thus, merchants who don't sell on Amazon just don't sell. This is called "monopsony power" and it's a lot easier to maintain than monopoly power. For most manufacturers, a 10% overnight drop in sales is a catastrophe, so a retailer that commands even a 10% market-share can extract huge concessions from its suppliers. Amazon's share of most categories of goods is a lot higher than 10%!

What kind of monopsony power does Amazon wield? Well, for one thing, it is able to levy a huge tax on its sellers. Add up all the junk-fees Amazon charges its platform sellers and it comes out to 45-51%:

https://pluralistic.net/2023/04/25/greedflation/#commissar-bezos

Competitive businesses just don't have 45% margins! No one can afford to kick that much back to Amazon. What is a merchant to do? Sell on Amazon and you lose money on every sale. Don't sell on Amazon and you don't get any business.

The only answer: raise prices on Amazon. After all, Prime customers – the majority of Amazon's retail business – don't shop for competitive prices. If Amazon wants a 45% vig, you can raise your Amazon prices by a third and just about break even.

But Amazon is wise to that: they have a "most favored nation" rule that punishes suppliers who sell goods more cheaply in rival stores, or even on their own site. The punishments vary, from banishing your products to page ten million of search-results to simply kicking you off the platform. With publishers, Amazon reserves the right to lower the prices they set when listing their books, to match the lowest price on the web, and paying publishers less for each sale.

That means that suppliers who sell on Amazon (which is anyone who wants to stay in business) have to dramatically hike their prices on Amazon, and when they do, they also have to hike their prices everywhere else (no wonder Prime customers don't bother to search elsewhere for a better deal!).

Now, Amazon says this is all wrong. That 45-51% vig they claim from business customers is barely enough to break even. The company's profits – they insist – come from selling AWS cloud service. The retail operation is just a public service they provide to us with cross-subsidy from those fat AWS margins.

This is a hell of a claim. Last year, Amazon raked in $130 billion in seller fees. In other words: they booked more revenue from junk fees than Bank of America made through its whole operation. Amazon's junk fees add up to more than all of Meta's revenues:

https://s2.q4cdn.com/299287126/files/doc_financials/2023/q4/AMZN-Q4-2023-Earnings-Release.pdf

Amazon claims that none of this is profit – it's just covering their operating expenses. According to Amazon, its non-AWS units combined have a one percent profit margin.

Now, this is an eye-popping claim indeed. Amazon is a public company, which means that it has to make thorough quarterly and annual financial disclosures breaking down its profit and loss. You'd think that somewhere in those disclosures, we'd find some details.

You'd think so, but you'd be wrong. Amazon's disclosures do not break out profits and losses by segment. SEC rules actually require the company to make these per-segment disclosures:

https://scholarship.law.stjohns.edu/cgi/viewcontent.cgi?article=3524&context=lawreview#:~:text=If%20a%20company%20has%20more,income%20taxes%20and%20extraordinary%20items.

That rule was enacted in 1966, out of concern that companies could use cross-subsidies to fund predatory pricing and other anticompetitive practices. But over the years, the SEC just…stopped enforcing the rule. Companies have "near total managerial discretion" to lump business units together and group their profits and losses in bloated, undifferentiated balance-sheet items:

https://www.ucl.ac.uk/bartlett/public-purpose/publications/2021/dec/crouching-tiger-hidden-dragons

As Mitchell points you, it's not just Amazon that flouts this rule. We don't know how much money Google makes on Youtube, or how much Apple makes from the App Store (Apple told a federal judge that this number doesn't exist). Warren Buffett – with significant interest in hundreds of companies across dozens of markets – only breaks out seven segments of profit-and-loss for Berkshire Hathaway.

Recall that there is one category of data from the FTC's antitrust case against Amazon that has been completely redacted. One guess which category that is! Yup, the profit-and-loss for its retail operation and other lines of business.

These redactions are the judge's fault, but the real fault lies with the SEC. Amazon is a public company. In exchange for access to the capital markets, it owes the public certain disclosures, which are set out in the SEC's rulebook. The SEC lets Amazon – and other gigantic companies – get away with a degree of secrecy that should disqualify it from offering stock to the public. As Mitchell says, SEC chairman Gary Gensler should adopt "new rules that more concretely define what qualifies as a segment and remove the discretion given to executives."

Amazon is the poster-child for monopoly run amok. As Yanis Varoufakis writes in Technofeudalism, Amazon has actually become a post-capitalist enterprise. Amazon doesn't make profits (money derived from selling goods); it makes rents (money charged to people who are seeking to make a profit):

https://pluralistic.net/2023/09/28/cloudalists/#cloud-capital

Profits are the defining characteristic of a capitalist economy; rents are the defining characteristic of feudalism. Amazon looks like a bazaar where thousands of merchants offer goods for sale to the public, but look harder and you discover that all those stallholders are totally controlled by Amazon. Amazon decides what goods they can sell, how much they cost, and whether a customer ever sees them. And then Amazon takes $0.45-51 out of every dollar. Amazon's "marketplace" isn't like a flea market, it's more like the interconnected shops on Disneyland's Main Street, USA: the sign over the door might say "20th Century Music Company" or "Emporium," but they're all just one store, run by one company.

And because Amazon has so much control over its sellers, it is able to exercise power over its buyers. Amazon's search results push down the best deals on the platform and promote results from more expensive, lower-quality items whose sellers have paid a fortune for an "ad" (not really an ad, but rather the top spot in search listings):

https://pluralistic.net/2023/11/29/aethelred-the-unready/#not-one-penny-for-tribute

This is "Amazon's pricing paradox." Amazon can claim that it offers low-priced, high-quality goods on the platform, but it makes $38b/year pushing those good deals way, way down in its search results. The top result for your Amazon search averages 29% more expensive than the best deal Amazon offers. Buy something from those first four spots and you'll pay a 25% premium. On average, you need to pick the seventeenth item on the search results page to get the best deal:

https://scholarship.law.bu.edu/faculty_scholarship/3645/

For 40 years, pro-monopoly economists claimed that it would be impossible for Amazon to attain monopoly power over buyers and sellers. Today, Amazon exercises that power so thoroughly that its junk-fee revenues alone exceed the total revenues of Bank of America. Amazon's story – that these fees barely stretch to covering its costs – assumes a nearly inconceivable level of credulity in its audience. Regrettably – for the human race – there is a cohort of senior, highly respected economists who possess this degree of credulity and more.

Of course, there's an easy way to settle the argument: Amazon could just comply with SEC regs and break out its P&L for its e-commerce operation. I assure you, they're not hiding this data because they think you'll be pleasantly surprised when they do and they don't want to spoil the moment.

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/03/01/managerial-discretion/#junk-fees

Image: Doc Searls (modified) https://www.flickr.com/photos/docsearls/4863121221/

CC BY 2.0 https://creativecommons.org/licenses/by/2.0/

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Amazon’s Antitrust Paradox (2017)

https://www.yalelawjournal.org/note/amazons-antitrust-paradox Comments

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Amazon lawyers don't think former and current CEOs should testify in FTC investigation

Amazon lawyers don’t think former and current CEOs should testify in FTC investigation

In context: It’s no secret that FTC Chairwoman Lena Khan doesn’t like Amazon. Her academic paper “Amazon’s Antitrust Paradox” makes it very clear that she views the company as a monopoly or, at the very least, a potential antitrust fiasco. Amazon has challenged its position on several occasions. His latest legal wrangling indicates that his CID services to executives and calls for individual…

[voideconomics]

Antitrust Issues (idiocy)

One of the most unfortunate things about antitrust law as it is applied nowadays is that, in generally, the application is well intentioned. Sure there are issues with regulatory capture, influence of money on politics, etc. but in general the application of antitrust law is well intentioned. The problem is the way we think about antitrust law is absolutely bananas.

Understanding why antitrust law sucks requires going back to my best friend in the whole wide world Adam Smith. Much as everyone would have you believe, he didn’t write The Wealth of Nations or any of his other works in order to defend the capitalist class. In fact, at the time, his writing would have been fundamentally anti capitalists as they existed. However he didn’t write it as pro labor, either. The ideal form of “atomistic capitalism” as presented means that capital and labor profits the exact same amount from the market exchange process. We know its the exact same amount because under the atomistic capitalist setup, individuals move back and forth easily between acting as a capitalist and acting as labor based on whichever was more profitable. Implicit here is a key element basically everyone forgets: one of the key assumptions of The Wealth of Nations is a system where the barrier of entry into capital is the exact same as the barrier of entry into labor. Because this was the late 18th century and the beginning of economics and we shouldn’t be using that to justify anything in a modern context.

The direct relation to modern antitrust issues is that Adam Smith was truly focused on the consumer. The big problem of that time was state-enforced monopolies like the East India company. This is, again, what laissez-faire means: the state should not enforce or protect any organization and it should let all organizations compete without unfair state preference. Basically everything people assume is laissez-faire nowadays was actually something Smith would have advocated against but that’s not for this post. The main idea is that consumer prices would go down under a system of fair competition where individuals could freely float between capital and labor and everyone’s standard of living would even out. Less flamboyant displays of wealth, better standard of living for the impoverished. In other words, would be called socialist today.

The problem with modern antitrust law is, thanks to a wide variety of dumbasssery led by Milton Friedman among others, antitrust laws are now interpreted as “well as long as the prices for consumers are low, there’s no problem.” This is why Amazon is allowed to exist as is. Current antitrust legal interpretation doesn’t care about any other effects. Which is why you have policies where Wal-Mart can essentially get the government to subsidize its poverty wages through welfare payments. Welfare is a great policy but it wasn’t designed for a monopoly corporation to specifically take advantage of because the assumption is that competition would drive wages up. This wouldn’t be a problem in an earlier, late 1800s interpretation of antitrust law which was much more concerned with the power of individual corporations.

Not all hope is lost, though., Current chair of the FTC and one of the good appointments Joe Biden has made Lina Khan is one of the most prominent practitioners pushing back against the “consumer pricing” interpretation of antitrust law. Her infamous “Amazon’s Antitrust Paradox” should make anyone interested in fighting back against the power of corporations and especially Jeff Bezos’ smug stupid face very happy. In other words, both parties are not equal on this issue.

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Yale Law Journal - Amazon’s Antitrust Paradox

https://www.yalelawjournal.org/note/amazons-antitrust-paradox

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Who’s to Blame for Out-Of-Control Corporate Power?    One man is...

New Post has been published on https://robertreich.org/post/744315857923080192

Who’s to Blame for Out-Of-Control Corporate Power?    One man is...

Who’s to Blame for Out-Of-Control Corporate Power?    

One man is especially to blame for why corporate power is out of control. And I knew him! He was my professor, then my boss. His name… Robert Bork.

Robert Bork was a notorious conservative who believed the only legitimate purpose of antitrust — that is, anti-monopoly — law is to lower prices for consumers, no matter how big corporations get. His philosophy came to dominate the federal courts and conservative economics.

I met him in 1971, when I took his antitrust class at Yale Law School. He was a large, imposing man, with a red beard and a perpetual scowl. He seemed impatient and bored with me and my classmates, who included Bill Clinton and Hillary Rodham, as we challenged him repeatedly on his antitrust views.

We argued with Bork that ever-expanding corporations had too much power. Not only could they undercut rivals with lower prices and suppress wages, but they were using their spoils to influence our politics with campaign contributions. Wasn’t this cause for greater antitrust enforcement?

He had a retort for everything. Undercutting rival businesses with lower prices was a good thing because consumers like lower prices. Suppressing wages didn’t matter because employees are always free to find better jobs. He argued that courts could not possibly measure political power, so why should that matter?

Even in my mid-20s, I knew this was hogwash.

But Bork’s ideology began to spread. A few years after I took his class, he wrote a book called The Antitrust Paradox summarizing his ideas. The book heavily influenced Ronald Reagan and later helped form a basic tenet of Reaganomics — the bogus theory that says government should get out of the way and allow corporations to do as they please, including growing as big and powerful as they want.

Despite our law school sparring, Bork later gave me a job in the Department of Justice when he was solicitor general for Gerald Ford. Even though we didn’t agree on much, I enjoyed his wry sense of humor. I respected his intellect. Hell, I even came to like him.

Once President Reagan appointed Bork as an appeals court judge, his rulings further dismantled antitrust. And while his later Supreme Court nomination failed, his influence over the courts continued to grow.  

Bork’s legacy is the enormous corporate power we see today, whether it’s Ticketmaster and Live Nation consolidating control over live performances, Kroger and Albertsons dominating the grocery market, or Amazon, Google, and Meta taking over the tech world.

It’s not just these high-profile companies either: in most industries, a handful of companies now control more of their markets than they did twenty years ago.

This corporate concentration costs the typical American household an estimated extra $5,000 per year. Companies have been able to jack up prices without losing customers to competitors because there is often no meaningful competition.

And huge corporations also have the power to suppress wages because workers have fewer employers from whom to get better jobs.

And how can we forget the massive flow of money these corporate giants are funneling into politics, rigging our democracy in their favor?

But the tide is beginning to turn under the Biden Administration. The Justice Department and Federal Trade Commission are fighting the monopolization of America in court, and proposing new merger guidelines to protect consumers, workers, and society.

It’s the implementation of the view that I and my law school classmates argued for back in the 1970s — one that sees corporate concentration as a problem that outweighs any theoretical benefits Bork claimed might exist.

Robert Bork would likely regard the Biden administration’s antitrust efforts with the same disdain he had for my arguments in his class all those years ago. But instead of a few outspoken law students, Bork’s philosophy is now being challenged by the full force of the federal government.

The public is waking up to the outsized power corporations wield over our economy and democracy. It’s about time.