Over a 100 years ago, the US company Pullman produced railroad cars and wanted to place a factory 10 miles outside the city center. It built a city around the factory premises, where all the workers could live and thus use their money in the Pullman Town. In that way the staff ended up paying Pullman to build the factory. Amazon is like Pullman.
This is the beginning of a talk by Shaoul Sussman, who last week told us about “Amazon Pandemic: Why Amazon Will Emerge Stronger Than Ever,” in a virtual talk hosted by Data and Society Research Institute. Sussman, who is a Legal Fellow at the Institute for Local Self-Reliance, focuses his research focuses on the intersection of antitrust law and big tech. And he really could tell us interesting stuff about Amazon.
Half of Amazon’s business come from online sales, see figure. Another quarter from letting third-parties sell on its platform. And then a much smaller part comes from Amazon Web Services, who are probably the biggest cloud provider in the world! But Amazon sits on about 40% of US online sales, so the company, whom I interviewed in 1995, when it was a small online digital book store startup, really is unbelievably enormous. Congrats, Jeff Bezos, the richest man on the Earth, according to Forbes.
When that is said, it is truly disturbing to listen to Sussman.
“Amazon uses its market share to make the third party sellers bear the costs of its main platform,” he said and made the parallel to how Pullman made their employers take the costs.
He talked of Amazon’s ‘data barrier’, which consist of a whole range of measures giving Amazon immense power:
- The true identity of sellers are only known to Amazon. Sellers cannot contact each other. And they are insulated from consumers, if consumers want to go after them. Amazon controls the information on who is selling on its platform. Unless there is a court order Amazon keeps the identity secret
- Amazon does not reveal the metrics it uses to analyse the flow of eyeballs. Very little data on Amazons actual volume of sales is revealed to the public or the sellers
- It controls inventory data. Amazon is able to know, how much inventory a shop selling on its platform has, and also if somebody sells the same product. Amazon can pull it together and analyse it and give preference to one seller over another – which it does
- The metrics Amazon uses to determine seller performance are also a secret. So, as a seller you sometimes has not idea why your are penalized by the platform. Amazon basically created its own tribunal as only they know who is the seller
- Legal rights of sellers, too. Amazon can remove products, if you are violating their policy and then you have to prove that you are not violating the policy. They can suspend your account
- Amazon charges different prices and costs to sellers – there is no transparency how it works, what metrics Amazon is using and the same counts for the role of advertising. Here is an article about how Amazon abuses this knowledge for its own products.
- Finally Amazon is also a bank. But it does not allow independent auditors, and sellers have to rely on Amazons own lending services to get credit to sell on the platform.
Essentially, government agencies cannot regulate anything, said Sussman. It is up to Amazon to police its own market place. This power has caused collapse of many small businesses, said Sussman.
His solution to this is doing the same government did to Pullman.
“Separate the lines of business. Allow them to be a market place, but not to be a fulfillment service. You cannot do your own logistics. You cannot have the warehouses. You should not be allowed to be a bank for your sellers. You can pick one thing but not use your monopoly to compete unfairly in the other markets,” said Sussman.
What We Should Do in Europe
In Europe, it is paramount that we stop Amazon from conquering such big shares of the markets, as it has done in the US. It is devastating for small businesses. What to do:
- Regulators in data protection, consumer and antitrust must continue to force Amazon to live up to European laws – e.g. like they do in France.
- Companies and public authorities should stop buying form Amazon – including from Amazon Web Services
- And European citizens should avoid Amazon as a whole. Don’t use any of Amazon’s platforms at all.