A Blog by Jonathan Low

 

Aug 6, 2020

Without Even Trying, Amazon Reaps A Fortune During the Pandemic

There is simply no competitive alternative at its scale. Between ecommerce sales to a populace leery of entering stores or its AWS cloud business on which so many rely,, Amazon is dominant in crucial areas of the not-so-new economy. Which may, ironically, be the seed of its undoing.

But this assumes demand for social and political change which has yet to actually reveal itself - at a similar scale. JL

Shira Ovide reports in the New York Times:

Three months ago, Amazon chief executive Jeff Bezos declared that his company would try to lose money. Instead, Amazon declared the largest profit in its history. What has been bad for the United States hasn’t yet been bad for Big Tech. Is, then, what’s good for Big Tech good for the country? A company like Amazon planning to lose money and instead making billions of dollars in profit is a compelling sign of dominance. Despite broader economic pains and a growing backlash to their power, American tech superpowers appear as close to invulnerable as you can get.
Three months ago, the Amazon chief executive Jeff Bezos effectively declared that his company would try to lose money. Instead, Amazon declared on Thursday the largest profit in its history.
It was a bit awkward.
Companies are supposed to make money, for sure. But this comes at a moment when politicians and the public are wondering if America’s digital superstars are so powerful — and perhaps, tilt the game to their advantage — that they simply can’t be beaten.
A company like Amazon planning to lose money and instead making billions of dollars in profit is a pretty compelling sign of dominance.
This week in technology made me think of that old line about a once dominant car company: What’s good for the United States was good for General Motors, and what was good for GM was good for the country. (There’s a debate about what the GM executive meant by this, but it’s still a good line. Stay with me.)
The bosses of four of America’s tech giants, dragged (virtually) in front of Congress this week, said some version of that old saw. They said that their successes are uniquely American, and that their companies enrich the country and the lives of people who live in it.
That’s true. It is, however, hard to ignore that the fortunes of the country and its leading corporate citizens are currently going in opposite directions.
We learned on Thursday that the United States wiped out five years of economic growth in a matter of months, as my colleague Ben Casselman put it. During that period, Amazon, Apple, Google and Facebook mostly raked in money hand over fist.
Mostly, this makes sense. During a pandemic, we have needed the products and services these companies provide. That does not, however, guarantee them financial success.
Facebook’s Mark Zuckerberg said a few months ago that the way his company makes money — selling ads to a local bakery or an online luggage maker — tends to naturally rise and fall in tune with the economy. That’s generally true, but not right now. The economy is tanking at its worst rate in many decades. Facebook’s advertising sales are fine.
What has been bad for the United States hasn’t yet been bad for Big Tech. Is, then, what’s good for Big Tech good for the country? I’m not sure.
There’s an axiom in technology that change happens gradually, then suddenly. Tech companies can seem unbeatable until they aren’t — often because of some rapid evolutionary change. It happened to Nokia and Sun Microsystems — whose old headquarters was taken over by Facebook in a symbol of one empire replacing a crumbled one.
So could there be a Fall of Rome moment for today’s tech superpowers? Yes, in theory, and we might never see it coming. Right now, though, despite broader economic pains and a growing backlash to their power, these four American tech superpowers appear to be as close to invulnerable as you can get.

The antitrust code was written to tackle railroads and steel companies that grew strong enough to raise their prices at will.
A hot conversation in legal scholarship is whether those laws apply to Google, Facebook and other companies that offer many products for no (monetary) cost to us. (My colleague Cecilia Kang talked about this on The Daily.)
There are, however, at least a couple of examples in which tech companies are being accused of behavior that has led to higher sticker prices for us. In other words, there are conventional, railroad-baron-type antitrust claims against the tech giants, too.
These instances didn’t get much of an airing during the congressional hearing this week into tech company power, but they’re worth paying attention to.
One issue involves Apple’s App Store. A lawsuit that is winding its way through U.S. courts claims that Apple’s commission of as much as 30 percent on digital app transactions makes all iPhone apps more expensive than they would be without Apple’s monopoly over iPhone app distribution.
Another involves Amazon’s marketplace. Some merchants have said that Amazon punishes them if they list what they sell on Amazon for lower prices on Walmart.com or other spots. Those sellers claim that Amazon is in essence pushing up the prices on products on competitor’s shopping sites.
Members of Congress didn’t ask Apple and Amazon about these allegations, and the companies have previously denied them.
Tim Wu, a professor at Columbia Law School and a contributing Opinion writer for The New York Times, told me that he believed those price claims were the strongest potential antitrust case against Amazon on legal grounds.
He said, though, that there’s a distinction between “technical antitrust and public opinion antitrust.” Intricate discussions about price setting are boring in congressional hearings.

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