Amazon and Piling On

Image via Zegreg63.

Image via Zegreg63.

Lately, you can’t follow a Twitter feed without reading an article lambasting Amazon for one or another business practice. These articles are often fraught with inconsistency, economic fallacy, and anti-business/anti-corporate leftist rhetoric. I don’t often delve into politics on this blog, but I wanted to take just a minute to point out one instance of where I think the anti-Amazon fever is dead wrong.

The Wall Street Journal (to demonstrate that misconceptions aren’t limited to the left) makes the following statement in discussing the ongoing Amazon-Disney dispute:

Amazon has engaged in tough negotiations with Hollywood studios in the past, but until the Warner Bros. dust-up, it doesn’t appear to have previously impeded consumers’ ability to preorder discs.

This is inaccurate, and remarkably so. Amazon cannot “impede consumers’ ability to preorder discs.” They can only “impede” consumers’ ability to preorder discs from Amazon. Indeed, the Wall Street Journal describes the dispute as centered on Amazon’s desire to get paid back by studies for their losses when they discount prices to match brick-and-mortar stores like Wal-Mart and Best Buy. Retail stores, the Journal says, use DVDs as loss leaders (as they do so many other products) to drive customers into their stores, who then buy other profitable items. Amazon, it’s contended, can’t do the same, although that’s an odd proposition since Amazon benefits whenever someone visits their site.

But indeed, consider: the Journal describes the competition that Amazon faces, but then goes on to imply that Amazon doesn’t face competition. How else can you account for the idea that Amazon can “impede” consumer access to a product that is easily accessible from their competition? The entire notion of Amazon as a “monopoly” is also thereby destroyed–monopolies don’t mean simply that companies aren’t allowed to compete. If “monopoly” has any meaning, it must be that a company can directly prohibit competition.

The fact is that Amazon, like Wal-Mart and Best Buy and any other large retailer, has some level of economic power, which should be considered as distinct from political power. The most that Amazon (or Wal-Mart, or Best Buy) can do is offer the best products at the lowest prices with the most convenience, or some combination thereof, and by doing so be more competitive than the alternatives. Amazon has economies of scale that offer some advantages over smaller retailers, hence their economic power, but they cannot (and should not be able to) disrupt the ability for their competitors to do better than them. Certainly, they can’t literally “impede” anyone from buying from someone else.

If there’s one thing that the technology industry has shown us, it’s that the common notion of “monopoly” power is demonstrably false. Monopolies are possible when they derive from political power, such as local municipalities granting monopolies to cable companies, but they’re impossible when they derive purely from economic power. But we’ve seen enough disruption in the industry to know that no company can fail to compete and survive for long.

Consider that Amazon, for all of its influence, uses lower prices and better convenience to create competitive advantage, things that should be recognized as net values for consumers. For some reason, however, Amazon’s tactics are seen by many as predatory, even when compared to a company like Disney that is known for its own aggressive (but equally legitimate) business practices. It’s exceedingly strange to me that a company, Amazon, that is lauded for making it exceedingly easy to buy products at the lowest prices, can be so relentlessly attacked when so many people directly benefit from their efforts.

I’ve only scratched the surface here in considering the many attacks on Amazon. Their conflict with Hatchette is another topic that’s full of the same sort of anti-corporate mentality, and which I won’t tackle in this post. Suffice it to say that I’ve yet to find a discussion that handles Amazon and its competition in a consistent and viable light, on either side.

But I’ll keep looking.



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