In September, 2023, the Federal Trade Commission and seventeen states sued Amazon on ant-trust grounds for restraining trade and excessively raising prices on third-party sellers and consumers. Three months later, a leaked internal memo revealed Amazon’s anti-labor strategies of buying off local politicians and gaining reputational capital through well-publicized charitable work. Such work, as an anti-union strategy, demonstrates that the very expression, corporate social responsibility, is an oxymoron, or at the very least a misnomer (i.e., misnamed); a more accurate, and thus revealing, label would be corporate marketing. One effect of the “responsibility” connotation is that companies such as Amazon with mammoth market power could effectively hide strategic efforts in restraint of trade, and thus curtailing competition. Combined with feckless anti-trust prosecution, the result is an American economy that has not lived up to Adam Smith’s theory wherein competition via the price mechanism is necessary for individual self-interests to have beneficial unintended consequences systemically and thus in terms of the public good.
The civil case accused Amazon “of engaging in anti-competitive practices
through measures that deter sellers from offering lower prices for products on
non-Amazon sites.”[1]
Amazon was being accused of deprioritizing listings of products sold at lower
prices on non-Amazon sites, forcing merchants to raise their prices on Amazon’s
platform and other sites “in order to keep their products competitive on
Amazon.”[2]
The customers suffer as relevant results of searches are replaced by paid
advertisements that favor Amazon’s own brands. Also, the company was charging
third-party sellers nearly half of their total revenue as fees for using Amazon’s
platform, the result being higher prices for the consumers. The company was
also compelling the sellers to use the company’s logistics service in order to
qualify for Amazon Prime. With nearly 40 percent of the e-commerce market, Amazon
was allegedly flexing its muscle at the expense of competition.
Yet the chairperson of the
Federal Trade Commission, Lina Khan, was not asking the court to break up the
mammoth company, preferring instead to limit herself to “liability.”[3]
I contend that such an avenue falls short as a vehicle for instituting a
competitive market. Firstly, a company with market power of nearly half of the
e-commerce market can be expected to use its muscle in restraint of trade even
while paying out liability claims because the oligopolistic excess-profits (akin
to “monopoly rents”) more than compensate for the (tax deductible) expenses. Secondly,
I submit that it is utterly unrealistic to suppose that a company with such
overwhelming market power will not use it merely because of external
disincentives such as civil fines. The use of “sticks” and even “carrots” to
get such a company to not act as a profit-maximizer comes up short because such
“motivating” tools are tertiary; they do not shake the fundamentals, whereby a
non-competitive market is restructured to be competitive and thus
composed of price-takers rather than a price-setter.
It is worth expanding on the tactics
that an oligopolistic company can use to protect itself from extraneous
attempts to fundamentally change the market. We get a glimpse of Amazon’s “play
book” from an eight-page memo that reveals how one of America’s largest
companies “executes on its public relations objectives and attempts to curtail
reputational harm stemming from criticisms of its business. It also illustrates
how Amazon [sought] to methodically court local politicians and community
groups in order to push its interest in a region where [the company] could be hampered
by local moratoriums on warehouse development, and [where the company was]
facing resistance from environmental and labor activists.”[4]
Knowing the company’s tactics in Southern California can give us an insight
into how the company’s management blunts federal legislative action that
could break up Amazon itself in order to create a competitive playing field in
e-commerce.
In a nutshell, Amazon’s strategy
was to create the illusion of on-going charity work and to pay off elected
government officials to, among other goals, resist unionization of the company’s
workforce and restrictions on where the company can build. Specifically, the
management “’cultivated’ Michael Vargas, the mayor of the town of Perris,
through pandemic-related donations” ostensibly to “support the region,” but
actually to buy off his support for new warehouse construction.[5]
This is proof that companies use money even aside from political campaign “donations”
to get elected representatives to affect public policy favorably to the
companies themselves. If this is so locally, we can be assured that companies
as large as Amazon wouldn’t withhold the tactic from being used to buy federal
lawmakers, whose power could include breaking up the company.
In regard to Amazon’s corporate “social
responsibility” programs, the leaked document includes plans to have employees
drop off food to the Los Angeles Food Bank “in big media moments that are
broadcasted/posted.” The illusion of ongoing charitable work would of course
work to the company’s advantage in public relations. As the “memo suggested
curating similar moments during a back-to-school donation event and a [Christmas]
toy drive, where drop offs occur and Amazon executives, as well as groups who
receive grants from the company, ‘speak about Amazon’s impact” to the media
present, even as the company planned on cutting off groups that “did not result
in measurable positive impact,” charity was clearly viewed by Amazon’s managers
as a promotional tactic.[6]
The false societal image of a benevolent oligopolistic company could be
expected to shield governmental efforts to break up the company and perpetuate
the erroneous assumption that civil liabilities (i.e., verdicts against the
company) are enough to safeguard consumers because the company’s management is
benevolent.
In conclusion, the Federal Trade Commission shirked its governmental mandate to enforce the Sherman Antitrust law from the onset of the litigation, thus hampering the ability of the judiciary to order an effective remedy. In a large industry in which one company has 40 percent market share, and that company actively buys government officials and strategically uses public relations, the danger is not just to competitive markets, but also to American representative democracy and the rule of law itself. It is, I submit, no accident that the chairwoman of the FTC did not include breaking up Amazon as a remedy. We need only look at the company's strategially placed political contributions to surmise which elected officials might have put political pressure on the FTC. The company’s memo reveals that Amazon uses its extraordinary wealth to bend public policy away from the public good, like a black hole in space bends even space itself, to protect the company's viability by donating directly or indirectly to elected officials. I submit that plutocracy, rather than mob rule, is the greatest threat to American democracy. At the very least, private wealth knows how to protect itself politically, and even how to cover its tracks under the patina of corporate social responsibility.
2. Ibid.
3. Ibid.
4. Haleluya Hadero, “Amazon’s Internal Plans to Advance Its Interests in California Are Laid Bare in Leaked Memo,” APNews.com, December 7, 2023.
5. Ibid.
6. Ibid, for the quoted material, which is both from the article and the memo itself.
