Elizabeth Warren wants to break up the “big tech” companies: Amazon, Facebook, Google, Instagram. Is this a good idea? (1 Viewer)

[timschochet]

The argument can be made that Amazon is going down the path that leads to where China is today.  

I don’t understand what you mean by this. 

 

[IvanKaramazov]

Have you read about Diapers.com?  There does come a certain point where these companies get to a certain size and dominate the market so much that they are essentially anti-competitive. I guess to your point, Amazon’s been mostly consumer friendly and competitor or even supplier unfriendly. But eventually, I think people worry they’ll use their pricing power when they run everyone else out of business. 

People used to make this same argument about Walmart.  It's seems ridiculous in hindsight, but people were really worried about Walmart wiping out all of its competitors and taking advantage of its ensuing monopoly-retailer status.  Applying that same argument to Amazon is even more ridiculous because at least you could make a plausible argument that an individual Walmart store might become a local monopolist in some rural community (at least you could that argument in the pre-internet era).  That's not even remotely plausible for an online retailer.  

I get the concerns about Facebook and Twitter and the like -- network effects naturally result in a small number of very large social media companies that give them outsized influence on society.  The retail industry is entirely different and not at all similar.

 

[The Commish]

I don’t understand what you mean by this. 

Warren lays it out quite nicely actually.  It's the one area of her "we have to break up these big companies" shtick I agree with.  They own the platform.  They control the data.  They control the searches.  They control delivery.  They control every aspect of their platform AND they sell their own products on their platform.  That's a problem.  Take a simple phone case as an example.  There are hundreds of options for your iPhone.  Amazon has an option for you as well.  They are in that business.  Whose product do you think is in the top three results when you're looking for a case?  Whose product do you think is labeled "Amazon's Choice"?  Whose product do you think it is you see in their "suggestions" emails?  Whose product do you think is always available via Amazon Prime?  Who do you think has to pay more to Amazon for offering "Prime" delivery?  Who do you think has the ability to set the same price as the competition on the site and also be a direct cost line item to the competition?

The things I have mentioned are only the tip of the iceberg.  They control every aspect of interaction with their platform and they are creating products to compete with the products they already know are successful because they can see how successful they are.  Hey....smashproof phone cases from ABC company are flying out of our warehouses at $30 a pop, let's create our own and sell them for $25 a pop.  We don't even have to pay for the shipping services!!!"

 

[IvanKaramazov]

Warren lays it out quite nicely actually.  It's the one area of her "we have to break up these big companies" shtick I agree with.  They own the platform.  They control the data.  They control the searches.  They control delivery.  They control every aspect of their platform AND they sell their own products on their platform.  That's a problem.  Take a simple phone case as an example.  There are hundreds of options for your iPhone.  Amazon has an option for you as well.  They are in that business.  Whose product do you think is in the top three results when you're looking for a case?  Whose product do you think is labeled "Amazon's Choice"?  Whose product do you think it is you see in their "suggestions" emails?  Whose product do you think is always available via Amazon Prime?  Who do you think has to pay more to Amazon for offering "Prime" delivery?  Who do you think has the ability to set the same price as the competition on the site and also be a direct cost line item to the competition?

The things I have mentioned are only the tip of the iceberg.  They control every aspect of interaction with their platform and they are creating products to compete with the products they already know are successful because they can see how successful they are.  Hey....smashproof phone cases from ABC company are flying out of our warehouses at $30 a pop, let's create our own and sell them for $25 a pop.  We don't even have to pay for the shipping services!!!"

Are you saying that the problem with Amazon is that consumers get to buy things for lower prices?

Edit: Also, how is that like China?  I agree with tim in that I truly don't understand where you're going with that one.

 

[timschochet]

Warren lays it out quite nicely actually.  It's the one area of her "we have to break up these big companies" shtick I agree with.  They own the platform.  They control the data.  They control the searches.  They control delivery.  They control every aspect of their platform AND they sell their own products on their platform.  That's a problem.  Take a simple phone case as an example.  There are hundreds of options for your iPhone.  Amazon has an option for you as well.  They are in that business.  Whose product do you think is in the top three results when you're looking for a case?  Whose product do you think is labeled "Amazon's Choice"?  Whose product do you think it is you see in their "suggestions" emails?  Whose product do you think is always available via Amazon Prime?  Who do you think has to pay more to Amazon for offering "Prime" delivery?  Who do you think has the ability to set the same price as the competition on the site and also be a direct cost line item to the competition?

The things I have mentioned are only the tip of the iceberg.  They control every aspect of interaction with their platform and they are creating products to compete with the products they already know are successful because they can see how successful they are.  Hey....smashproof phone cases from ABC company are flying out of our warehouses at $30 a pop, let's create our own and sell them for $25 a pop.  We don't even have to pay for the shipping services!!!"

Where does China come in? 

 

[IvanKaramazov]

One of my new favorite things about Amazon is the ability to buy half a dozen tubes of toothpaste, sticks of deodorant, cans of shaving cream, etc. in one delivery.  I know I'm probably late to the party on this one, but not having to step into a brick-and-mortar retailer except for weird, one-off purchases is really nice.  

 

[The Commish]

Where does China come in? 

China requires the exact same sorts of things to be in their market.  The difference here is "industry" vs "entire market", but the concepts are nearly identical.  Scale is different, which doesn't matter all that much for the point Warren is making.

 

[The Commish]

Are you saying that the problem with Amazon is that consumers get to buy things for lower prices?

Edit: Also, how is that like China?  I agree with tim in that I truly don't understand where you're going with that one.

No....I thought I gave a pretty good list of the problems I see, but I'll continue.

So now, let's think about everything that got small business XYZ to being able to sell on Amazon for $30 a pop.  They had to spend money on R&D.  They had to price themselves to be competitive with other small businesses.  They had to figure out the logistics of manufacturing and shipping.  It's likely that it took them years to get to where they're at.  And it's going to take years to recoup that money.  Amazon has the luxury of billions of dollars in backing.  They already KNOW the product is going to be just fine, especially at $5 cheaper than the competition.  They know that the product is loved.  It's safe to manufacture and they have shipping built in.  There is virtually zero R&D.  Basically all they need to do is figure out how to make it different enough so they don't violate patent laws.  That's it.  That's from a tangible perspective and doesn't even get into the marketing perspective which they completely and totally own in their space.  Hey....XYZ company is still selling more phone cases than us and we're $5 cheaper.  What's going on?  Don't know...lets just bury them on page 10 of the search results...problem solved.  We can sit here for days talking about all the potential problems in this space.  It's significantly different than dealing in the brick and mortar space.  Much faster, higher paced and much more of a black box to most people.  This doesn't even touch on AWS.

 

[The Commish]

And I should note, I use the #### out of Amazon.  I'm not against them by any stretch, but it's easy to see where this is headed if they aren't kept in check.  There just needs to be segregation of duties IMO.

 

[timschochet]

China requires the exact same sorts of things to be in their market.  The difference here is "industry" vs "entire market", but the concepts are nearly identical.  Scale is different, which doesn't matter all that much for the point Warren is making.

A private company attempting to corner a market is pretty different from a government that does so. 

 

[sporthenry]

People used to make this same argument about Walmart.  It's seems ridiculous in hindsight, but people were really worried about Walmart wiping out all of its competitors and taking advantage of its ensuing monopoly-retailer status.  Applying that same argument to Amazon is even more ridiculous because at least you could make a plausible argument that an individual Walmart store might become a local monopolist in some rural community (at least you could that argument in the pre-internet era).  That's not even remotely plausible for an online retailer.  

I get the concerns about Facebook and Twitter and the like -- network effects naturally result in a small number of very large social media companies that give them outsized influence on society.  The retail industry is entirely different and not at all similar.

Have you read the Yale article about it?  It lays the argument out better than I ever could.
I’m not suggesting breaking up Amazon either, I just think we need to redefine how we look at monopolies and anti-competitive behavior. I don’t want to punish Google for being so big and successful that they can’t buy anyone again but rather watch their competitive practices more. Instead, we block deals like Staples and Office Depot on archaic standards. 
 

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

 

[The Commish]

China requires the exact same sorts of things to be in their market.  The difference here is "industry" vs "entire market", but the concepts are nearly identical.  Scale is different, which doesn't matter all that much for the point Warren is making.

A private company attempting to corner a market is pretty different from a government that does so.

In scale, yes....in concept no....as I pointed out.  To illustrate my point further, what "market" do you believe it is that Amazon is attempting to corner?

 

[timschochet]

In scale, yes....in concept no....as I pointed out.  To illustrate my point further, what "market" do you believe it is that Amazon is attempting to corner?

I was responding to your comments about Amazon. 

But as to what you just wrote, it really is a very different concept. A government forces things on me. Amazon does not. I don’t have to use them. 

 

[Murph]

I was responding to your comments about Amazon. 

But as to what you just wrote, it really is a very different concept. A government forces things on me. Amazon does not. I don’t have to use them. 

If you use the internet you use Amazon Web Services. You don't get a choice in that.

 

[The Commish]

I was responding to your comments about Amazon. 

But as to what you just wrote, it really is a very different concept. A government forces things on me. Amazon does not. I don’t have to use them. 

Is is about as disingenuous as you can get.  As it pertains to China, you don't have to go into their market either    You're sliding goalposts around to avoid acknowledging the obvious.  I'm just not sure what it is you think you're getting out of doing that.

ETA:  Question still remains regarding the "market" you were talking about.