One of the most common descriptors of an average millennial would be their constant need for instant gratification. We live in an age of convenience and an on-demand economy. It should, therefore, come as no surprise that one would rather get their groceries home-delivered than go out and buy them when they could be using that time to catch up on their work, especially if you are getting a discount on your online order. This particular rule applies to almost every commodity in our lives, from food items to books to clothes. It is an unarguable fact that online shopping has made our daily functioning far more efficient and easy than before. Imagining a world where I would have to step out of the comforts of my home every time I need to buy something sounds unwelcoming. Amazon, Flipkart and eBay are the self-care essentials that every millennial would swear by.
Unfortunately, in the last 18 months, Amazon has come under fire for anti-competitive activities in several countries, particularly Germany, India, Spain, the USA and the European Union (EU). While it managed to settle disputes in Germany ahead of the investigation in the EU, the tech giant is currently struggling under the combined forces of investigation in various countries. The reason for Amazon’s recent yet potentially jeopardising trysts lies in the Sherman Act of 1980 passed in the United States, it was the first ‘Modern Antitrust’ law. Following their lead, many countries implemented a slightly modified version of the Sherman Act, along with competition enforcement authorities in their own countries. A particular complexity arising out of this trend is that firms operating globally would fall under the jurisdiction of multiple antitrust laws. So while laws in South Africa would focus on bringing more South African companies in the economy, laws in India would aim to protect small and medium scale firms from foreign competition. Therefore, antitrust laws differ depending upon the social and economic needs of a particular country. They also act as a barrier to large companies from forming a global merger and gaining access to a larger share of markets to effectively reduce competition.
However, while globally diverse antitrust laws may have the particular benefit in avoiding powerful mergers, it does introduce obstacles in the form of technicalities that would allow a firm to get away with exploitation and unfair trade practices. To avoid that, there are the basic principles in antitrust legislation that are universally accepted to minimise the chances of the aforementioned instance occuring, however, they may be implemented according to the nation’s preferences. These three principles are:
Market Allocation: Companies cannot divide markets based on regional or geographical locations amongst themselves because such division leads to lesser choices for the consumer and consequently, lesser bargaining power for them and lesser competition among the firms.
Price fixing by companies: Companies cannot fix prices amongst themselves and have to let the market forces (or the government) determine the price.
Monopolies formed due to predatory practices: Monopoly refers to a company that has the greatest share of the market, such that they can easily influence prices. Monopolies formed when a firm prevents other firms from selling goods is an example of predatory practice. There are various forms of predatory practices and Amazon is currently accused of indulging in a combination of them.
Having understood what these principles are, we must understand why these laws are significant. The antitrust laws came into existence for the protection of rights of the consumer and to ensure that the consumers have the freedom to choose and purchase a product without being bullied or manipulated into making that choice. It ensures fair prices and good quality products for the consumer. How this necessarily works is through the mechanism of competition. For instance, if a firm cannot form a monopoly or manipulate the consumers into buying their product, they would have to compete with the other firms based on merit and quality, which would result in giving the consumer a really good product at competitive prices.
One cannot argue against the ingenuity of Amazon’s business model. The same applies to its antitrust predatory activities. Initially, the small retailers found Amazon’s online selling platform a most beneficial mechanism to expand their market outreach, and trade in geographically unavailable locations. Amazon repaid their trust by using the sales and product database from these small retailers registered on their site to launch similar products under their brand name but with the added advantage of having minimum costs and ready-made data available of the most receptive customers. Amazon has been analysing these data reports from the local retailers for its own benefit. They have also slashed their prices to an unmatched level. While this may imply that Amazon would suffer losses initially, it is guaranteed that in the future, they would start earning profit or raise prices to earn profit once they establish their dominance by capturing the largest portion of the market through their extremely low prices. In essence, Amazon loses money to gain market share. This act is known as predatory pricing and is one of the most difficult to prove forms of violation.
One of the reasons why Amazon has been able to get away with this in so many countries it deals with is because it has not violated one of the core dictates of antitrust laws, that is, consumer welfare. Amazon is notorious for its good quality products and cheap delivery at the most minimal prices. Additionally, a major element of the Amazon enterprises, the Amazon web service is responsible for providing facilities such as cybersecurity, server space and all essential components that any business needs to operate on the internet. Furthermore, almost all major websites ranging from Spotify, Adobe to the CIA use Amazon web services, making Amazon almost indispensable to the virtual and tech world. Hence, most countries are unwilling to hold Amazon accountable or to even look into this matter. No one wants to mess up with someone who single-handedly controls a major chunk of essential online portals.
Small-to-medium retailers and indigenous firms face the consequences of willful ignorance of their governments. Local retailers lose out on their most contributing consumers and consequently run out of business because of Amazon’s poaching resulting in large scale unemployment and dissatisfaction amongst the poor and middle-class workers. Amazon also works its poor and mostly immigrant workers to the bone to provide its express delivery services. Amazon workers are criminally underpaid and overworked as a result of predatory pricing and have no respite because of lack of government interference or regulations.
Even if we were to consider the benefits of consumer welfare through the express delivery of quality goods at cheap prices, there is no guarantee that such would be the case in the long run, or that by running small firms out of business and eliminating competition, Amazon will not be depriving the consumers of different and perhaps better choices in the future. Considering the aforementioned consequences, the trade-off between assumed consumer welfare and not holding Amazon accountable seems mightily unfair.
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