July 14, 2017 / 5:58 PM / 5 months ago

Amazon monopoly game will take forever to play out

NEW YORK (Reuters Breakingviews) - Amazon.com’s real-life game of monopoly will come to feel just as endless as the board-game version. The e-commerce titan’s plan to buy upscale grocery chain Whole Foods triggered fresh fears of its dominance. For the time being, consumers and investors probably keep winning.

Amazon.com's logo is seen at Amazon Japan's office building in Tokyo, Japan, August 8, 2016. REUTERS/Kim Kyung-Hoon - RTSLR6U

The plan to push aggressively into food last month rattled more than just supermarket investors. It stirred competition critics, too. Open Markets, a branch of Washington think tank New America, called for the government to block the Whole Foods deal and launch an investigation into how it impedes rivals. One hedge-fund boss said this week he was betting against the stock because of a possible congressional review.

Amazon’s growing power is obvious. Various estimates reckon the firm founded by Jeff Bezos already controls at least a third of U.S. online retail purchases. After generating $136 billion in revenue last year, it also grabbed 5.1 percent of total retail sales in the categories it serves, excluding food, in the first quarter, according to MKM analysts, who used Census Bureau data to conclude it is “eating the retail world.”

Less obvious is how Amazon’s foregoing of profit over two decades to achieve its rarefied position might be illegal. “In particular, current law underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive,” as one Yale Law Journal assessment surmised in January. Other scholars also suggest a new approach may be needed for the modern marketplace. In addition, while the likes of Wal-Mart Stores may have been too slow to react to Amazon’s threat, they also haven’t given up fighting with gusto.

An antitrust case may be more plausible from the European Commission, which has led in challenging technology goliaths. The EU focuses on how monopolies harm other business not just consumers, who have yet to feel any pain from Amazon. The company, however, currently wields far more influence at home than abroad.

Even an eventual government effort to restrain or break up $475 billion Amazon might not necessarily be value-destructive. For example, its cloud-computing operation, AWS, could be spun out fairly easily. The same probably goes for the gadget-making business behind Kindle and Echo. Either way, Bezos built Amazon for the long game, and is readying to play against trustbusters, too.


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