Is Amazon.com a Monopoly?

Amazon.com, the preeminent online marketplace for seemingly all goods that exist, has been a lightning rod for criticism.  It experienced backlash over trying to control the e-book market and putting brick and mortar bookstores out of business.  It has also been accused of being a monopoly in violation of antitrust law.  News recently broke about Amazon potentially looking into the creation of their own delivery service in order to stop paying fees for the sue of UPS and FedEx.  With this addition, the evidence for Amazon being a monopoly may actually increase.

A monopoly has been defined by the Supreme Court to have two elements: the power to control prices and/or exclude competition in a similar market and the willful acquisition or maintenance of said power as a consequence of a superior product.  Clearly, determining the “market” that Amazon appeals to is a challenge, as they offer so many products which cover a wide spectrum of demographics.  However, if Amazon were to use their own delivery service, this would be directly attacking the market of UPS and FedEx.  The courts look to three things in determining these elements: market power, exclusionary conduct and business justification.

In using their own service (dubbed “Consume the City” by some, as a nod to Amazon’s efforts to control delivery on every street corner), Amazon would be able to control their shipping costs.  According to the Wall Street Journal, Amazon spent over $10 billion in recent years in shipping on a mere quarterly basis while boasting a quarterly income of over $30 billion.  Clearly, the market power of Amazon is staggering, especially when one considers that it began as a mere online book retailer.

By cutting out the middle man, so to speak, Amazon would essentially decide on their own terms what to charge customers while also getting packages to them faster and making an impact on Amazon sales of billions.  There appear to be 40-50 million Amazon Prime subscribers in the United States alone.  If Amazon is offering every product under the sun at their own, discounted price, why would a customer use a website that charges more for shipping?  This would directly impact UPS and FedEx and have an exclusionary impact on them.  This seems as though it fits into the first element.

The second element would be a little more difficult to prove.  If the market was gained as a result of superior products or innovation, then this is allowed.  However, exclusionary supply or refusal to deal with a merchant would apply.  The only superior product that Amazon would be offering is its delivery system but it would not be delivering products outside of Amazon; therefore, its supposed superior delivery would seem to only apply to specific products and may act as exclusionary.  This could be seen as an unlawful use of its new power under the second element.

The courts would side with Amazon if they had a proper business justification for this new service.  On its face, this certainly does seem to favor the consumer if it truly does offer a better delivery service that is both cheaper and faster.  It is well known at this point that Amazon is experimenting with the use of drones for delivery so there is a history of attempting to implement new, faster forms of delivery.

Ultimately, Amazon may very well already have a monopoly and could be expanding its monopoly to delivery companies.  If UPS and FedEx were to lose their ability to deliver Amazon packages, they would suffer great financial burdens and need to completely retool their approach to delivery.  After all, the busiest time of the year for delivery companies is the holiday season when consumers need a package to arrive as soon as possible; Amazon already offers free two-day shipping for Amazon Prime members and will sometimes even offer free overnight shipping.  Once UPS and FedEx lose their place for the holidays, it could be disastrous for these companies.  However, proving a monopoly that results in damages or an agreement to stop their own delivery service would be difficult to prove.  But companies such as UPS and FedEx must be wary of this new development.

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