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$1 of Every $2 Spent Online Goes to Amazon. Can We Break the Company's Stranglehold?

Wednesday, December 21, 2016 By Mario Vasquez, Truthout | Report
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Amazon Books, for now the online retailer's sole physical bookstore, at the University Village mall in Seattle, March 9, 2016. (Photo: Michael Hanson / The New York Times) Amazon Books, for now the online retailer's sole physical bookstore, at the University Village mall in Seattle, March 9, 2016. (Photo: Michael Hanson / The New York Times)

Stories like this will always remain free to read at Truthout. But if you can spare a small donation, please click here to ensure independent media has a future!

Amazon.com is ubiquitous: It seems to reach into all the corners of our lives, selling everything from toiletries to furniture. Yet, beyond the "A to Z" selections offered on Amazon exists the reality that workers, consumers and their communities are suffering from the retailer's stranglehold on the American economy, researchers at the Institute for Local Self-Reliance (ILSR) say in a study released in late November. Not only does Amazon possess an increasingly dominant share of the retail market -- with one of every two dollars spent online going to the company -- but it is increasingly expanding into other low-road money-making schemes, at the expense of public coffers. Amazon's grip on the US economy should be worrisome for anyone seeking an egalitarian and fair society.

"A to Z"? The M Is for Monopoly

As ILSR puts it, when considering Amazon, imagine "if Walmart owned most of our malls and Main Streets, decided the terms by which its rivals could rent these spaces, and oversaw every sale they made." Although Walmart has long been the archetype for a corporation that drags down communities with poverty-waged big-box store jobs and exploitative labor practices up and down its supply chain, it has nothing on Amazon's gatekeeper status. Upon inspection, Amazon's business practices, obfuscated behind the gleam of a seamless, consumer-friendly online interface, reveal that the company is what ILSR describes as a "monopoly hiding in plain sight."

First, Amazon uses its position as the owner of its massive retail marketplace to its advantage when it comes to marketplace participants. For third-party sellers on the site's marketplace, Amazon ends up taking a portion of each sale: somewhere between 15 and 50 percent. If the sellers do not agree to these terms, and forgo a place on the company's platform, then there exists the risk that their products won't be seen by the one-half of online shoppers who start their shopping directly at Amazon instead of via search engines. Amazon is currently the top toy retailer, and by end of next year, it will be the leading retailer of clothing and consumer electronic goods. This will come on top of the company's dominance in book retail (where much of publicized Amazon's strong-arming against smaller competitors occurs). Within the book industry, Amazon owns 65 percent of the market share. This is as much as Standard Oil owned of the oil industry back in 1911, when it was broken up for acting as a monopoly.

Any success that third-party sellers do have usually leads to Amazon creating its own knockoff product, decreasing sales of the original product when Amazon's copy is boosted to the top of the results page. This practice is underlined by Amazon's ability to track customer shopping habits, boosting its chances of manufacturing a particularly successful product. The cumulative effect, ILSR believes, is limited choice and the stifling of competition from smaller, independent online retailers and suppliers. It is Amazon's control of several parts of the supply chain, as both a manufacturer and retailer -- what is called vertical integration -- and the power that comes with it that gives the company an exceptional edge.

Anyone hoping for a Standard Oil-like split up for Amazon, as ILSR recommends, would have to acknowledge that the political will to act on antitrust violators has shrunk since the 1970s and 80s, transitioning more toward the mindset that as long as consumers are getting low prices, everything is fine. Amazon's powerful position as a dual manufacturer and retailer would have been viewed as an antitrust violation before the ideological shift on breaking up monopolies began, but as law scholar Linda Khan tells Truthout, "Current law has a very dim view of what constitutes as 'anticompetitive' in vertical arrangements."

The Public Cost of an "Everything" Store

Beyond Amazon's predatory tactics lies the public damage the company causes with its dominance. When accounting for the fact that retail shopping is rapidly shifting online, ILSR estimates that Amazon has "displaced enough sales at brick-and-mortar stores to force the elimination of about 295,000 retail jobs," while only creating roughly half as many jobs in its warehousing and distribution operations. In almost half of the country, Amazon generates billions of dollars in sales within each state without employing a single person. The loss of retail jobs in physical locations means store closures and subsequent vacancies, and as ILSR finds, because on-the-ground shopping is one form of social interaction in the community, the hyper-reliance on Amazon leads to a reduction in social bonds and communal vibrancy.

The fiscal losses to public coffers at the expense of Amazon's private gain could be just as damaging. The shift toward online shopping -- half of it conducted on Amazon -- means that communities and states lose the property taxes that would have been brought in through brick-and-mortar stores. Furthermore, as the progressive advocacy group Good Jobs First notes in a study released this week, politicians are encouraging Amazon's behavior via public subsidies. Since 2005, Amazon has received approximately $900 million worth of subsidies to construct and operate its facilities, with $241 million awarded since the start of 2015. These efforts grease the track for a corporation that has to build these facilities, regardless of any potential subsidies. The researchers at Good Jobs First conclude: "Public officials must recognize their communities' value. They need to recognize that the prize on the bargaining table isn't an Amazon facility: it's more access to the local market for another aggressive retailer growing at the expense of existing retailers."

The Squeeze on Labor

The people inside Amazon's oft-publically-subsidized warehouse and distribution facilities, who keep its infrastructure functioning, are also victims of Amazon's might. You'd never know it from the outside: One job posting for its order fulfillment centers reads, "Our fulfillment centers are where Amazon orders come to life, where we focus on delighting our customers by delivering smiling boxes filled with everything under the sun." But the experiences of workers detailed in ILSR's study shed light on grim conditions. A harsh quota system must be met at a breakneck pace. An International Business Times report describes the company's manipulative motivation technique: "Amazon's productivity numbers are apparently purposely designed to be unattainable for most workers so that employees feel that they are falling down on the job and push harder to hit the impracticable levels. This strategy [is] known as management by stress." With wages lower than at comparable facilities (9 percent to 22 percent less, according to ILSR estimates), the quota system creates high turnover. This makes for a tougher terrain to utilize a key tool that might significantly alter the way the company operates -- unionization.

The massive volume of packages that go in and out of Amazon facilities also gives the company leverage to affect the work at carriers who deliver Amazon orders. The start of the United States Postal Service's (USPS) partnership with Amazon in 2013 opened the doors for Sunday package delivery, leading to a new "underclass" of postal employees often working more than seven consecutive days, and dragging down standards for the entire workforce. Meanwhile, Amazon has sought to reduce its dependence on the union-backed workers at United Parcel Service (UPS). ILSR notes that in an effort to reduce its shipping costs, Amazon has steadily decreased its use of UPS and FedEx in the past few years, switching instead to regional couriers that utilize independent contractors "who are in many cases treated like employees but denied the benefits and security of the employer-employee relationship." The proliferation of such potentially unjust contract work lowers the standards throughout the delivery industry and provides an out for management to extract concessions from unionized shops at USPS and UPS.

ILSR codirector and study author, Stacy Mitchell, tells Truthout, "Delivery drivers at companies like UPS and the postal service, as well as freight pilots, typically earn solid middle-income wages and have reasonable workloads. But Amazon's intention is to impose the same arduous and dehumanizing conditions and workloads on the people in its delivery system as it does in its warehouses."

The independent contract situation within the courier industry will grow further entangled with Amazon in the near future. As a part of a strategy that company insiders call "Consume the City," Amazon is seeking to flesh out its own shipping and delivery infrastructure -- described in one report as an "e-commerce Walmart with a FedEx attached." Amazon is supplementing its own Uber-like delivery service called Amazon Flex, which is already operating in 30 cities across the US. Like other "gig economy" companies, Amazon touts that its platform enables the flexibility of supplemental income. But given Amazon's proven record of dragging down job standards and killing retail jobs, the question of whether the company has an obligation to make Flex participants actual employees is a real one.

The Fight Back

Amazon's move toward controlling more of its package delivery logistics has also led it toward investing in cargo airlines, what it calls Prime Air. Earlier this year, Amazon announced plans to lease as many as 40 planes from two carriers, Air Transport Services Group (ATSG) and Atlas Air, with the option to purchase 20 percent and 30 percent stakes of each respective company in the next few years. Here, Amazon is running into its first pockets of real resistance, and it is turning into a battle to set the standards of labor at Amazon's air investments.

On November 22, 250 pilots at ATSG's Amazon-servicing subsidiary, ABX Air, went on strike to protest the lack of compensatory time off granted after the pilots were forced to work extra hours to make up for the understaffing at the airline. The pilots, members of Teamsters Local 1224, were forced back to work the next day after an injunction was ordered by Judge Timothy Black of the US Court for the Southern District of Ohio. Judge Black remarked, "Absent an injunction, ABX, its customers, and the public will suffer immediate, irreparable harm. Imagine Christmas without Amazon!"

Over at Atlas Air, home of the first Boeing 747 jet flying Prime Air branding, 1,700 pilots are considering their own strike. The same understaffing issues, as well as low pay and benefits, are at the center of the conflict. The pilots, also members of Teamsters Local 1224, picketed at Amazon headquarters on December 7 with signs reading, "Santa won't deliver on time without us." They hope that Amazon will push Atlas to come to the negotiating table in good faith. "You reach a point where no matter what you offer, pilots don't want to work there because it's their livelihood. You spend a lot of time in these jobs here and you want to work in a place that is rewarding," says the head of Atlas' union pilots, Robert Kirchner.

Considering Amazon's treatment of workers across the supply chain, as described in ILSR's findings, it should perhaps be no surprise that Amazon chose these specifically low-road cargo airlines as its bases for Prime Air. However, the Teamsters Local 1224 chose to fight back, and their fight could provide a model of resistance for other workers under the thumb of Amazon.  "If the time comes, if the situation happens, there will be no hesitation about going on strike at all," says Kirchner.

The labor fight could also stimulate policy makers to wake up to the stranglehold that Amazon has on society at large. Could the stranglehold not be more evident than when a federal judge used "Imagine Christmas without Amazon!" as his logic for squashing a strike?

ILSR recommends strengthening labor law to allow greater room for successful unionization and bargaining, saying that tougher enforcement on misclassified independent contractors is key to loosening Amazon's drag on the economy. Additionally, antitrust laws must be expanded and brought back from the "dim view" that Khan describes to break up Amazon's anti-competitive measures as a retailer and manufacturer.

"Without a strong and thoughtful public policy response to Amazon's growing monopoly power, and the high costs it's imposing on competition, small businesses, workers and consumers, many of the benefits of the digital revolution will not be realized," ILSR concludes.

Copyright, Truthout. May not be reprinted without permission.

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$1 of Every $2 Spent Online Goes to Amazon. Can We Break the Company's Stranglehold?

Wednesday, December 21, 2016 By Mario Vasquez, Truthout | Report
  • font size decrease font size decrease font size increase font size increase font size
  • Print

Amazon Books, for now the online retailer's sole physical bookstore, at the University Village mall in Seattle, March 9, 2016. (Photo: Michael Hanson / The New York Times) Amazon Books, for now the online retailer's sole physical bookstore, at the University Village mall in Seattle, March 9, 2016. (Photo: Michael Hanson / The New York Times)

Stories like this will always remain free to read at Truthout. But if you can spare a small donation, please click here to ensure independent media has a future!

Amazon.com is ubiquitous: It seems to reach into all the corners of our lives, selling everything from toiletries to furniture. Yet, beyond the "A to Z" selections offered on Amazon exists the reality that workers, consumers and their communities are suffering from the retailer's stranglehold on the American economy, researchers at the Institute for Local Self-Reliance (ILSR) say in a study released in late November. Not only does Amazon possess an increasingly dominant share of the retail market -- with one of every two dollars spent online going to the company -- but it is increasingly expanding into other low-road money-making schemes, at the expense of public coffers. Amazon's grip on the US economy should be worrisome for anyone seeking an egalitarian and fair society.

"A to Z"? The M Is for Monopoly

As ILSR puts it, when considering Amazon, imagine "if Walmart owned most of our malls and Main Streets, decided the terms by which its rivals could rent these spaces, and oversaw every sale they made." Although Walmart has long been the archetype for a corporation that drags down communities with poverty-waged big-box store jobs and exploitative labor practices up and down its supply chain, it has nothing on Amazon's gatekeeper status. Upon inspection, Amazon's business practices, obfuscated behind the gleam of a seamless, consumer-friendly online interface, reveal that the company is what ILSR describes as a "monopoly hiding in plain sight."

First, Amazon uses its position as the owner of its massive retail marketplace to its advantage when it comes to marketplace participants. For third-party sellers on the site's marketplace, Amazon ends up taking a portion of each sale: somewhere between 15 and 50 percent. If the sellers do not agree to these terms, and forgo a place on the company's platform, then there exists the risk that their products won't be seen by the one-half of online shoppers who start their shopping directly at Amazon instead of via search engines. Amazon is currently the top toy retailer, and by end of next year, it will be the leading retailer of clothing and consumer electronic goods. This will come on top of the company's dominance in book retail (where much of publicized Amazon's strong-arming against smaller competitors occurs). Within the book industry, Amazon owns 65 percent of the market share. This is as much as Standard Oil owned of the oil industry back in 1911, when it was broken up for acting as a monopoly.

Any success that third-party sellers do have usually leads to Amazon creating its own knockoff product, decreasing sales of the original product when Amazon's copy is boosted to the top of the results page. This practice is underlined by Amazon's ability to track customer shopping habits, boosting its chances of manufacturing a particularly successful product. The cumulative effect, ILSR believes, is limited choice and the stifling of competition from smaller, independent online retailers and suppliers. It is Amazon's control of several parts of the supply chain, as both a manufacturer and retailer -- what is called vertical integration -- and the power that comes with it that gives the company an exceptional edge.

Anyone hoping for a Standard Oil-like split up for Amazon, as ILSR recommends, would have to acknowledge that the political will to act on antitrust violators has shrunk since the 1970s and 80s, transitioning more toward the mindset that as long as consumers are getting low prices, everything is fine. Amazon's powerful position as a dual manufacturer and retailer would have been viewed as an antitrust violation before the ideological shift on breaking up monopolies began, but as law scholar Linda Khan tells Truthout, "Current law has a very dim view of what constitutes as 'anticompetitive' in vertical arrangements."

The Public Cost of an "Everything" Store

Beyond Amazon's predatory tactics lies the public damage the company causes with its dominance. When accounting for the fact that retail shopping is rapidly shifting online, ILSR estimates that Amazon has "displaced enough sales at brick-and-mortar stores to force the elimination of about 295,000 retail jobs," while only creating roughly half as many jobs in its warehousing and distribution operations. In almost half of the country, Amazon generates billions of dollars in sales within each state without employing a single person. The loss of retail jobs in physical locations means store closures and subsequent vacancies, and as ILSR finds, because on-the-ground shopping is one form of social interaction in the community, the hyper-reliance on Amazon leads to a reduction in social bonds and communal vibrancy.

The fiscal losses to public coffers at the expense of Amazon's private gain could be just as damaging. The shift toward online shopping -- half of it conducted on Amazon -- means that communities and states lose the property taxes that would have been brought in through brick-and-mortar stores. Furthermore, as the progressive advocacy group Good Jobs First notes in a study released this week, politicians are encouraging Amazon's behavior via public subsidies. Since 2005, Amazon has received approximately $900 million worth of subsidies to construct and operate its facilities, with $241 million awarded since the start of 2015. These efforts grease the track for a corporation that has to build these facilities, regardless of any potential subsidies. The researchers at Good Jobs First conclude: "Public officials must recognize their communities' value. They need to recognize that the prize on the bargaining table isn't an Amazon facility: it's more access to the local market for another aggressive retailer growing at the expense of existing retailers."

The Squeeze on Labor

The people inside Amazon's oft-publically-subsidized warehouse and distribution facilities, who keep its infrastructure functioning, are also victims of Amazon's might. You'd never know it from the outside: One job posting for its order fulfillment centers reads, "Our fulfillment centers are where Amazon orders come to life, where we focus on delighting our customers by delivering smiling boxes filled with everything under the sun." But the experiences of workers detailed in ILSR's study shed light on grim conditions. A harsh quota system must be met at a breakneck pace. An International Business Times report describes the company's manipulative motivation technique: "Amazon's productivity numbers are apparently purposely designed to be unattainable for most workers so that employees feel that they are falling down on the job and push harder to hit the impracticable levels. This strategy [is] known as management by stress." With wages lower than at comparable facilities (9 percent to 22 percent less, according to ILSR estimates), the quota system creates high turnover. This makes for a tougher terrain to utilize a key tool that might significantly alter the way the company operates -- unionization.

The massive volume of packages that go in and out of Amazon facilities also gives the company leverage to affect the work at carriers who deliver Amazon orders. The start of the United States Postal Service's (USPS) partnership with Amazon in 2013 opened the doors for Sunday package delivery, leading to a new "underclass" of postal employees often working more than seven consecutive days, and dragging down standards for the entire workforce. Meanwhile, Amazon has sought to reduce its dependence on the union-backed workers at United Parcel Service (UPS). ILSR notes that in an effort to reduce its shipping costs, Amazon has steadily decreased its use of UPS and FedEx in the past few years, switching instead to regional couriers that utilize independent contractors "who are in many cases treated like employees but denied the benefits and security of the employer-employee relationship." The proliferation of such potentially unjust contract work lowers the standards throughout the delivery industry and provides an out for management to extract concessions from unionized shops at USPS and UPS.

ILSR codirector and study author, Stacy Mitchell, tells Truthout, "Delivery drivers at companies like UPS and the postal service, as well as freight pilots, typically earn solid middle-income wages and have reasonable workloads. But Amazon's intention is to impose the same arduous and dehumanizing conditions and workloads on the people in its delivery system as it does in its warehouses."

The independent contract situation within the courier industry will grow further entangled with Amazon in the near future. As a part of a strategy that company insiders call "Consume the City," Amazon is seeking to flesh out its own shipping and delivery infrastructure -- described in one report as an "e-commerce Walmart with a FedEx attached." Amazon is supplementing its own Uber-like delivery service called Amazon Flex, which is already operating in 30 cities across the US. Like other "gig economy" companies, Amazon touts that its platform enables the flexibility of supplemental income. But given Amazon's proven record of dragging down job standards and killing retail jobs, the question of whether the company has an obligation to make Flex participants actual employees is a real one.

The Fight Back

Amazon's move toward controlling more of its package delivery logistics has also led it toward investing in cargo airlines, what it calls Prime Air. Earlier this year, Amazon announced plans to lease as many as 40 planes from two carriers, Air Transport Services Group (ATSG) and Atlas Air, with the option to purchase 20 percent and 30 percent stakes of each respective company in the next few years. Here, Amazon is running into its first pockets of real resistance, and it is turning into a battle to set the standards of labor at Amazon's air investments.

On November 22, 250 pilots at ATSG's Amazon-servicing subsidiary, ABX Air, went on strike to protest the lack of compensatory time off granted after the pilots were forced to work extra hours to make up for the understaffing at the airline. The pilots, members of Teamsters Local 1224, were forced back to work the next day after an injunction was ordered by Judge Timothy Black of the US Court for the Southern District of Ohio. Judge Black remarked, "Absent an injunction, ABX, its customers, and the public will suffer immediate, irreparable harm. Imagine Christmas without Amazon!"

Over at Atlas Air, home of the first Boeing 747 jet flying Prime Air branding, 1,700 pilots are considering their own strike. The same understaffing issues, as well as low pay and benefits, are at the center of the conflict. The pilots, also members of Teamsters Local 1224, picketed at Amazon headquarters on December 7 with signs reading, "Santa won't deliver on time without us." They hope that Amazon will push Atlas to come to the negotiating table in good faith. "You reach a point where no matter what you offer, pilots don't want to work there because it's their livelihood. You spend a lot of time in these jobs here and you want to work in a place that is rewarding," says the head of Atlas' union pilots, Robert Kirchner.

Considering Amazon's treatment of workers across the supply chain, as described in ILSR's findings, it should perhaps be no surprise that Amazon chose these specifically low-road cargo airlines as its bases for Prime Air. However, the Teamsters Local 1224 chose to fight back, and their fight could provide a model of resistance for other workers under the thumb of Amazon.  "If the time comes, if the situation happens, there will be no hesitation about going on strike at all," says Kirchner.

The labor fight could also stimulate policy makers to wake up to the stranglehold that Amazon has on society at large. Could the stranglehold not be more evident than when a federal judge used "Imagine Christmas without Amazon!" as his logic for squashing a strike?

ILSR recommends strengthening labor law to allow greater room for successful unionization and bargaining, saying that tougher enforcement on misclassified independent contractors is key to loosening Amazon's drag on the economy. Additionally, antitrust laws must be expanded and brought back from the "dim view" that Khan describes to break up Amazon's anti-competitive measures as a retailer and manufacturer.

"Without a strong and thoughtful public policy response to Amazon's growing monopoly power, and the high costs it's imposing on competition, small businesses, workers and consumers, many of the benefits of the digital revolution will not be realized," ILSR concludes.

Copyright, Truthout. May not be reprinted without permission.

Hide Comments

blog comments powered by Disqus