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Monopoly Capitalism in Action: How Amazon's Acquisition of Whole Foods Could Affect Us All

Friday, July 07, 2017 By Alison Rose Levy, Truthout | Report
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A customer shops for produce at a Whole Foods Market February 22, 2007 in San Francisco, California. (Photo: Justin Sullivan / Getty Images)A customer shops for produce at a Whole Foods Market February 22, 2007, in San Francisco, California. (Photo: Justin Sullivan / Getty Images)

In today's anti-regulatory climate, mega-corporations have enormous latitude in their quest to dominate market sectors and water down regulations. And the clash between capitalism and the public good is never more worrisome than when the conflict between profit motives and access to basic life supports involves food or health care.

One new development that has food and environmental activists concerned is Amazon's recent acquisition of Whole Foods. While some have been reluctant to make concrete predictions about the consequences, others have voiced their fear that the acquisition could take the food system a giant step in the wrong direction.

"At this point it is just an acquisition. We do not know what they are doing. We do know one thing: the retail crash is coming," Paul Hawken, author of the book Drawdown, told Truthout.

And while it's true that Amazon's plans for food will remain a closely held business secret, given the potential impacts, it's vital to begin the assessment now.

"This is monopoly capitalism in action," said Marion Nestle, author of Food Politics and professor of nutrition, food studies and public health at New York University. "Whenever Amazon takes over more and more and more of any consumer area, that gives consumers less choice. And now it's food."

In the days to come, it remains to be seen whether the Amazon business model will substantively alter the organic commitments associated with the Whole Foods brand and, more broadly, whether organics can survive the interaction between a food monopoly and the current administration's takedown of regulations.

Will Organics Survive a Food Monopoly and the Trump Administration's Deregulation Agenda?

Antitrust laws were originally instated to level the playing field between businesses and consumers. The repeal in sector after sector has given the average American firsthand experience with monopolies. From cell phone service suppliers to cable companies, when moneyed entities face off and snuff the competition, both consumers and small businesses suffer.

It's well known that the outsized scale of Amazon's operations tends to first capture suppliers, and next, drive down their prices. To assess how this might translate to food and food agriculture, let's first look at how it's worked in other realms.

"[Amazon] has deflated prices in book publishing," noted journalist Matt Stoller. "And retailers across the board are terrified that Amazon is in the process of ripping their guts out…. It's quite clear that Amazon is a deflationary force, pushing down wages, prices, tax revenues, and new non-Amazon business activity."

Is a business monopoly the right foundation for the integrity, sustainability and growth of healthy foods? The bottom line is that, through this purchase, Amazon will join -- if not lead -- the ranks of corporations with a substantive share of the organic brand, corporations that regularly strive to water down the hard-won organic standards.

"Organics are always vulnerable," Marion Nestle told me, "because they are an explicit critique of the industrial agricultural system that is protected by the government and promoted by the US Department of Agriculture (USDA). Many industrial food producers would like to minimize the regulation of organic production so that the approved substances include as many different kinds of pesticides and herbicides as possible. So, there is a constant battle to keep the Organic Standards strict."

The Organic Standards are supposed to guarantee that food labeled organic is truly free of pesticides, herbicides, chemical additives, GMOs, hormones and toxicants. Even under the Obama administration -- and despite Michelle Obama's high-profile food initiatives -- the Standards were regularly assaulted in backstage USDA meetings. Under previous USDA Secretary Tom Vilsack, rule changes nibbled at the Organic Label. And with each additional nibble the label drew closer to what Naomi Klein in her book, No Logo, called a "hollow brand" -- a marketing label that claims to sell something it fails to deliver.

Sales of natural and organic food have been rising and now make up 5 percent of total food sales and are worth $47 billion. But at the same time, over the last five years, the health promise of organics has already been diluted, thanks to the backstage conflict between "big organics" (major companies selling organic products, whose ranks Amazon will join) and "little organics" (the growing movement of foodies, farmers and small companies infused with energized, next-generation foodies).

The most notable dilution occurred through the July 2016 defeat of GMO labeling, a federal legislative disaster that highlighted the innate incompatibility between big and little organics. Many food movement leaders charged the big organic companies with betraying the movement through backing a deal that killed the right to a universal and visually clear GMO label. The industry compromise was to replace the legible label with an inconsistently used and incomprehensible code system, signed into law by President Obama one day after the Democratic National Convention.

Even prior to this food movement loss, Whole Foods deviated from the call for universal labeling. Instead of throwing its full support to that effort, it sought to develop its own arcane form of labeling -- vowing that all products would be labeled for their GMO contents by 2018 -- six months from now.

It's unknown where Amazon will stand on GMOs, labeling or the struggle to maintain bona fide Organic Standards. Though under no obligation to disclose its plans, its acquisition of Whole Foods endows Amazon with the industry standing to degrade (or upgrade) organic foods, if Amazon and CEO Jeff Bezos so choose.

It's already well documented that Amazon has a take-no-prisoners philosophy in its existing retail business. It's not merely business foes who get mowed down; it can also be the company's own suppliers.

Corporate Monopoly Is Not a Viable Model for Future Healthy Food Supply

"By integrating across business lines, Amazon now competes with the companies that rely on its platform," writes New York Times author Lina M. Khan. "This decision to not only host and transport goods but to also directly make and sell them gives rise to a conflict of interest, positioning Amazon to give preferential treatment to itself."

Meanwhile, Matt Stoller has argued, "If you are a supplier to Amazon, you not only sell the company goods at cut-rate prices, but you are also effectively required to make Amazon a 0% loan that turns over as long as you have a relationship with the company. Amazon is a cannibal, running itself on the working capital of other, small companies."

This practice could be even more economically damaging to organic farmers, especially at a time when growers are struggling to supply enough goods to meet current demand. Switching to organic requires a three-year commitment before a farmer can charge organic prices. Every season thereafter, there are upfront costs, along with the risks of crop loss due to unpredictable weather. Although it's possible to climate control a book warehouse, one cannot do the same for the earth.

"When food becomes a thing -- a commodity -- and you have to produce a lot of that commodity as quickly as possible, you automatically think on a larger scale," said Fred Kirschenmann, a leader in sustainable agriculture and the president of Stone Barns Center for Food and Agriculture in Pocantico Hills, New York. "Farmers are pushed towards growing only a few food commodities: corn, wheat, soybeans and rice. These allow food suppliers to process foods at a cheap price."

What's more, the for-profit business culture that Amazon enacts "favors efficient design aimed at maximizing short-term returns," said Kirschenmann.

This dictates a specific type of structured design, which sociologist Charles Perrow calls "complex tightly coupled systems." Both monopolies and monocultures exemplify the use of complex tight coupling. In contrast, local and regional agricultural models, which sustainability experts consider more resilient, function as what Perrow calls "uncoupled systems."

According to Perrow's decades of research, the tightly coupled design is inherently more risk-prone, especially when not moderated by counter forces, such as regulations. So, what are the risks of an unmoderated use of the tightly coupled model?

Perrow, an emeritus professor in sociology at Yale, cautions that without regulation, "we get the concentration not just of economic power but … vulnerabilities in parts of our critical infrastructure, such as the Internet, electric power, transportation, and agriculture."

A major rationale for building local and regional food systems is that they enhance food security and resilience. The unpredictability and changes in the food system are easier to manage in smaller-scale, local relationships, because the person-to-person (or person-to-local-buyer) dynamic is relationship-based and therefore inherently more flexible, forgiving and adaptive than a contract between a farmer whose fields have flooded due to higher impact hurricanes and a multinational corporation.

Community Sponsored Agriculture (CSA), a signature food movement initiative, represents a decoupled and interdependent system that enlists customers to help farmers. Locals share the farmer's risks by helping to cover costs for the next growing season and collecting their boxes of veggies in season. This strategy supports the growth of organic farms and builds vibrant communities.

Unfortunately, the CSA model is 180 degrees from the Amazon-style business deal, which engenders a double bind: If sellers reject an unfavorable deal, they can't sell products. But if sellers accept deals on poor terms, they may undergo financial hardship.

This sort of relationship typifies what Perrow calls "dependencies" in his book, The Next Catastrophe: Reducing Our Vulnerabilities to Natural, Industrial, and Terrorist Disasters. "Many dependencies can and should be avoided, and instead we should reorganize to maximize the values of interdependency," he writes. "In some notable cases, this increases economic efficiency as well as reducing vulnerabilities."

A farmer who sells to multiple outlets is functioning interdependently. This contrasts with a farmer who is entirely dependent on sales to one company.

"The old playbook is that you get labor and raw materials as cheaply as possible so that you can maximize the profits in your own business and externalize your environmental and social costs as much as possible," said Kirschenmann. "If companies continue to operate by the old playbook, they are not going to be that successful in the future because they will no longer have thriving communities in which to do business."

The old business playbook is also more vulnerable to catastrophe because a tightly coupled system is only as strong as its weakest link.

"The global food system in many parts of the world is no longer working because it's dependent on cheap energy. We are simply not going to have the cheap fossil fuels that sustained an industrial food system," said Kirschenmann.

Yet Amazon's model is based on using cheap fuels to sort, pack and ship goods long distances.

"Now they are centrally managed and operating on a large scale. They could potentially re-design themselves to operate as a bioregional system," said Kirschenmann. "But it's hard to imagine."

Copyright, Truthout. May not be reprinted without permission.

Alison Rose Levy

Alison Rose Levy writes on health, food and the environment. Her weekly radio program on Progressive Radio is "Connect the Dots." Follow her on Twitter: @alisonroselevy.

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Monopoly Capitalism in Action: How Amazon's Acquisition of Whole Foods Could Affect Us All

Friday, July 07, 2017 By Alison Rose Levy, Truthout | Report
  • font size decrease font size decrease font size increase font size increase font size
  • Print

A customer shops for produce at a Whole Foods Market February 22, 2007 in San Francisco, California. (Photo: Justin Sullivan / Getty Images)A customer shops for produce at a Whole Foods Market February 22, 2007, in San Francisco, California. (Photo: Justin Sullivan / Getty Images)

In today's anti-regulatory climate, mega-corporations have enormous latitude in their quest to dominate market sectors and water down regulations. And the clash between capitalism and the public good is never more worrisome than when the conflict between profit motives and access to basic life supports involves food or health care.

One new development that has food and environmental activists concerned is Amazon's recent acquisition of Whole Foods. While some have been reluctant to make concrete predictions about the consequences, others have voiced their fear that the acquisition could take the food system a giant step in the wrong direction.

"At this point it is just an acquisition. We do not know what they are doing. We do know one thing: the retail crash is coming," Paul Hawken, author of the book Drawdown, told Truthout.

And while it's true that Amazon's plans for food will remain a closely held business secret, given the potential impacts, it's vital to begin the assessment now.

"This is monopoly capitalism in action," said Marion Nestle, author of Food Politics and professor of nutrition, food studies and public health at New York University. "Whenever Amazon takes over more and more and more of any consumer area, that gives consumers less choice. And now it's food."

In the days to come, it remains to be seen whether the Amazon business model will substantively alter the organic commitments associated with the Whole Foods brand and, more broadly, whether organics can survive the interaction between a food monopoly and the current administration's takedown of regulations.

Will Organics Survive a Food Monopoly and the Trump Administration's Deregulation Agenda?

Antitrust laws were originally instated to level the playing field between businesses and consumers. The repeal in sector after sector has given the average American firsthand experience with monopolies. From cell phone service suppliers to cable companies, when moneyed entities face off and snuff the competition, both consumers and small businesses suffer.

It's well known that the outsized scale of Amazon's operations tends to first capture suppliers, and next, drive down their prices. To assess how this might translate to food and food agriculture, let's first look at how it's worked in other realms.

"[Amazon] has deflated prices in book publishing," noted journalist Matt Stoller. "And retailers across the board are terrified that Amazon is in the process of ripping their guts out…. It's quite clear that Amazon is a deflationary force, pushing down wages, prices, tax revenues, and new non-Amazon business activity."

Is a business monopoly the right foundation for the integrity, sustainability and growth of healthy foods? The bottom line is that, through this purchase, Amazon will join -- if not lead -- the ranks of corporations with a substantive share of the organic brand, corporations that regularly strive to water down the hard-won organic standards.

"Organics are always vulnerable," Marion Nestle told me, "because they are an explicit critique of the industrial agricultural system that is protected by the government and promoted by the US Department of Agriculture (USDA). Many industrial food producers would like to minimize the regulation of organic production so that the approved substances include as many different kinds of pesticides and herbicides as possible. So, there is a constant battle to keep the Organic Standards strict."

The Organic Standards are supposed to guarantee that food labeled organic is truly free of pesticides, herbicides, chemical additives, GMOs, hormones and toxicants. Even under the Obama administration -- and despite Michelle Obama's high-profile food initiatives -- the Standards were regularly assaulted in backstage USDA meetings. Under previous USDA Secretary Tom Vilsack, rule changes nibbled at the Organic Label. And with each additional nibble the label drew closer to what Naomi Klein in her book, No Logo, called a "hollow brand" -- a marketing label that claims to sell something it fails to deliver.

Sales of natural and organic food have been rising and now make up 5 percent of total food sales and are worth $47 billion. But at the same time, over the last five years, the health promise of organics has already been diluted, thanks to the backstage conflict between "big organics" (major companies selling organic products, whose ranks Amazon will join) and "little organics" (the growing movement of foodies, farmers and small companies infused with energized, next-generation foodies).

The most notable dilution occurred through the July 2016 defeat of GMO labeling, a federal legislative disaster that highlighted the innate incompatibility between big and little organics. Many food movement leaders charged the big organic companies with betraying the movement through backing a deal that killed the right to a universal and visually clear GMO label. The industry compromise was to replace the legible label with an inconsistently used and incomprehensible code system, signed into law by President Obama one day after the Democratic National Convention.

Even prior to this food movement loss, Whole Foods deviated from the call for universal labeling. Instead of throwing its full support to that effort, it sought to develop its own arcane form of labeling -- vowing that all products would be labeled for their GMO contents by 2018 -- six months from now.

It's unknown where Amazon will stand on GMOs, labeling or the struggle to maintain bona fide Organic Standards. Though under no obligation to disclose its plans, its acquisition of Whole Foods endows Amazon with the industry standing to degrade (or upgrade) organic foods, if Amazon and CEO Jeff Bezos so choose.

It's already well documented that Amazon has a take-no-prisoners philosophy in its existing retail business. It's not merely business foes who get mowed down; it can also be the company's own suppliers.

Corporate Monopoly Is Not a Viable Model for Future Healthy Food Supply

"By integrating across business lines, Amazon now competes with the companies that rely on its platform," writes New York Times author Lina M. Khan. "This decision to not only host and transport goods but to also directly make and sell them gives rise to a conflict of interest, positioning Amazon to give preferential treatment to itself."

Meanwhile, Matt Stoller has argued, "If you are a supplier to Amazon, you not only sell the company goods at cut-rate prices, but you are also effectively required to make Amazon a 0% loan that turns over as long as you have a relationship with the company. Amazon is a cannibal, running itself on the working capital of other, small companies."

This practice could be even more economically damaging to organic farmers, especially at a time when growers are struggling to supply enough goods to meet current demand. Switching to organic requires a three-year commitment before a farmer can charge organic prices. Every season thereafter, there are upfront costs, along with the risks of crop loss due to unpredictable weather. Although it's possible to climate control a book warehouse, one cannot do the same for the earth.

"When food becomes a thing -- a commodity -- and you have to produce a lot of that commodity as quickly as possible, you automatically think on a larger scale," said Fred Kirschenmann, a leader in sustainable agriculture and the president of Stone Barns Center for Food and Agriculture in Pocantico Hills, New York. "Farmers are pushed towards growing only a few food commodities: corn, wheat, soybeans and rice. These allow food suppliers to process foods at a cheap price."

What's more, the for-profit business culture that Amazon enacts "favors efficient design aimed at maximizing short-term returns," said Kirschenmann.

This dictates a specific type of structured design, which sociologist Charles Perrow calls "complex tightly coupled systems." Both monopolies and monocultures exemplify the use of complex tight coupling. In contrast, local and regional agricultural models, which sustainability experts consider more resilient, function as what Perrow calls "uncoupled systems."

According to Perrow's decades of research, the tightly coupled design is inherently more risk-prone, especially when not moderated by counter forces, such as regulations. So, what are the risks of an unmoderated use of the tightly coupled model?

Perrow, an emeritus professor in sociology at Yale, cautions that without regulation, "we get the concentration not just of economic power but … vulnerabilities in parts of our critical infrastructure, such as the Internet, electric power, transportation, and agriculture."

A major rationale for building local and regional food systems is that they enhance food security and resilience. The unpredictability and changes in the food system are easier to manage in smaller-scale, local relationships, because the person-to-person (or person-to-local-buyer) dynamic is relationship-based and therefore inherently more flexible, forgiving and adaptive than a contract between a farmer whose fields have flooded due to higher impact hurricanes and a multinational corporation.

Community Sponsored Agriculture (CSA), a signature food movement initiative, represents a decoupled and interdependent system that enlists customers to help farmers. Locals share the farmer's risks by helping to cover costs for the next growing season and collecting their boxes of veggies in season. This strategy supports the growth of organic farms and builds vibrant communities.

Unfortunately, the CSA model is 180 degrees from the Amazon-style business deal, which engenders a double bind: If sellers reject an unfavorable deal, they can't sell products. But if sellers accept deals on poor terms, they may undergo financial hardship.

This sort of relationship typifies what Perrow calls "dependencies" in his book, The Next Catastrophe: Reducing Our Vulnerabilities to Natural, Industrial, and Terrorist Disasters. "Many dependencies can and should be avoided, and instead we should reorganize to maximize the values of interdependency," he writes. "In some notable cases, this increases economic efficiency as well as reducing vulnerabilities."

A farmer who sells to multiple outlets is functioning interdependently. This contrasts with a farmer who is entirely dependent on sales to one company.

"The old playbook is that you get labor and raw materials as cheaply as possible so that you can maximize the profits in your own business and externalize your environmental and social costs as much as possible," said Kirschenmann. "If companies continue to operate by the old playbook, they are not going to be that successful in the future because they will no longer have thriving communities in which to do business."

The old business playbook is also more vulnerable to catastrophe because a tightly coupled system is only as strong as its weakest link.

"The global food system in many parts of the world is no longer working because it's dependent on cheap energy. We are simply not going to have the cheap fossil fuels that sustained an industrial food system," said Kirschenmann.

Yet Amazon's model is based on using cheap fuels to sort, pack and ship goods long distances.

"Now they are centrally managed and operating on a large scale. They could potentially re-design themselves to operate as a bioregional system," said Kirschenmann. "But it's hard to imagine."

Copyright, Truthout. May not be reprinted without permission.

Alison Rose Levy

Alison Rose Levy writes on health, food and the environment. Her weekly radio program on Progressive Radio is "Connect the Dots." Follow her on Twitter: @alisonroselevy.