Amazons acquisition of Whole Foods Market is expected to be blocked by monopoly regulators, but as long as they retain delivering the goods no one seems to mind

The news that Amazon had acquired Whole Foods Market for $13.7 bn sent chills down the spine of every retailer in America. Shares in Walmart fell 7 %, and rival Kroger by 17%. Amazons market capitalisation, in contrast, ran up by $11 bn. So why the fuss? At first sight it seemed straightforward: Amazon wanted to get into meat sales, and it fancied having a network of 400 urban stores; and Whole Foods( which some of my American friends call whole wallet because of the cost of its products) was ailing. There was also a small political slant: John Mackey, co-founder of Whole Foods, had been enmeshed in a row with an activist investor that threatened to drive him from power; by selling to Amazon, he gets to keep his occupation. So: small-scale earthquake in meat retailing , not many dead?

Er , not quite, and only if you avoid taking the long view. And, with Amazon, the long view is the only one that constructs sense. In the mid-1 990 s, people thought that its founder, Jeff Bezos, just wanted to run an online bookshop. After a while, as Amazon rapidly started selling lots of non-book material, people thought he just wanted the company to become the next Walmart. Spool forward a few more times and people realised that Bezos aspired to run the everything storage. Then he launched Amazon Web Services( AWS) and rapidly became the dominant provider of cloud computing services. And so it gone on, to the point where people began to ask: what business does Jeff Bezos not want to dominate? And the only answer to that currently is: no one knows.

Just consider the numbers. According to New York Times figures for the US, Amazon now accounts for 43% of all online retail sales; half of all online shopping searches start on Amazon( eat your heart out, Google ); in 2016, the company had total revenues of $63 bn from online marketings which is more than the next top 10 online retailers mixed; it controls 74% of ebook marketings, and is soon set to become the most difficult garb retailer in the US. AWS, for my own part, has become a $10 bn annual revenue business with more than 50% of big companies preferring it to competitives market share is expected to reach 64% in three years.

By any common-sense touchstone, therefore, Amazon exerts monopoly power and specific activities should trigger activity by regulators. The difficulty is that US antitrust( rivalry) law have all along parted company with common sense. The rot set in when Robert Bork published The Antitrust Paradox in 1978, in which he argued that competition law had become too focused on preventing cartels, price-fixing and mergers that make monopolies, and should return instead to what he claimed was its original concern with protecting customers. This view was then energetically promulgated by the influential Chicago Law School and seems to have become the conventional wisdom of competition authorities across the world.

Crudely put, the implication of the Bork view is that no matter how big or dominant a company becomes, if theres no evidence that its predominance is harming consumers, then theres no antitrust fear. And the digital giants that now dominate the landscape have driven a coach-and-four and horses through this loophole. Google and Facebook, for example, “re saying that” since they are providing superb free services that are highly valued by consumers, then penalizing them simply for their marketplace predominance would amount to penalising excellence and efficiency.

Although Amazon does not provide free services, it can and does argue that it furnishes excellent customer service and very competitive costs. The company has grown prodigiously year-on-year, but has consistently returned very small profits. Instead it ran fund into advertising, investing in infrastructure and price discounts. Amazon recorded consistent losings for the first seven years that it was in business and yet its marketings and inventory price continued to rise. And its still doing it: in two of the last five years, for example, it reported losses and its highest yearly net profit was still less than 1% of its cyberspace sales.

Amazons Whole Foods acquisition will have to be approved by the Federal Trade Commission, but my guess is that it will get through. The company will argue that even after buying Whole Foods Market its share of the American grocery marketplace will be less than 5 %. Monopolist, moi? is likely to be Mr Bezoss plea. But if the FTC does indeed accept this argument, then we will have a really good measure of how irrelevant antitrust statute has become in curbing corporate power in a digital world. The law does not expressing concern about trifles, used to be the proud boasting of legal theorists. Now it doesnt appears to expressing concern about monsters either.

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