Amazon seems to be an unstoppable juggernaut, crushing everything in its path in its race to be the biggest firm on the planet. But there may be unforeseen obstacles in its path, the same ones that stopped a whole host of similar monopolizers in the past – the spectre of anti-trust actions by the US Government.
Antitrust actions in the USA seem to run in cycles, with a major filing by the Department of Justice every 10 years or so, which overturns the accepted order and changes the structure of an industry every time. In the first half of the 1900’s, the focus was on heavy industries that underpinned economic growth such as Standard Oil (broken into 34 separate companies), US Steel, International Harvester, etc.
During the second half, the focus shifted more to the technology sector, reflecting its central role for most economies, with the attention moving over a period of time from Hardware to Software and B2B Services. In the seventies we had AT&T. In the Eighties IBM faced action. Microsoft’s turn came in the Nineties. And now, seventeen years after that case was decided, companies who benefited from the Microsoft ruling like Google and Facebook are the ones under scrutiny.
In the near future, as technology-enabled companies such as Airbnb, Uber and Amazon gain more clout and occupy an increasingly central position in the economy, the focus is likely to move from B2B Services to Tech-enabled Consumer Services.
Each of the three examples above is well on its way to creating a dominant monopolistic position in its industry. Amazon in particular has a massive and startling impact on the US economy. The Huffington Post quotes a report from the Institute for Local Self-Reliance (original article here) to illustrate this. Amazon has annual revenues of more than $100 billion and has captured a share of nearly $1 of every $2 spent online. The report indicates that impact on retailers has been disastrous, saying that Amazon has caused more than 135 million square feet of retail space to become vacant, and has led to the NET loss of 149,000 jobs as its business has expanded. Even the direct jobs the company has created at its warehouses often pay less than comparable work. Its impact reaches to other sectors as well – nearly 1 million jobs of unionized workers at UPS and the U.S. Postal Service are threatened by Amazon’s low-wage temporary hiring model.
These examples of its negative impact are a direct result of its success. Over the next decade as Amazon races towards a trillion dollar top-line its positives and negatives will only be accentuated. At that stage it will completely dominate the e-commerce space and will attract the action by the US Government to mitigate its negative impact. Its an open question whether the company will survive untouched by its brush with legislators looking to muzzle its power.
RIP Amazon circa 2030?
About the Author
Atul Vaid has extensive experience in strategic planning, market entry consulting and new initiatives development for corporates, nonprofits and Government clients. He has 20+ years of experience with global firms, where he handled a variety of assignments in India, the Middle East, the USA and Japan; as well as cross-border engagements run remotely out of India. He set up the marketing services hub for a US-based consulting and technology firm, started an online skills assessment portal, and ran a global innovation program for a strategy consulting firm.