Amazon Must Be Broken Up: NYU Professor Amplifies Trump’s Antitrust Comments

Amazon Must Be Broken Up: NYU Professor Amplifies Trump’s Antitrust Comments
A worker drives a Powered Industrial Truck at the Amazon fullfillment center in Aurora, Colo., on May 3, 2018. (Rick T. Wilking/Getty Images)
Petr Svab

The retail behemoth Amazon must be targeted for antitrust violations and broken up into smaller companies, argues Scott Galloway, a marketing professor at New York University.

“Amazon has become an invasive species that is unhealthy for our economy,” he said at the Recode conference on Sept. 17.

In fact, Galloway would like to see Apple, Facebook, and Google broken up too, and he’s not alone in harboring that view. A camp of left-leaning critics who support the idea of breaking up big tech has been echoed, to a degree, by President Donald Trump.

“As you know, many people think it is a very antitrust situation, the three of them,” Trump told Bloomberg in an Aug. 30 interview, referring to Google, Amazon, and Facebook.

He was reticent, though, on what action should be taken.

“I won't comment on the breaking up, of whether it's that or Amazon or Facebook,” he said.

Galloway, on the other hand, laid out his case specifically against Amazon in detail.

While many worry about the lack of competition in the telecom market, of which Verizon controls close to two fifths, Amazon has already captured half of all online commerce in America—a sector worth a quarter trillion dollars each year, Galloway said.

In the last year alone, Amazon market capitalization increased by about 75 percent, adding nearly $400 billion to the company’s value. That means Amazon has added more than the total value of Walmart, Target, Best Buy, Kohl’s, Macy’s, and Nordstrom combined.

Amazon has already passed the monopoly threshold triggered in the past by conglomerates like Standard Oil or AT&T, according to Galloway.

Willful Monopoly?

Even if wielding monopoly power, in order to violate the antitrust Sherman Act of 1890, a company must engage in “the willful acquisition or maintenance” of a monopoly “as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident,” the Justice Department states.

Galloway suggests, however, that Amazon indeed engages in business practices that damage competition.

Armed with massive wads of investor cash, the Amazon juggernaut has so much sway that it can make stocks tumble across whole industry sectors just by announcing an intent to enter them or by buying minor players.

One example Galloway gave was the 2017 Amazon purchase of Whole Foods—a higher-priced supermarket chain. While Whole Foods has a mere 1.2 percent market share, the purchase wiped nearly a third of the stock price off Kroger, a grocery chain with six times the market share.

Amazon may also gain unfair advantage by collecting data from retailers who use its platform and using that data to displace the retailers, James Thomas, law professor at Cleveland State University who focuses on antitrust and business regulation, explained in a op-ed last year.

Amazon has also faced criticism, including from Trump, for avoiding local and state taxes.

The company started charging the taxes years ago on goods it sells directly, but many third-party merchants who make up half of Amazon’s order volume still don’t charge the taxes. Other online retailers may also play to the same tax advantage by inviting third-party merchants to their platforms, though a Supreme Court decision earlier this year expanded the states' ability to require sales tax collection, which may wipe out the third-party advantage in the future.

'It's Time'

According to Galloway, Amazon has already reached the point of unfair advantage.

“I think it’s impossible to compete with Amazon,” he said.

It needs to be broken up, he argues, not because it pays little in corporate tax or because it’s “evil,” and not even because it invests in automation that may cost some people their jobs.

“We break [big tech] up because the key to competitive markets is capitalism,” he said.

Galloway predicts the breakups would lead to more jobs, a broader tax base, more mergers and acquisitions, more venture capital-backed funding, fewer billionaires, but more millionaires.

“We break up big tech because we are capitalists and it is time,” he said.

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Petr Svab is a reporter covering New York. Previously, he covered national topics including politics, economy, education, and law enforcement.
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