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Is Amazon a Monopoly?

And the impact on small business

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WHAT IT IS

  • Amazon is an online realtor that sells anything from food to clothing and technology.

  • Amazon has even expanded into original TV shows and movies, spending around $4.5 billion to compete with Netflix. [Business Insider]

  • Amazon was founded in 1994 by the chairman and Chief Executive Officer (CEO) Jeff Bezos.

  • Amazon controls 38% of the e-commerce market to date. [TIME]

  • Some fear Amazon’s product range and online access make it a monopoly, breaking anti-trust laws. [The New York Times]

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A few companies (in the middle) own or control a major portion of the companies surrounding. Some argue these companies are a monopoly.

  • A monopoly is defined as "having exclusive control over a commodity." [Merriam-Webster Dictionary]  
  • For example, a single business becomes powerful enough to buy its competitor. If the trend of buying competitors continues, the corporation becomes a monopoly.
  • A monopoly is able to set the price for many products, as well as gain political influence. [Britannica]
  • Anti-trust laws protect the consumer by making monopolies illegal. [Wired]

WHY IT MATTERS

 

CIVICS: Congress has passed anti-trust laws to protect the American people against monopolies. With some revisions, these are the three core federal antitrust laws still in effect today. [Federal Trade Comission]

  • In 1980, the Sherman Act was passed as a "comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade."
  • In 1914, Congress passed two additional antitrust laws: the Federal Trade Commission Act, which created the FTC, and the Clayton Act.

SOCIAL: In 2016, Amazon had over 310 million worldwide users and that number is growing. [Statista]  With their global reach, Amazon has the power to squeeze out competing businesses, and/or add them to their success plan. This is already affecting small businesses to the economy at large, with many worried it could head in a negative direction.

AMAZON HELPS

Supporting small

Half of the items sold on Amazon come from small businesses, which supports and often increases their sales. [Forbes]

 

Amazon is looking for small delivery businesses to help distribute packages, which would bring in more revenue for those businesses. [The Washington Post

 

 

Job creation

Amazon claims it has helped small businesses create more than 900,000 jobs worldwide and has lent more than $1 billion to small and medium-sized companies. [The Washington Post

 

 

New life into old

Many argue that small business and large corporations should thank Amazon - the online giant has forced them to innovate to stay alive. [The New York Times]

 

AMAZON HURTS

Consumer behavior

“The retailers that get it recognize that Amazon has forever changed consumer behavior,” said Barbara Kahn, a marketing professor at the University of Pennsylvania. 

 

Many buyers are now accustomed to the ease of ordering goods online. This behavior has put physical retail stores, like shopping malls and storefronts, out of business. [The New York Times]

 

 

Fighting against a giant

Due to Amazon’s wide range of products, almost every type of business is in competition with Amazon and is in danger of losing. [Business Insider

 

 

Reliance

Although Amazon can be an outlet for small businesses, working through them decreases the independence a small business is intended to create.

 

Some people believe small businesses have to just deal with Amazon, and can’t compete with them. [USA Today

WHERE WE ARE NOW

  • Amazon isn’t slowing down. The company is stepping further into new industries with its own products and has begun competing with other mega-companies such as Google. [The Huffington Post

  • Amazon is no longer just digital. With the purchase of Whole Foods and development of Amazon bookstores, the company now has brick and mortar stores.

  • 2018: Amazon released a Small Business Impact report to share the scope of its business. Read it here.

  • July 2020: Big Tech CEO, including Bezos, faced Congres in an anti-trust hearing. Many believe the hearing signals that regulation is coming soon. [The Associated Press]

  • Pandemic 2020: Amazon is poised to emerge stronger than ever, with online purchases surging. [TIME]

THINGS TO THINK ABOUT

  • The Department of Justice (DOJ) filed an antitrust lawsuit against Google. This is the DOJ's first major action in two decades. Read more.

  • Amazon is controversial for other reasons, such as political tension with the Trump administration and reports of poor treatment of employees. [The Washington Post]

  • Is there room for a new business to compete with Amazon, or are they too far gone to reach?

  • How can a small business thrive without using sites such as eBay and Amazon?

  • Dive deep into how Amazon makes money.

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