Leave Amazon out of Big Tech regulation — it doesn’t have a monopoly


A 450-page report by the House antitrust subcommittee released this week rocked the technology industry.

Calls for regulation have accelerated as Capitol Hill ramps up what it sees as anti-competitive behavior to widespread abuse of technology hurting privacy, security and democracy. This week the targets were the biggest tech companies — Apple
AMZN,
+3.01%,
Facebook
FB,
+0.26%,
Google
GOOG,
+1.97%
 
GOOGL,
+1.82%
 and Amazon
AMZN,
+3.01%.

Background:Congress should consider breaking up Big Tech and limiting acquisitions, House says

It’s understandable why Congress would want to examine more closely the impact that big tech has on competition, especially the four companies being brought into focus in this case.

However, I believe that while Apple’s, Facebook’s and Google’s potential anti-competitive behavior could reasonably be looked at through a similar lens, Amazon’s business is so vastly different that it would require a completely different approach. Moreover, its lack of dominance and big contribution to job creation and small business in the market, despite that perception, may make it a lower priority for regulators in its entirety.

Apple

In the U.S., Apple has a monopoly share of the smartphone market. Therefore, it has the lion’s share of the operating system, with over 52% of users on iOS. On top of that, its app ecosystem tightly controls the distribution of apps, making the entire developer ecosystem hostage to its policies.

Companies that try to fight Apple are essentially left for dead as you cannot survive in the U.S. without an app in Apple’s App Store.

Google

Google has absolute control over internet search. Over 86% of internet searches are done on Google, a staggering number that undoubtedly gives Google unilateral control over the distribution of information. There is a reason for regulators to look more deeply into the impact Google can have over how information is discovered and to potentially place some regulation over its practices to make sure it doesn’t unreasonably favor information for gains to its business(es).

Facebook

Facebook is a Juggernaut. There is seemingly choice in social media with Twitter
TWTR,
-0.23%,
Pinterest
PINS,
-0.50%,
Snap
SNAP,
-0.18%
and TikTok, all rivaling Facebook. However, when you put together Facebook, Instagram and WhatsApp, it has created a tether of applications that would be nearly impossible to unwind. All three have over a billion active users, with Facebook and WhatsApp over two billion.

Couple this with the company’s continuous suspect handling of abuse of the platform by bad actors across the political spectrum, and you have a company that is ripe for some intervention to assure the safety of personal information and global democracy.

Amazon

Amazon’s presence among this group seems to be more based on its size than any verifiable anti-competitive behavior. Sure, the company is large, and the Covid-19-related shutdown of the economy has made it larger. Amazon also has a significant presence in tech via e-commerce, cloud and its smart-device businesses with Ring and Nest.

However, the business is diverse, with commerce making up the majority of the revenue, although AWS (the cloud business) is the most notable profit generator. In the second quarter, Amazon boosted revenue 33.5% year over year, with its business in North America growing only 2.9% faster than the entire company.

That pales in comparison with many of its competitors amid the pandemic. Since the coronavirus hit our shores, such retailers are reporting soaring digital sales: Best Buy
BBY,
+1.45%
 grew online sales by 250%, Target
TGT,
+1.14%
 by 195%, Lowe’s
LOW,
+1.38%
 by 135%, Kroger
KR,
+0.46%
 by 127%, and Walmart
WMT,
+1.00%
 by 97%.

Sure, the law of large numbers plays a role here. However, retail is massive and unlike top-heavy industries like airlines and mobile networks, where the top five control massive portions of the market, retail, inclusive of Amazon, Costco
COST,
+1.19%,
Walmart, Walgreens
WBA,
-1.96%
and Kroger, represent only 19.9%.

Retail is such a large market that Amazon today only represents about 1% of the global $25 trillion market and 4% of retail in the U.S. So, where is the monopoly?

On top of this, Amazon has played a significant role amid the pandemic in everything from keeping the at-risk population safe through efficient delivery of goods at scale to being the No. 1 creator of jobs since the pandemic began, adding 175,000 jobs from March to early June alone. Given the challenging state of the economy, the importance of job creation at all levels in vast regions should not be understated.

Wrong time

Dealing with a global pandemic that has raged on the better part of 2020 and an impending national election that will change the shape of our country for the next four years at least, I find it untimely for Congress to focus on regulating a company such as Amazon. This company has no role in the spread of (mis)information. It has been one of the most significant drivers of the economic recovery in 2020 through hiring and investments in small businesses.

This isn’t to say Amazon won’t require a deeper look at some point in the future — even Jeff Bezos has said that on the record. Its growth rate and overall size in itself will warrant scrutiny.

However, the vast competitive landscape in e-commerce, retail, cloud and smart devices make Amazon anything but a monopoly. Focusing on the regulation of Amazon’s business at this moment will surely be more of a hindrance on the global recovery than an investment in protecting consumers and our democracy — which, if anything, is what our regulators should be focused on in any efforts to regulate tech.

Daniel Newman is the principal analyst at Futurum Research, which provides or has provided research, analysis, advising, and/or consulting to Amazon and dozens of companies in the tech and digital industries. Neither he nor his firm holds any equity positions with any companies cited. Follow him on Twitter @danielnewmanUV.





Source link