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SAG-AFTRA members walk a picket line outside HBO/Amazon corporate headquarters at Hudson Yards, August 14, 2023, in New York.
Five years ago, a Morgan Stanley analyst figured out what the political system hadn’t about Amazon. The analyst looked at the profit margins Amazon made from certain types of sales. When they sold their own products, they made a nice profit of 5 percent. But when third-party sellers made a sale on Amazon’s marketplace, the company earned a margin of 20 percent, a fourfold increase.
At the time, there were concerns about Amazon ripping off seller data to identify popular products, copy them, and manipulate placement on its website to undercut rivals. That surely happened in a few high-value circumstances. But what the analyst revealed was that Amazon was going to be more interested in skimming from third-party sales than doing the work of manufacturing, marketing, and selling its own products. Amazon’s goal, evident in the financial numbers, was to take a tax from every economic transaction.
This week, we learned that the analyst was right. Amazon has wound down 27 of its 30 clothing brands, as well as its furniture brands, leaving few in-house products available for sale. The exodus started last year, which you can see as a way to deflect regulatory scrutiny about conflicts of interest.
Meanwhile, Amazon announced a new fee on third-party sellers who ship their own products under the “Seller Fulfilled Prime” program, the latest attempt to force sellers into Amazon’s own logistics network, Fulfillment By Amazon (FBA). Already, Seller Fulfilled Prime users were held to on-time delivery standards that even FBA doesn’t match. Don’t hit the delivery numbers and sellers get kicked out of Prime, with sales consequently plummeting. That makes FBA less an option and more of an imperative, putting sellers where Amazon can squeeze them without mercy. As of 2021, Amazon was taking 34 cents out of every dollar a third-party seller makes on the site, up from 19 cents in 2014.
It’s illegal under antitrust law to tie one service (access to Amazon’s marketplace) to another (its “voluntary” logistics program). Tying could be a big part of the Federal Trade Commission’s widely expected antitrust suit against Amazon. But it’s also completely expected behavior from a profit-maximizing business that discovered through years of trial and error how to make the most money.
The more you poke around our economy, the more you see these examples of fiduciary logic at odds with American law and basic morality. It makes you recognize that the challenges the country faces are all part of the same fight, a pitched battle against corporate power that we lose whenever political elites and pundits conveniently decide that the battle doesn’t exist.
The more you poke around our economy, the more you see these examples of fiduciary logic at odds with American law and basic morality.
This week offered several examples of dominant companies acting on their revenue-maximizing impulses, in both business and politics. For example, nursing home operators are under fire in New York from multiple lawsuits by state Attorney General Letitia James alleging fraud and neglect. So the operators started pouring tens of thousands of dollars into the campaign coffers of New York’s governor Kathy Hochul, which could “buy influence” with one powerful player in the regulatory landscape, according to one government watchdog.
Vital cancer drugs are in shortage nationwide because of complicated factors involving bulk purchasing groups with unbreakable sole-source contracts that make producing generic drugs unprofitable. The shortages do make it profitable for a network of “gray market” distributors that follow shortage lists, buy up whatever supply they can find, and then jack up prices 1,000 percent for desperate hospitals. The ultimate culprits here are the concentrated group purchasing organizations that create drug shortages in the first place, and the concentrated distribution firms at the top that fail to maintain enough supply to allow for this price-gouging.
More evidence connects the tragic Maui fires to sparks from toppled power lines, just a few years after Pacific Gas & Electric’s power lines wiped out the city of Paradise, California. PG&E later committed to burying power lines, but didn’t do so before because of the cost; risk analysis was clearly not factored into this calculation. It seems Hawaiian Electric Co. didn’t learn from the example.
Elsewhere, the nation reached an entertainment milestone, as television accounted for less than 50 percent of U.S. viewing time last month, with streaming now a majority. Streamers who built up their networks by offering cut-rate prices to attract eyeballs have flipped the switch to recoup their investment, raising prices by almost 25 percent in the last year. As most of the same companies that control streaming are responsible for abandoning cable television to a wasteland of reruns, they give viewers little choice but to pay up.
Connected with this is the fact that residuals for actors and writers are much worse for streaming, prompting the studios’ move to those platforms. This has been a disaster for America’s most vibrant export, entertainment. When UAW president Shawn Fain said this week that striking Hollywood creatives and auto assembly line personnel had a lot in common, he was dead-on; both saw the dominant businesses in their industries change the terms for workers to get out from under paying them for their work. “All of us are at war with corporate greed and with companies that are prioritizing profits over people,” Fain said.
The war extends to obscure corners. America’s clean-energy build-out is hampered by what is often characterized as organic, self-defeating NIMBY pushback to utility-scale solar and other renewables. But self-interested corporations play a major role. The difficulties of a transmission line in Maine to connect hydroelectric power from Quebec to customers across New England is linked to NextEra Energy, which has its own power station in the region and wants to maintain its dominance. The natural gas industry is waging a hidden PR campaign to maintain gas stoves. The fossil fuel–funded Caesar Rodney Institute has used astroturf groups to pursue lawsuits to block offshore wind development. The Texas Public Policy Foundation, a think tank funded by oil and gas companies, is doing the same thing. Random people who populate anti-renewable Facebook groups just coincidentally have bunches of fossil fuel money around them.
It of course makes financial sense for fossil fuel companies to oppose renewable energy, especially through astroturf groups posing as local opposition. It makes financial sense for suppliers to respond to shortages with higher prices, for utilities to ignore risks for short-term profits, for entertainment firms to gravitate to platforms that minimize payouts to writers and actors, for auto companies to reclassify electric vehicles and batteries to get out of union contracts, for nursing home operators to use political contributions to protect their businesses, and for Amazon to inextricably tie sellers in its marketplace to its logistics network, for which it commands a high fee.
All of these things make sense for our most profitable corporations; none make sense for anyone who works for, buys from, or partners with a corporation, to say nothing of popular liberty, democracy, or planetary survival. That’s why the fights for better health care, a stronger environment, middle-class prosperity, and the pursuit of happiness are all really one and the same: a fight to reduce concentrated corporate power. The rich men north of Richmond responsible for working-class anguish aren’t the ones taking tax money and distributing it to allegedly unworthy welfare recipients; they run businesses that mean to control every aspect of our lives.
We lose that fight the moment we deflect from it, the moment we say, for example, that it doesn’t matter who is blocking clean energy as long as we reform the processes that enable the blockage. This is deeply sloppy and reductive thinking about how this country works. Of course it matters who uses rules to their advantage. It informs how you pursue the reform, as the same interests using those rules will be in the room when they’re rewritten. It informs what other means can be used to achieve the same result, like breaking down the power of the incumbent firms and building up their competitors to equalize the influence.
This country isn’t governed like a model U.N. It’s a knife fight, where who has power and what they’re doing with it overrules white papers about ideal efficiency. That a pillar of Bidenomics involves the limitation of unearned and damaging power suggests that at least some in the political system are finally beginning to understand the nature of this problem.
