Written by: Stephanie Varin
Is Amazon a Monopoly?
The growth of the Amazon, the e-commerce company, is staggering. Year over year, they have consistently grown by $15 billion dollars, according to to CNBC. It’s growth has been enormous within the past few years as it has absorbed many companies from several different industries. This worries economists and politicians across the board, including POTUS, Donald Trump. In fact, if Trump is reelected, it is very possible he will appeal to the Senate in order to create new antitrust laws that might force Amazon to break up. Why all the fuss? Many believe that Amazon is quickly becoming too big and too powerful. In short, Amazon may be becoming a monopoly.
So, is Amazon becoming a monopoly? Well, no. Though some believe the company is becoming the textbook definition of a controlling power in the market, as least for our standards, it isn’t. According the Merriam-Webster, “a monopoly occurs when complete control of the entire supply of goods or of a service in a certain area or market rests with a single entity,”, and the FTC defines a monopoly as a company with +50% total market share, whereas Amazon only controls 5% of all retail sale in the US (Forbes). However, it does exhibit some monopolistic tendencies (see this video for a summary). For example, about 1 in every 2 dollars spent online is spent at Amazon. Also, in 2016, Amazon’s sales were six times greater than the online sales of Walmart, Target, Best Buy, Nordstrom, Home Depot, Macy’s, and Costco, combined (HowStuffWorks). Not only this, but Amazon seems to be dipping its toe into every pond out there, and has significant market value in many industries, including, but not limited to, electronics retail, fashion, consumable manufacturing, food delivery, grocery, bookstores, healthcare, pharmacy, and web services (CNBC). With all of its market holdings, Amazon is making many companies within these industries very nervous, and could very well threaten their performance, especially that of brick and mortar stores. So why isn’t the FTC taking action against this retail giant? Well, it’s all based in the consumer welfare. Because Amazon’s prices are so low, one of the many reasons that consumers love the site, it can’t be seen as threatening the consumers, and thus some economists don’t see it as a problem (Forbes). Also, it isn’t restricting trade which is the largest reason why monopolies are restricted and banned -- government wants to promote competitive and free trade.
So, is Amazon a monopoly by traditionally defined standards? No, but that does not mean that Congress could not create new antitrust laws that redefine what a monopoly is, and if that happens, Amazon could be in deep trouble.
Works Cited
Hanbury, Kate Taylor Mary. “Amazon's Growth Could Threaten These 10 Industries.” Business Insider, Business Insider, 28 June 2018, www.businessinsider.com/amazon-is-killing-these-7-companies-2017-7#healthcare-companies-8.
Ladd, Brittain. “Is Amazon A Monopoly? Donald Trump Thinks So.” Forbes, Forbes Magazine, 30 July 2018, www.forbes.com/sites/brittainladd/2018/07/29/amazon-is-not-a-monopoly-president-trump-yet/#46aa580c4735.
Markets, Economy &. “Here's Why Amazon Isn't a Monopoly.” Business Insider, Business Insider, 15 Aug. 2017, www.businessinsider.com/amazon-stock-price-not-a-monopoly-2017-8.
Salinas, Sara. “Amazon Sales Grew by $15 Billion Year over Year - Its Peers Don't Come Close to That Level of Growth.” CNBC, CNBC, 27 July 2018, www.cnbc.com/2018/07/27/amazon-sales-grew-by-15-billion-year-over-year-blowing-away-peers.html.
“Why Is Amazon Not Considered a Monopoly?” HowStuffWorks, HowStuffWorks, 11 Dec. 2017, money.howstuffworks.com/why-is-amazon-not-considered-monopoly.htm.
