New Report Provides Analysis on Amazon’s Negative Impact

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On Tuesday, November 29, the Institute for Local Self-Reliance (ILSR) published a comprehensive analysis on the negative impact of Amazon’s expansion and growing power. The report, “Amazon’s Stranglehold: How the Company’s Tightening Grip is Stifling Competition, Eroding Jobs, and Threatening Communities,” provides in-depth details on how Amazon is monopolizing the economy, undermining job growth, and weakening communities — and what can be done to address the online retailer’s dominance across a growing number of marketplaces. As the report makes clear, while Amazon may be a dominant, perhaps ubiquitous, force in America’s economy, for all its size, its effects are surprisingly unexamined, and the report, the authors attest, aims to pull back Amazon’s “cloak of invisibility.”

“We applaud ILSR for this in-depth and very thorough examination of Amazon’s growing dominance in the retail sector — and beyond — and of the widespread deleterious effects its business practices are having across a broad range of American society,” said Oren Teicher, CEO of the American Booksellers Association (ABA). “Following up on the ABA and Civic Economics ‘Empty Storefronts’ study — which documented the severe losses in Main Street storefronts and jobs due to the massive shift of retail spending to Amazon — the ILSR report is further proof that the American public needs decisive action from all levels of government, including the new administration and Congress, to counter Amazon’s market dominance and dubious practices, which are affecting the entire economy.”

Similar to the “Amazon and Empty Storefronts” study, which was updated this past September, the ILSR report clearly spells out the overall negative impact that Amazon has had on Main Streets across the country and that this impact is only growing worse, and significantly so.

The “Amazon Strangehold” report, authored by Stacy Mitchell, co-director of ILSR, and Olivia LaVecchia, a researcher with ILSR’s Community-Scaled Economy Initiative, notes that Amazon is now capturing nearly $1 in every $2 that Americans spend online. The company sells more books, toys, and, by next year, apparel and consumer electronics than any retailer online or off.

“Amazon increasingly controls the underlying infrastructure of the economy,” the authors write. “Its Marketplace for third-party sellers has become the dominant platform for digital commerce.” Noting that Amazon Web Services provides the cloud computing backbone for much of the country (including Netflix and the CIA) and how Amazon has warehouses and delivery stations in nearly every major U.S. city, the study points out that by “controlling … critical infrastructure, Amazon both competes with other companies and sets the terms by which these same rivals can reach the market.”

Amazon’s market dominance “comes with significant consequences,” the report stresses. “It’s eroding opportunity and fueling inequality, and it’s concentrating power in ways that endanger competition, community life, and democracy. And yet these consequences have gone largely unnoticed thanks to Amazon’s remarkable invisibility and the way its tentacles have quietly extended their reach.”

The report provides a detailed examination as to why this is the case, drawing on interviews with manufacturers, retailers, labor organizers, and others. The study looks at how Amazon has used its market power to eliminate competition and take control of one industry after another. It details the company’s labor model and how it harkens back to conditions that labor fought in the early 20th century.

Importantly, the report notes, Amazon has upset the “longstanding relationship between commerce and place, changing the way that our communities feel and threatening the revenue streams and social capital that they depend on to function.” The report concludes with an analysis of how Amazon has taken advantage of billions of dollars in tax subsidies to fuel further growth and how government should respond to Amazon in the same manner it responded in the last century to the market dominance of Standard Oil and A&P.

Among the policy solutions the authors recommend is that policymakers should “restore the broader range of goals that guided antitrust enforcement for much of the 20th century” and divide Amazon into separate firms, as well as prevent it from using financial resources to capsize smaller competitors. They also urge lawmakers to update labor laws at the state and federal level to protect workers’ rights in the digital economy, “including establishing stronger protections for temporary workers and blocking companies from classifying workers as independent contractors as a way of evading wage and hour standards.” The authors also suggest that local and state governments should cease providing subsidies to Amazon.

 Look for more on this report in future issues of Bookselling This Week.