American Booksellers Association President Betsy Burton, the co-owner of The King’s English Bookshop [6] in Salt Lake City, Utah, writing on behalf of ABA bookstore members, urged a U.S. Senate committee to investigate Amazon for violations of antitrust laws. Burton’s testimony was submitted to the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights hearing on “Oversight of the Enforcement of the Antitrust Laws.” The hearing was held on Wednesday, March 9.

In the testimony submitted to the Senate antitrust subcommittee, Burton wrote: “Amazon’s vast growth in key facets of the book industry — from book sales to publishing to distribution to, now, bricks-and-mortar retail — has created barriers of entry to its smaller and mid-size competition. The mega-book retailer has achieved such considerable market power with such questionable business tactics that it is undermining the ecosystem of the entire book industry in a way that will be detrimental, especially to mid-list authors, new authors, and minority voices. Given Amazon’s dominant market share, no publisher — regardless the size — can afford not to do business with them, whatever the cost.”

Amazon’s business model is very similar to that of the A&P grocery store chain prior to 1949, when the U.S. Court of Appeals ruled that A&P violated antitrust laws, Burton pointed out. “Like A&P, Amazon is not keeping prices artificially high,” she stated in the submitted testimony. “Indeed, it is keeping prices artificially low, and extending its reach into production and distribution. This spurs further growth for Amazon, while forcing smaller competitors to do business with it even as it simultaneously competes against them. In the process, Amazon has garnered great influence among policymakers in states and in the federal government, garnering tax subsidies that only increase its market advantage at the cost of tax revenue and millions of jobs.”

A recent Civic Economics study, “Amazon and Empty Storefronts [7],” estimates that nationally, in 2014, Amazon sold $44.1 billion worth of retail goods nationwide, while avoiding $625 million in state and local sales taxes. That is the equivalent of 30,000 retail storefronts, 107 million square feet of commercial space, which might have paid $420 million in property taxes. That amounts to a total of more than $1 billion in revenue lost to state and local governments. Amazon also operated 65 million square feet of distribution space, employing roughly 30,000 full-time workers and 104,000 part-time and seasonal workers. Even counting all the jobs in Amazon distribution centers, Civic Economics found that Amazon sales produced a net loss of 135,973 retail jobs at the national level.

Booksellers are strongly encouraged to write to their state and federal lawmakers to urge them to investigate Amazon’s business model for antitrust violations. To make members’ outreach easier, ABA has created the Antitrust Action Kit [8], which provides state-specific template letters that booksellers can adapt and send to their lawmakers.

Burton’s full testimony is below.

Written Testimony, submitted for the Senate Committee on the Judiciary Antitrust, Competition Policy, and Consumer Rights Subcommittee Hearing: “Oversight of the Enforcement of the Antitrust Laws”

Betsy Burton, President
American Booksellers Association
333 Westchester Ave., S202
White Plains, NY 10604

&

Owner, The King’s English Bookshop
1511 South 1500 East
Salt Lake City, UT 84105

March 9, 2016

Dear Chairman Lee, Ranking Member Klobuchar, and Distinguished Members of the Committee:

As the President of the American Booksellers Association (ABA), and as owner of The King’s English Bookshop in Salt Lake City, Utah, and on behalf of ABA bookstore members across the country, I submit this testimony to call into question Amazon’s business practices for violations of federal antitrust laws.

ABA strongly believes that Amazon’s abuse of its dominance and its growing monopolization have had a negative impact on the health of America’s book industry and on free expression, including a chilling effect on the diversity of, and access to, books and information.

ABA is a 116-year-old organization that represents the nation’s locally owned and operated independent booksellers. ABA member bookstores do business in nearly 2,100 locations nationwide. A central tenet of ABA’s mission is to ensure that a broad array of books is as widely available to American consumers as possible. The greater the number of books, the greater the number of voices and ideas; the greater the number of voices and ideas, the richer the lives of our citizens and the stronger our society.

Amazon’s vast growth in key facets of the book industry — from book sales to publishing to distribution to, now, bricks-and-mortar retail — has created barriers of entry to its smaller and mid-size competition. The mega-book retailer has achieved such considerable market power with such questionable business tactics that it is undermining the ecosystem of the entire book industry in a way that will be detrimental, especially to mid-list authors, new authors, and minority voices. Given Amazon’s dominant market share, no publisher — regardless the size — can afford not to do business with them, whatever the cost.

Amazon has as large a market share in the entire book business as Standard Oil did in 1911, right before it was broken up into 34 companies as a result of an antitrust action brought by the federal government. Amazon now controls 75 percent of online sales of physical books, 65 percent of e-book sales, more than 40 percent of new book sales, and about 85 percent of self-published e-book authors.

Moreover, Amazon’s business model is eerily similar to the A&P grocery store chain’s prior to 1949, when the U.S. Court of Appeals ruled that A&P violated antitrust laws. Like A&P, Amazon is not keeping prices artificially high. Indeed, it is keeping prices artificially low, and extending its reach into production and distribution. This spurs further growth for Amazon, while forcing smaller competitors to do business with it even as it simultaneously competes against them. In the process, Amazon has garnered great influence among policy makers in states and in the federal government, garnering tax subsidies that only increase its market advantage at the cost of tax revenue and millions of jobs.

For example, a recent Civic Economics study, “Amazon and Empty Storefronts,” estimates that in Utah, for example, in 2014, Amazon sold $337.4 million worth of retail goods statewide. That is the equivalent of 237 retail storefronts, 800,000 square feet of commercial space, which might have paid $2 million in property taxes and more than $24.6 million in revenue lost to state and local governments. Even counting the jobs in Amazon distribution centers, Civic Economics estimates that Amazon sales produced a net loss of 2,066 jobs in Utah.

From a national perspective, the numbers in the Civic Economics study are just as astounding. In 2014, Amazon sold $44.1 billion worth of retail goods nationwide, all while avoiding $625 million in state and local sales taxes. That is the equivalent of 30,000 retail storefronts, 107 million square feet of commercial space, which might have paid $420 million in property taxes. That amounts to a total of more than $1 billion in revenue lost to state and local governments. Amazon also operated 65 million square feet of distribution space, employing roughly 30,000 full-time workers and 104,000 part-time and seasonal workers. Even counting all the jobs in Amazon distribution centers, Civic Economics finds that Amazon sales produced a net loss of 135,973 retail jobs at the national level.

Amazon has been engaged in high-profile fights with publishers as it attempts to secure greater discounts, and it has restricted the sales of publishers’ books in an attempt to dictate terms. As bad as this would be in any business, in the book trade, such tactics have a significant negative impact on the free exchange of ideas — a dangerous precedent in a democracy.

Moreover, Amazon’s massive market presence has made it attractive as a kind of online “holding company.” Countless small merchants have partnered with Amazon to increase their market presence, to the point where these retailers cannot survive without Amazon’s online engine. As such, Amazon takes advantage of these business relationships to extend its dominant business practices.

While Amazon’s growth as a retailer, publisher, and distributor may appear to benefit consumers because of lower prices, the result is a chilling effect on the diversity of voices in the publishing industry, and, as the aforementioned statistics show, a severe financial impact on communities in the state and across the country. Amazon’s recent foray into bricks-and-mortar retailing will only grow the retail giant’s presence and, with it, this negative impact on the diversity of books available.

In many ways, Amazon has avoided close review and antitrust challenges regarding its business practices because its key market channel, the Internet, is relatively new. But with this technology now maturing, it is increasingly clear that what constituted a monopoly in 1911 and 1949 constitutes a monopoly today. Antitrust laws exist to protect consumers, their communities, and small businesses from the very business practices now being employed by Amazon.

We urge you to investigate Amazon. Toward that end, I respectfully submit this testimony for the record to lend an important, yet all-too-often overlooked, perspective to this critical discussion.

Thank you for your consideration in this important matter.

Sincerely,

Betsy Burton, President
American Booksellers Association

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Owner, The King’s English Bookshop
Salt Lake City, Utah