Krugman on Amazon’s abuse of market power

Paul Krugman had an interesting column about Amazon the other day. He dives straight in:, the giant online retailer, has too much power, and it uses that power in ways that hurt America.
O.K., I know that was kind of abrupt. But I wanted to get the central point out there right away, because discussions of Amazon tend, all too often, to get lost in side issues.

Among those ‘side issues’ are the fact that Amazon is good for book buyers and good at customer service (which it is). Krugman is a Prime subscriber, as am I. “The desirability of new technology”, he writes,

“or even Amazon’s effective use of that technology, is not the issue. After all, John D. Rockefeller and his associates were pretty good at the oil business too — but Standard Oil nonetheless had too much power, and public action to curb that power was essential”.

Krugman sees Amazon’s tactics in its dispute with the publisher Hachette as an exact analogy to Standard Oil’s treatment of rail companies that refused to grant the company special discounts for shipping its oil. Amazon is delaying and impeding the sale of Hachette titles on its webssite, because Hachette won’t agree to give discounts to Amazon on the same scale as other publishers apparently do.

In economic jargon, Amazon is not acting like a monopolist (i.e. gouging customers) — not yet anyway. Instead it’s behaving like a monopsonist — i.e. a dominant buyer with the power to push down suppliers’ prices.

Way back in the 1920s, it was that kind of behaviour that triggered state action. “The robber baron era ended”, Krugman writes, “when we as a nation decided that some business tactics were out of line.” The question is whether analogous state action is now likely.

You only have to ask the question to know the answer. The neoliberal ideology has so entered our rulers’ souls that the concept of taking on Amazon is not only verboten, but unthinkable.