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Although Amazon has clocked staggering growth—reporting double-digit increases in net sales yearly—it reports meager profits, choosing to invest aggressively instead.
The company listed consistent losses for the first seven years it was in business, with debts of billion.7 While it exits the red more regularly now,8 negative returns are still common.
Trying to make sense of the contradiction, one journalist noted that the critics’ argument seems to be that “even though Amazon’s activities tend to reduce considered good for consumers, they ultimately hurt consumers.”22 In some ways, the story of Amazon’s sustained and growing dominance is also the story of changes in our antitrust laws.
Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.
This analysis reveals that the current framework in antitrust—specifically its equating competition with “consumer welfare,” typically measured through short-term effects on price and output24—fails to capture the architecture of market power in the twenty-first century marketplace.
In other words, the potential harms to competition posed by Amazon’s dominance are not cognizable if we assess competition primarily through price and output.
I am deeply grateful to David Singh Grewal for encouraging me to pursue this project and to Barry C.
Lynn for introducing me to these issues in the first place.
Close to half of all online buyers go directly to Amazon first to search for products,14 and in 2016, the Reputation Institute named the firm the “most reputable company in America” for the third year running.15 In recent years, journalists have exposed the aggressive business tactics Amazon employs.
Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible.
Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend.
We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output.
Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive.