Paul Krugman Divulges Exactly Why Amazon Is So Evil and Dangerous

Case in point: Delivery times for Paul Ryan's book and book criticizing Koch brothers.

October 20, 2014  |  

Sometimes Paul Krugman eases into his column by writing metaphorically, or giving some valuable background. In Monday's column, he just up and blurts out his point: "Amazon.com, the giant online retailer, has too much power, and it uses that power in ways that hurt America."

He spends most of the rest of the column explaining why this is so, and why, while the online retailer is not quite "a  monster" intent on eating the whole economy, as some critics portray it to be, it is nonetheless a too-powerful company that is playing a deeply troubling role

It is in some way comparable to Standard Oil, which in its day had "too much power," Krugman writes, "and public action to curb that power was essential."

By way of illustration, Krugman recounts the dispute between Amazon and Hachette, a major publishing house, back in May.

Amazon had been demanding a larger cut of the price of Hachette books it sells; when Hachette balked, Amazon began disrupting the publisher’s sales. Hachette books weren’t banned outright from Amazon’s site, but Amazon began delaying their delivery, raising their prices, and/or steering customers to other publishers.

You might be tempted to say that this is just business — no different from  Standard Oil, back in the days before it was broken up, refusing to ship oil via railroads that refused to grant it special discounts. But that is, of course, the point: The robber baron era ended when we as a nation decided that some business tactics were out of line. And the question is whether we want to go back on that decision.

Does Amazon really have robber-baron-type market power? When it comes to books, definitely. Amazon overwhelmingly dominates online book sales, with a market share comparable to Standard Oil’s share of the refined oil market when it was broken up in 1911. Even if you look at total book sales, Amazon is by far the largest player.

How Amazon differs from Standard Oil? Instead of being a monopolist, which Krugman defines as "a dominant seller with the power to raise prices," Amazon is being a monopsonist, "a dominant buyer with the power to push prices down." This is why consumers tend to love Amazon, especially when it comes to buying books, but it is very dangerous indeed. Because, Amazon uses its outsize power in some measure to control the conversation. Publishing, like other entertainment businesses, relies in great measure on buzz. "And what Amazon possesses is the power to kill the buzz," Krugman writes.  "It’s definitely possible, with some extra effort, to buy a book you’ve heard about even if Amazon doesn’t carry it — but if Amazon doesn’t carry that book, you’re much less likely to hear about it in the first place."

And the Hachette dispute shows unequivocably that Amazon abuses this power. 

It's also telling, Krugman points out, how Amazon is using its power to select what Americans read, which may have everything to do with owner Jeff Bezos' politics.

Last month the Times’s  Bits blog documented the case of two Hachette books receiving very different treatment. One is Daniel Schulman’s “ Sons of Wichita,” a profile of the Koch brothers; the other is “ The Way Forward,” by Paul Ryan, who was Mitt Romney’s running mate and is chairman of the House Budget Committee. Both are listed as eligible for Amazon Prime, and for Mr. Ryan’s book Amazon offers the usual free two-day delivery. What about “Sons of Wichita”? As of Sunday, it “usually ships in 2 to 3 weeks.” Uh-huh.