business news in context, analysis with attitude

We reported yesterday that Sen. Elizabeth Warren (D-Massachusetts), who is running for the 2020 Democratic presidential nomination, on Friday said that she is in favor of new regulations that would require the breakup of Amazon, as well as other giant technology companies such as Apple, Facebook, and Google.

Warren’s proposal, if implemented, would mean that Amazon could no longer operate an online marketplace on which other companies could sell their products and also be a retailer on that same platform. The proposal “calls for the appointment of regulators who would “unwind tech mergers that illegally undermine competition,” as well as legislation that would prohibit platforms from both offering a marketplace for commerce and participating in that marketplace.

I commented, in part:

I am sympathetic to the notion that giant companies can be seen as stifling competition from smaller entities; they have have so many resources, so much brainpower, and so much access to capital that they make it difficult for a smaller company to compete. I get it.

But I am not persuaded that Warren’s approach is the right one, and I’m certainly not convinced that it has much chance of becoming law, even if she were elected President, simply because there would be too much opposition to such a heavy-handed regulatory approach.

Let’s take the case of Amazon. There was a time, actually not so long ago, when Amazon was a small company, facing off in one category - books - against giant retailers such as Barnes & Noble and Borders. It succeeded because it had a better, more progressive idea that resonated with consumers.

Those same consumers, as it happens, tend to give Amazon very high marks for prices, customer service, etc … and the last time I checked (and to be sure, I am not a lawyer), I thought antitrust law primarily existed to protect consumers. Break up Amazon, and the result could be higher prices and less product availability, not to mention lower customer service standards.

I do think - and have said here for a long time - and new definitions for what “unfair competition” means need to be drawn up for a 21st century business environment. I’m good with that. And when big companies - I’m looking at you, Facebook - can be shown to have ignored the best interests of their customers and even lied to them about how they use their data, for example, then I think the regulatory response needs to be tough, swift and customer-centric.


One MNB reader responded:

In typical fashion, whether ignorant or on purpose, the left leaning don’t explain all repercussions of their positions. For instance, if you participate in a 401K what could the tech breakup plan do to everyone’s 401K investment regardless of your income level? Many 401K plans include these tech behemoths because they are led by business savvy leaders, bring a great returns to ALL investors both personal and institutional. So in the end, they wreck a business for their means and it effects the wealthy (great) but especially the everyday person’s 401K investment’s. All this in the name of protecting the small people, of which no politician resembles.

Here is the age old line, the US government is upside down $22 trillion, not one agency is running in the black…education, military and oh yes the post office to name a few. So they want to tell successful businesses how they should run companies.

We live in the greatest country ever mostly due to Capitalism, so let’s follow the socialist model and wreck it! A quick note, if we move to socialism, we will not need a boarder wall, no one will want to come to America…problem solved!
 
Ignorant or on purpose, I choice the former!


So I can put you down as a ‘no’?

MNB reader Gary Loehr wrote:

I find it interesting that politicians find huge companies with excessive power to be evil, while seeing no problem with our overblown self righteous government.  One big difference.  Big tech companies got that way by being successful. Our government got big by legislating their own expansion.  Big tech is pretty good at what they do, government is not.

Another ‘no’?

MNB reader Tim Phillips wrote:

Couldn’t agree more with your comments on Warren’s new position on tech. It’s interesting that Warren’s comments came just as Bernie jumped into the race closely followed by Joe Biden coming in likely sometime this week. How about taking an extreme position Elizabeth to position yourself differently???

Relative to Amazon what she clearly misses is Amazon’s importance in the labor market. They now employee in excess of 600,000 people……more people than live in Baltimore or Milwaukee and consistently pay their people above the norm ( e.g. taking a stand on raising the minimum wage to $15). I have a relative who works for them and they compensate people fairly and objectively and give people equity in the company who deliver on their work goals (what could be a better promise than that!)

Additionally as a consumer I cannot think of a better partner than Amazon in terms of providing my family with a terrific platform to acquire products and services with great pricing and even better customer service. As a Prime member they also provide incremental benefits ( Streaming Services) that other parties do not have.

Elizabeth, you are barking up the wrong tree on Amazon………clearly you are not a Prime Member and appreciate what they provide to the economy. To group them with Google and Facebook is ridiculous….As a Massachusetts resident I have heard this all before from her…….many here are weary of her and her extreme positions.


Maybe. But she did get more than 60 percent of the vote in her recent re-election.

From another reader:

The key issue with any antitrust act is “ where’s the harm ?”. And “ do consumers have reasonable and affordable alternatives ?” If there is harm, and no reasonable alternatives the government usually acts. For these tech companies, there doesn’t seem to be any harm. Facebook and Google are free… hard to see the harm there. Apple is not the share leader in smart phones. And they have a very effective competitor in Samsung. If Apple gets a higher price it’s because consumers think it’s worth it… not because they have no choice. As you said, Amazon has very high consumer satisfaction scores. Again they have formidable competitors in on line retail (Walmart), grocery (Kroger) and cloud (Microsoft) . As I recall, a while ago government wanted to break up Sears because of its retail dominance.

I’m a little less sanguine about Facebook than you are; I think it has done a pretty good job of persuading me that it really isn’t free … not really. The cost of satisfying Mark Zuckerberg’s ambitions, in fact, may be really high.

Another MNB reader wrote:

This is nothing short of Government outreach to take away both business and personal freedoms. Government controlling business not only doesn’t work but is never a good thing in the long term. We the taxpayers seem to always have to pony up at some point. Interesting once these freedoms are taken away, you never get them back.

First of all, I want to again be clear - I disagree with Warren’s proposal.

But I do think that it is important to remember that the impetus for this proposal is Warren’s belief - which she has held for decades - that mainstream consumers are not always best served by a kind of capitalism in which small companies are unable to compete, and that sometimes government needs to preserve as level a playing field as possible. I think this is a legitimate subject for discussion, even if I disagree with her prescription to address it.

I don’t think this is about her being a Socialist, or wanting to take away personal freedoms. I think she’s wrong, but I also think that political campaigns are where ideas and proposals get advanced and then discussed, analyzed and judged. In an ideal world, there is nuance and thought applied to these conversations, and when we come out on the other end, voters are able to make informed decisions about who makes sense and who does not.

I’d pay money for a pay-per-view forum, for example, in which Warren sat down with Jeff Bezos to chat about her proposal. Not argue. Just talk. It’d be really interesting, and might raise the public consciousness.
KC's View: