Paul Krugman is an Amazon customer.
But that’s not stopping the well known columnist for The New York Times from ripping the Seattle-based tech juggernaut, noting in a column today that the company is hurting America with its heavy-handed tactics and can’t be trusted.
It is one of the most brutal attacks on Amazon I’ve seen to date, and it speaks to the challenges that the company faces in the court of public opinion. For years now, the company has been moving into the realm of Walmart status — the dreaded retailer of the 80s and 90s that many believed ripped the heart out of small town America.
Krugman goes further, saying Amazon has attained “robber baron-type maker power” in the books business.
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.
So far Amazon has not tried to exploit consumers. In fact, it has systematically kept prices low, to reinforce its dominance. What it has done, instead, is use its market power to put a squeeze on publishers, in effect driving down the prices it pays for books — hence the fight with Hachette. In economics jargon, Amazon is not, at least so far, acting like a monopolist, a dominant seller with the power to raise prices. Instead, it is acting as a monopsonist, a dominant buyer with the power to push prices down.
So can we trust Amazon not to abuse that power? The Hachette dispute has settled that question: no, we can’t.
Krugman’s piece has struck a nerve, with more than 700 comments so far.
Amazon, for its part, tends to ignore these sorts of attacks. Just waiting them out, kind of like a farmer during a hailstorm.
Read Krugman’s full piece here.