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May 13, 2019 05:23 pm PDT

Amazon's monopsony power: the other antitrust white meat

In 2017, law student Lina Khan shifted the debate on Amazon and antitrust with a seminal paper called Amazon's Antitrust Paradox, which used Amazon's abusive market dominance to criticize the Reagan-era shift in antitrust enforcement, which rewrote the criteria for antitrust enforcement, so that antitrust no longer concerned itself with preventing monopoly, and only focused on "consumer harm" in the form of higher prices.

Khan's paper jumpstarted an important intellectual shift in the global perception of antitrust and Big Tech. For one thing, it revealed the thinness of the argument that Big Tech got big because of "network effects" or "first mover advantages, arguing instead that Big Tech's concentration was the result of utterly mundane monopolistic tactics that would be instantly recognizable to Brandeis, Carnegie and other players from the Gilded Age and the age of trustbusting.

Since then, other scholars have performed similar analysis on Big Tech giants like Facebook.

One important focus of this critique is the idea of "monopsony", when a single entity is the only buyer in a market, meaning that it can put pressure on suppliers, contractors and other parts of the value chain, distorting markets.

Now, Fordham University law student Shaoul Sussman has connected the idea of monopsony with the idea of "consumer harm" in a new paper for the Journal of Antitrust Enforcement: "Prime Predator: Amazon and the Rationale of Below Average Variable Cost Pricing Strategies Among Negative-Cash Flow Firms.

Sussman's argument is basically that even if you accept the Reaganist version of anti-trust where the only thing that matters is "consumer harm," then you should still be worried about Amazon's monopsism, because when Amazon squeezes profits at the expense of its suppliers, those suppliers lower the quality of their goods in order to stay profitable despite Amazon's profit-taking. Read the rest


Original Link: http://feeds.boingboing.net/~r/boingboing/iBag/~3/tXCULcLj8ps/consumer-harms-everywhere.html

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