By Martin Chávez
July 26, 2018 at 5:00 am ET
Google, Facebook and Amazon collectively acquired a staggering 182 companies from 2013 through 2017, making the business practices of Rockefeller’s Standard Oil seem in retrospect quaint and austere. Amazon’s latest billion-dollar purchase of PillPack, the online pharmacy startup that ships presorted prescriptions to customers throughout the United States, is a prime example of how big tech companies exploit lax regulations to devour potential competitors before they truly get off the ground.
Amazon’s acquisition of the Boston-based startup, which paves the way for the tech giant to infiltrate yet another industry and amass even more sensitive consumer data, should be the straw that broke the camel’s back for antitrust enforcers who talk a big game about the importance of startups and small businesses as the lifeblood of thriving local communities.
It is time for regulators at the U.S. Federal Trade Commission to flex their muscles and block these major acquisitions, and for state and local lawmakers stop forking over millions in taxpayer subsidies to woo Amazon and other big tech companies that can afford to pay their own way.
Regulators have largely taken a hands-off approach to mergers and acquisitions in the tech space over the last decade, allowing the major players to swallow up smaller companies in different or related sectors so long as there was no evidence the transaction would harm consumers. Google scooped up the breakthrough mobile navigation app Waze for a paltry $966 million and Facebook shelled out roughly $19 billion for the texting platform WhatsApp. More recently, Amazon paid $1 billion in cash to acquire smart-doorbell maker Ring. Regulators did not bat an eye — how bad could it be for consumers to enjoy even more efficient versions of products that were already free?
But this reductionist rationale ignores the damage these kinds of deals do to would-be entrepreneurs, who more and more are deciding to forego founding a business because they simply cannot compete with the powers that be. Amazon now accounts for nearly half of all online retail sales in the United States and rakes in one of every two dollars spent online. Meanwhile, the number of new American businesses created annually has plummeted by more than 65 percent since 1980.
Yet state and local lawmakers are still funneling massive sums of corporate welfare to companies like Amazon, which saw more than $177 billion in revenue last year. In fact, Amazon has received $1.5 billion in taxpayer subsidies since 2000. Instead of continuing to line the pockets of the third-richest company in the world, lawmakers should use taxpayer dollars to incentivize entrepreneurship and economic development in local communities – investing in 21st century workforce training programs, for example, that ensure small business owners have access to the talent they need to compete.
By purchasing PillPack, Amazon positions itself to become a key player in the pharmaceutical industry, which it has had its sights on since earlier this year when it announced that it was teaming up with Berkshire Hathaway and JPMorgan Chase to form an independent health care company. But instead of PillPack disrupting the pharmaceutical industry and nudging it into the 21st century, Amazon will once again exert unprecedented control over a critical market. The tech giant will also become the custodian of sensitive personal health information in an era when consumers are deeply worried about the ways in which major tech companies have failed to protect their data.
Startups and small businesses do not have a fighting chance in the modern economy if we continue down this reckless, short-sighted path. Local economies will be almost entirely dependent on a handful of tech companies, whose employees – save the coders and CEOs – will be increasingly disposable as they automate their way to record profits. In fact, Amazon’s warehouses are predominantly staffed by workers who earn 15 percent less on average than other workers in similar jobs in the same area and many are deemed “temporary,” which means they have minimal benefits—if any— and cannot receive compensation if they are injured on the job.
Simply put, Silicon Valley and the few other areas like it cannot be the only place where it is possible to create or land a job. It is time for members of Congress to finally flex their muscles and push regulators to protect innovation and competition from big tech’s unfettered ambition.
Startups and small businesses are the bedrock of our economy, constantly correcting for the shortcomings of the status-quo class and creating jobs that could not have previously been imagined. Amazon’s purchase of PillPack has many antitrust enforcers up in arms, but they should finally do something.
Martin Chávez, a former three-term mayor of Albuquerque, New Mexico and New Mexico state senator, is a national spokesperson for the Free & Fair Markets Initiative, a nonprofit coalition focused on supporting a modern, fair marketplace that serves the best interests of small businesses, local communities and everyday Americans.
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