By Paul Rafelson
August 5, 2021 at 5:00 am ET
Few issues transcend today’s deep political differences, but one that has emerged with bipartisan agreement is the need to address antitrust issues in online commerce and level the playing field for businesses of all sizes. And no one knows that better than the small businesses that have built Amazon and other platforms into the massive companies they are today.
Working in e-commerce, both as a lawyer and a seller over the past two decades, I have been able to witness firsthand how e-commerce companies have bent the rules in their favor, often at the expense of smaller competitors. Perhaps no company better embodies this than Amazon.
Amazon has created an unparalleled network to deliver millions of goods in a matter of days — if not hours — that has fundamentally altered the retail landscape. For this, the company deserves immense credit.
But what has also become clear is that the company would not have accomplished this much without preferential treatment. For instance, Amazon has received more than $4 billion — and counting — in taxpayer-funded subsidies and handouts to build warehouses across the country. Local and state governments tax Amazon’s competition and customers, only to give Amazon a financial advantage over their competition — a fundamentally unfair practice, especially given the unprecedented scale of these subsidies.
And these are just the subsidies that we know about. With its massive lobbying apparatus, Amazon has weighed heavily on state government officials to strike insider deals and allow the company build warehouses in their districts in exchange for not requiring Amazon to collect sales taxes, artificially causing Amazon to have lower prices than its local small businesses.
With a windfall in government cash and an artificial price advantage, Amazon has been able to further dominate by subsidizing its retail business by diverting profit streams of its other operations, such as the highly profitable Amazon Web Services. Investors questioning Amazon’s profit motives simply missed the forest for the trees and did not understand the big picture. Amazon did not focus on being profitable with retail operations, but instead on whether it could outlast the competition and achieve a dominant market position. Over time this would bleed competing retailers dry; without the benefit of a profitable tech company, or government-sanctioned “Duty Free” status to cover their losses, competitors have begun to wither away.
Would Amazon be where it is without all this preferential governmental treatment, along with the ability to subsidize itself to achieve dominance? Any reasonable person would say no. Some who disagree with antitrust action will discuss free markets and the government staying out of the marketplace. But dipping into public coffers and losing money long enough to wipe out the competition is not free market behavior. In fact, it was the failure of the government to stay out of the free market in the first place and choosing instead to “pick a winner” that enabled Amazon to achieve its dominance today.
By allowing Amazon to avoid sales tax for decades, states essentially paid for our Prime memberships. That’s not a free market — it’s government-backed enterprise.
The problems in online commerce are not about right versus left — they are a matter of right versus wrong. In the case of Amazon, strong-arming lawmakers and keeping regulators at bay on antitrust action has been critical to its unchecked growth. If we want to be able to restore our market to a fair and level playing field where smaller retailers are able to compete against e-commerce giants like Amazon, it’s time for lawmakers to take action, and undo the damage that their predecessors caused.
Paul Rafelson is the executive director of the Online Merchants Guild, the largest network small and micro e-commerce businesses nationwide.
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