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Trust and antitrust

coyote-roadrunner-cliff.pngFour years ago, 2021's new Federal Trade Commission chair, Lina Khan, made her name by writing an antitrust analysis of Amazon that made three main points: 1) Amazon is far more dangerously dominant than people realize; 2) antitrust law, which for the last 30 years has used consumer prices as its main criterion, needs reform; and 3) two inventors in a garage can no longer upend dominant companies because they'll either be bought or crushed. She also accused Amazon of leveraging the Marketplace sellers data it collects to develop and promote competing products.

For context, that was the year Amazon bought Whole Foods.

What made Khan's work so startling is that throughout its existence Amazon has been easy to love: unlike Microsoft (system crashes and privacy), Google (search spam and privacy), or Facebook (so many issues), Amazon sends us things we want when we want them. Amazon is the second-most trusted institution in America after the military, according to a 2018 study by Georgetown University and NYU Rounding out the top five: Google, local police, and colleges and universities. The survey may need some updating.

And yet: recent stories suggest our trust is out of date.

This week, a study by the Institute for Local Self-Reliance claims that Amazon's 20-year-old Marketplace takes even higher commissions - 34% - than the 30% Apple and Google are being investigated for taking (30%) from their app stores. The study estimates that Amazon will earn $121 billion from these fees in 2021, double its 2019 takings and that Amazon's 2020 operating profits from Marketplace will reach $24 billion. The company responded to TechCrunch that some of those fees are optional add-ons, while report author Stacy Mitchell counters that "add-ons" such as better keyword search placement and using Amazon's shipping and warehousing have become essential because of the way the company disadvantages sellers who don't "opt" for them. In August, Amazon passed Walmart as the world's largest retailer outside of China). It is the only source of income for 22% of its sellers and the single biggest sales channel for many more; 56% of items sold on Amazon are from third-party sellers.

I started buying from Amazon so long ago that I have an insulated mug they sent every customer as a Christmas gift. Sometime in the last year, I started noticing the frequency of unfamiliar brand names in search results for things like cables, USB sticks, or socks. Smartwool I recognize, but Yuedge, KOOOGEAR, and coskefy? I suddenly note a small, new? tickbox on the left: "our brands". And now I see : "our brands" this time are ouhos, srclo, SuMade, and Sunew. Is it me, or are these names just plain weird?

Of course I knew Amazon owned Zappos, IMDB, Goodreads, and Abe Books, but this is different. Amazon now has hundreds of house brands, according to a study The Markup published in October. The main finding: Amazon promotes its own brands at others' expense, and being an Amazon brand or Amazon-exclusive is more important to your product's prominence than its star ratings or reviews. Amazon denies doing this. It's a classic antitrust conflict of interest: shoppers rarely look beyond the first five listed products, and the platform owner has full control over the order. The Markup used public records to identify more than 150 Amazon brands and developed a browser add-on that highlights them for you. Personally, I'm more inclined to just shop elsewhere.

Also often overlooked is Amazon's growing advertising business. Insider Intelligence estimates its digital ad revenues in 2021 at $24.47 billion - 55.5% higher than 2020, and representing 11.6% (and rising) of the (US) digital advertising market. In July, noting its riseCNBC surmised that Amazon's first-party relationship with its customers relieves it of common technology-company privacy issues. This claim - perhaps again based on the unreasonable trust so many of us place in the company - has to be wrong. Amazon collects vast arrays of personal data from search and purchase records, Alexa recordings, home camera videos, and health data from fitness trackers. We provide it voluntarily, but we don't sign blank checks for its use. Based on confidential documents, Reuters reports that Amazon's extensive lobbying operation has "killed or undermined" more than three dozen privacy bills in 25 US states. (The company denies the story and says it has merely opposed poorly crafted privacy bills.)

Privacy may be the thing that really comes to bite the company. A couple of weeks ago, Will Evans reported at Reveal News, based on a lengthy study of leaked internal documents, that Amazon's retail operation has so much personal data that it has no idea what it has, where it's stored, or how many copies are scattered across its IT estate: "sprawling, fragmented, and promiscuously shared". The very long story is that prioritizing speed of customer service has its downside, in that the company became extraordinarily vulnerable to insider threats such as abuse of access.

Organizations inevitably change over time, particularly when they're as ambitious as this one. The systems and culture that are temporary in startup mode become entrenched and patched, but never fixed. If trust is the land mass we're running on, what happens is we run off the edge of a cliff like Wile E. Coyote without noticing that the ground we trust isn't there any more. Don't look down.

Illustrations: Wile E. Coyote runs off a cliff, while the roadrunner watches.

Wendy M. Grossman is the 2013 winner of the Enigma Award. Her Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. Stories about the border wars between cyberspace and real life are posted occasionally during the week at the net.wars Pinboard - or follow on Twitter.


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