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Amazon is huge, but it’s no monopoly

The government charges the e-commerce giant with hurting consumers and stifling competition. The data tell a different story.

The Federal Trade Commission accuses Amazon of monopolizing online marketplace services by degrading quality for shoppers and overcharging sellers.Gabby Jones/Bloomberg

There is no more powerful monopolist in America today than the US government.

Examples of Washington’s monopoly power abound. For instance, only the Bureau of Engraving and Printing may print paper currency and only the US Mint may produce coins for use as legal tender. Through the US Postal Service, the federal government has the exclusive right to deliver (and charge for) first-class mail. The granting of patents and trademarks is another area in which the feds have a monopoly. So is the allocation of broadcast frequencies on the electromagnetic spectrum.

These government monopolies didn’t always exist — the Pony Express was a private company and private banks used to issue their own paper money — but they are now mandated by law and taken for granted by most Americans. So there is a certain irony in the way federal regulators go after successful companies that are not protected from competition and loudly denounce them for exerting monopolistic control — something the government itself gets away with every day.

Last month the Federal Trade Commission, together with 17 state attorneys general, filed an antitrust lawsuit against Amazon, which they accuse of being a monopoly. The giant online merchant engages in illegal anticompetitive practices that “block off every major avenue of competition,” the FTC suit alleges. “Amazon has violated the law not by being big, but by how it uses its scale and scope to stifle competition.”


In a news release, the government summarizes the theory of its case: “Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.” Those are pretty unsavory accusations. If they’re true, why does Amazon so consistently rank near the top in surveys of the most trusted, most admired, and most loved corporate brands?


The government’s complaint is 172 pages long. “Amazon has seized control over much of the online retail economy,” it contends on its first page. “Amazon is a monopolist.” But in all the pages that follow, there is little concrete evidence to substantiate those charges.

How could there be? Amazon isn’t a monopoly.

As any economics textbook will affirm, a monopoly is an enterprise that is the sole provider of a good or service. Amazon may be big and popular, but it doesn’t come close to meeting that definition. The company’s market share accounts for a bit under 38 percent of leading retail e-commerce companies in the United States. That’s nothing to sneeze at, but a monopoly? The reason federal and state antitrust laws take such a dim view of monopolistic behavior is that it strangles competition — and when companies have no competition, consumers suffer through higher prices, lower quality, and fewer choices.

Yet Amazon’s rivals aren’t dwindling, they’re growing stronger. The Wall Street Journal reported in September that the company’s leading competitors are “growing of late instead of diminishing.” Walmart’s revenue from online sales has surged by an average of 39 percent each year for the last four years, and is expected to reach $62 billion in the current fiscal year. “Meanwhile, Shopify has more than tripled its revenue over just the past three years,” the Journal adds, thanks to a strategy of catering to merchants who want an alternative to selling on Amazon’s platform. The paper quotes Citigroup analyst Ronald Josey, who concludes in a new report: “The e-commerce market is becoming more competitive.”


If competition is increasing in a market, that market, pretty much by definition, is not being crushed by a predatory monopolist.

And if that is true in the market of “online superstores” — a new category invented by the FTC for purposes of this litigation in order to make Amazon seem more dominant — then imagine how much truer in the US retail market generally. Vast though it is, Amazon’s share of total retail sales nationwide is modest — somewhere between 5 percent, according to Bloomberg, and 10 percent, as calculated by business intelligence firm RIS. Amazon competes not just against Walmart and Target, and not even against all online sellers. Its competition includes all of the 1 million-plus brick-and-mortar retailers in America. Have you ever been in a bookstore or a specialty clothing boutique or a museum gift shop, seen something you liked, and pulled out your phone to check what it would cost to buy it online? If you’re like half of American consumers, you have — and thereby demonstrated that Amazon (and Walmart and Target and eBay) competes with all retailers, not just with its giant online peers.

Amazon and other Big Tech firms have an uncanny ability to reduce prominent officials to economic illiteracy.


When Jeff Bezos’s company bought MGM Studios in 2021, Senator Josh Hawley, a hard-right Republican from Missouri, seethed that the sale should be blocked on the grounds that “Amazon is already a monopoly platform that owns e-commerce, shipping, groceries, and the cloud. They shouldn’t be permitted to buy anything else. Period.” For the record, MGM’s film industry market share at the time was about 7 percent — far less than that of Disney (25.5 percent), Sony (23 percent), or Universal (15.6 percent).

Similarly, after Amazon acquired the Whole Foods supermarket chain, Senator Elizabeth Warren, the hard-left Democrat from Massachusetts, called for undoing the sale on antitrust grounds. Yet the acquisition of Whole Foods gave Amazon control of a mere 1 percent of the grocery market — a sliver of the 19 percent that Walmart commands.

If Amazon were a monopoly, its prices would be high and customers would have no recourse but to pay them. But Amazon’s prices are low. Year in, year out, it retains its standing as the online vendor with the cheapest prices. Indeed, one of the FTC’s indictments of Amazon is that it requires third-party sellers who use its platform to give Amazon customers their lowest price. That may give vendors a reason to gripe, but it’s great for consumers.

And that’s what matters most. The acid test for an unlawful monopoly is consumer welfare. A company that gives customers more choices, better service, and lower prices is no monopolist malefactor. In the space of a generation, Amazon has metamorphosed from a startup online bookseller to one of the most valuable, powerful, and diversified providers of goods and services the world has ever known. But the one thing it has not become is a monopoly. Which is why this is one lawsuit that deserves to fail.


Jeff Jacoby can be reached at jeff.jacoby@globe.com. To subscribe to Arguable, his weekly newsletter, visit globe.com/arguable.