Size Matters: Could Amazon Attract the Attention of Antitrust Regulators?

Antitrust Law has figured prominently in Washington business for almost as long as theres been a Washington state. In the Northern Securities case of 1904, the Supreme Court told James J. Hill that while he might control the Great Northern, the Northern Pacific and the Burlington Route, merging them was a violation of antitrust law and they had to be operated as separate companies, an arrangement that persisted until 1970 with the formation of Burlington Northern.

Bill Boeing ran afoul of antitrust efforts in the Franklin D. Roosevelt administration and in Congress, leading to the divestiture of United Air Lines. Boeing himself divested his interest in the company he founded.

As quaint a notion as it seems now, in the 1990s Microsoft was seen as so dominant and powerful a force in the personal computer business as to warrant breaking up the company which is what a federal judge ordered, proposing that the operating-systems business be separated from the software-applications side. That decision was appealed and reversed, and Microsoft and the government eventually agreed on a settlement that did not involve splitting the company.

Now, in the 20-teens, its Amazon around which the chatter of antitrust action swirls.

Even before its audacious bid to buy Whole Foods, Amazon was the subject of muttering over its power and reach across retailing and whether it should be somehow reined in. The grocery business, the criticism goes, is one more entry on a checklist of retailing subsectors that Amazon will move into and take over, squeezing out competitors.

Amazons influence over so much of American business, not just retailing, is inarguable. Its no small accomplishment to push Walmart, which should be quite familiar with portrayals as the bully of American retailing and despoiler of Main Street small business, into the role of an underdog trying to catch up to a more successful rival.

But antitrust law and policy present a thicket of philosophical tangles and practical snarls because of a series of questions that arise in every case: Is it any business of the governments to decide who is too big and powerful? Where is that point? What if near-monopoly status doesnt hurt consumers? Are technology and the emergence of new competitors more effective at tempering monopoly power than legal cases?

Companies tend to attract the attention of antitrust regulators on two issues: How did you create your monopoly power, and what did you do with it once you got it? Historians still debate the nature of John D. Rockefellers persuasions in forcing rivals to join Standard Oil or surrender their markets.

Microsoft was accused of practices that elbowed others out of the PC market. The railroads were regulated because of concern for what they would do to shippers, especially farmers with no alternatives, on freight rates.

The discovery of oil in regions Standard didnt operate in helped erode its power before the court case did. The rise of the internet and rivals like Google diluted Microsofts power.

Amazon became Amazon on a combination of convenience and price. Are consumers being harmed by that? The worry is that Amazon, once achieving domination, will then be free to squeeze suppliers on one end and consumers on the other. But why would Amazon want to squander those advantages?

If United States or European governments were to go after Amazon, how would they propose breaking it up? Tell it which businesses it can be in? How much market share it can have in those segments? To stick with online only? To be less successful? To turn away customers?

Those questions are not easily answered, which isnt surprising. Too Big to Fail hasnt been figured out, either. Too Big to Continue has a decades-long head start and its even further away from resolution.

Monthly columnist BILL VIRGIN is the founder and owner of Northwest Newsletter Group, which publishes Washington Manufacturing Alert and Pacific Northwest Rail News.