Regulators and labour organizations are taking aim at Amazon. This could eventually result in its logistics business being spun off as well as an increase in its operating costs.
Amazon’s dominant position in the market is being increasingly challenged in the US and elsewhere by a variety of different organizations and institutions. In the first instance, politicians and regulators fear that it is using its hold on the market to undertake anti-competitive practices. To add to growing pressure, however, labour organizations are alleging that is using its power to exploit workers and to reduce pay and standards across the industry.
Following the election of President Biden, the future of ‘Big Tech’, especially industry giants such as Amazon, Apple, Google and Facebook, has been in question. Their market dominance and the effect this has on competitors and customers has prompted calls by some for their break up.
One of the allegations levelled against Amazon is the behaviour of its ‘Fulfilled by Amazon’ operation (FBA). It is alleged that the company has been favouring third-party marketplace customers which use its logistics services, a strategy called ‘self-preferencing’.
Although third party customers do have the ability to fulfil orders placed over the platform themselves, the argument goes that by not signing up to FBA their products lose out on placement on the site and are more at risk from penalties for late delivery. Regulators believe that rather than just a feature of healthy competition in which companies like Amazon are in their rights to promote their own products and services, their size and power acts as a form of compulsion.
This has prompted a number of bipartisan antitrust proposals under discussion in the US by the House Antitrust Subcommittee, which if successful, could lead to the break up of the company. Also, Seattle Congresswoman Pramila Jayapal has introduced legislation, the ‘Ending Platform Monopolies Act’, which would allow the federal government to force tech companies to sell off operations where there was an alleged ‘conflict of interest’. The European Commission has also been proactive in its antitrust fight against tech giants and could pursue similar proposals.
It should be stressed that the chances of this present antitrust legislation being passed is remote – but it does show the general direction of movement in Washington. There has been the suggestion that rather than wait to be pushed by the federal government, Amazon might be tempted to spin off its logistics on its own terms, creating a huge independent rival to UPS and FedEx. If the company was compelled to sell off its Amazon Logistics business it could be worth, reportedly, $230bn (Bank of America).
However, Amazon is not only coming under pressure from the government but also from Unions which, in its own way, could also be highly disruptive to the company. The International Brotherhood of Teamsters (IBT) has announced that it will attempt to unionize the company’s warehouse workers and truck drivers. In a resolution to be voted on at its International Convention it accused the company of ‘changing the nature of work in our country’ and ‘[exploiting] employees, contractors and employees of contractors’.
The campaign comes after a bitter and hard-fought vote at Amazon’s Bessemer, Alabama warehouse earlier in the year over whether workers should join the Retail, Wholesale and Department Store Union. In this case, the company won although it was accused by labour organizations of using underhand tactics to persuade workers to reject the union contract. The IBT is setting up a special Amazon Division to lead the campaign. Given the size of Amazon’s workforce, membership would be hugely beneficial to the Union should it succeed.
Of course, if Amazon’s workforce does become unionized there would be a huge impact not only in terms of cost but also flexibility. Meeting peaks and troughs in demand in a highly volatile market environment would become hugely challenging. Of course, the move may in fact accelerate the company’s efforts to automate its operations, to reduce its dependence on labour.
In summary, Amazon’s management will be fighting on many fronts in the coming years, as well as dealing with the operational challenges created by the boom in e-commerce. Seemingly, the future structure of the company, not least whether or not it spins off Amazon Logistics, depends on the success of its arguments and the strength of the political opposition as much as market forces.
Source: Transport Intelligence, June 24, 2021
Author: John Manners-Bell