RILA v. Google and Amazon

Don't be evilThe United States Justice Department and Federal Trade Commission are about to get an earful about Amazon and Google from the Retail Industry Leaders Association (RILA). Bloomberg reports that RILA, whose members include Walmart, Target Corp., and Best Buy Co. and others …

… joins a slew of companies, including Oracle Corp., Yelp Inc., Tripadvisor, Inc. and News Corp., that have raised concerns about competitive harm from dominant technology platforms. The retailers’ group has already laid out its views on competition issues to the House Judiciary’s antitrust subcommittee, which is investigating the technology industry …

Antitrust laws exist to ensure healthy competition, the reasoning being that consumers suffer in its absence. Government needn’t delay stepping in until a monopoly has actually caused harm. The potential to cause harm is enough, a standard that has its roots in The United States v. Alcoa. When Alcoa happened upon a production method that took the price of aluminum from $545 to $8 per pound, it passed the savings to consumers who, not surprisingly, were quite pleased. It was competitors who sued for Alcoa’s breakup. Ultimately there was no breakup, however, it was now established that a too-dominant player could be deemed be an illegal monopoly, even when dominance is attained through fair play, and even when consumers benefit. The potential to harm can warrant oversight and, perhaps, action. 

It’s a philosophy with PR implications that make a two-edge sword of success.

Americans love tales of people who rise from rags to riches using only raw talent and gumption. Perhaps we like these stories because they give the rest of us hope. 

But beware too much success. 

Americans cheered Sam Walton, born a poor farm boy, as his suburban stores began closing on Sears, then the world’s largest retailer. But not long after toppling Sears, Walmart became something of a hiss and byword. Independent stores shuttered and blamed Walmart. Manufacturers complained of having to lower quality to meet Walmart’s pricing demands. Politicians accused Walmart of underpaying employees whose resort to welfare constituted an effective government subsidy.

Another entrepreneur, born to a humble, 17-year-old high school student, experienced similar cheers followed by jeers. He grew up, obtained an education, married, and then one day headed west, his wife at the wheel, while he mapped out plans for a business he would launch from a garage. For years, his venture failed to turn a profit. People admired his vision and while shaking their heads at his recklessness. Then, overnight or so it seemed, Amazon was suddenly a force to be reckoned with. Retail booksellers found themselves on the rocks. Publishers bowed to its will. Retailers had trouble competing with its ever-widening array of products. Jeff Bezos—I’m sure you guessed who by now—even bought The Washington Post, for crying out loud.

Or take the two Stanford University PhD students who couldn’t even spell googol. They were hep, they were cool, they were fun. They even had morals: “Don’t be evil” graced a headquarters wall. But then, Google kept growing. And then, Alphabet took them over. And then, they took “Don’t be evil” down, causing consternation despite the fact that one of Alphabet’s core values was “Do the right thing.” Eventually, “Don’t be evil” went back up, but for many it was too little too late. As Google’s fingers reached into more and more pies, its honeymoon phase with America drew to a close.

Which brings us to where we are today. According to Bloomberg:

“It’s pretty clear to us that the FTC and different relevant regulators should be taking a much closer look at these platform companies,” said Nicholas Ahrens, vice president of innovation for RILA, in an interview. “We are here to help.”

… The group wrote a letter to the FTC … arguing that the tech platforms create an “information bottleneck” that has the power to skew markets and circumvent the traditional power of price competition.

RILA also raised concerns about how tech companies may compromise the brands of retailers, favor their own products over sellers on their platforms, accumulate data about competitors and allow for the proliferation of counterfeit goods.

Note that RILA does not accuse the giants of having caused actual harm, but of having the potential to cause it.

“Too big to fail” is a related concern. As I wrote last month, the U.S. House Financial Services Committee has issued Facebook a cease and desist plea regarding Calibra. A recent report from Finextra says

“Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action,” the lawmakers wrote. “During this moratorium, we intend to hold public hearings on the risks and benefits of cryptocurrency-based activities and explore legislative solutions. Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail.”

Like most people in digital banking, I worry when government gets involved. It has a habit of using a rooter where a Q-tip would do. On the other hand, I’d be loath for government to await the emergence of a problem before taking action. On Amazon, Google, and Facebook scales, any problem could be instantly far-reaching.

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