Amazon is the fifth largest company in the world and dominates online retail. An expert report commissioned by LobbyControl analyses Amazon’s monopoly power and competition instruments against this concentration of power. It concludes that only the break-up of Amazon into several business units will solve the power problem.
Amazon is the dominant online marketplace in Germany and other European countries. For many small and medium-sized companies, there is no way around Amazon if they want to reach potential buyers. They are dependent on Amazon and its business practices. Amazon is using its monopoly position in online retail to expand into ever more business areas such as logistics, cloud services and entertainment. This expansion in turn supports its dominance in online retail. The company systematically uses its power, determines the rules of the game on its platform and thereby creates advantages for itself. Fair competition is hardly possible anymore.
Break-up as a legally possible solution
The report concludes that only breaking Amazon into several business units will solve the power problem. Previous attempts to control Amazon’s problematic behavior have not been effective enough. They do not go far enough to free companies and society from the tech giant’s dependency. A break-up of Amazon is therefore necessary to limit the company’s monopoly power and prevent damage to democracy.
The legal opinion proposes splitting Amazon along business lines into retail, services to third-party sellers (Marketplace), cloud (Amazon Web Services), smart home devices (Echo & Alexa) and logistics. Such a split is possible under German law competition law The most recent antitrust law reform of the coalition (GWB 11) allows a break-up as a result of a sector inquiry. It came into force in November.
Amazon exploits monopoly power
A break-up is necessary because Amazon uses its monopoly position massively in its own favour. The report explains this in detail: the company shifts profits from other business areas in order to undercut competitors, charges companies high fees to be able to offer their products on the platform, simply excludes unwelcome competitors from its platform or copies their most successful products. There is now no way around Amazon’s platform. Small and medium-sized companies are dependent on it. They and their employees suffer from Amazon’s aggressive market power.
Amazon also treats its own 28,000 employees in Germany badly and monitors them at work. The company also systematically avoids taxes by setting up in the countries with the lowest tax rates. In Europe, the group is based in the low-tax country of Luxembourg. Yet Germany is its most important market in the EU. There are also problems with data protection and sustainability, with Amazon destroying returned goods on a large scale.
The corporate group can afford to do this because it has so much power and no one effectively prevents it from its abusive practices. The competition on the market cannot take action against it; smaller competitors are either pushed off the platform or bought up. Although politicians and antitrust authorities have initiated individual measures against Amazon, they have so far failed to effectively and comprehensively limit the platform’s power. Amazon is using its strong position to further expand its power and defend it against politicians using lobbying power.
The Federal Cartel Office is called upon
It is now up to the Federal Cartel Office to use competition law. In the case of Amazon, it should act now and initiate a sector inquiry into online retail, thereby creating the conditions for Amazon to be split up. Otherwise, society and democracy will suffer further damage.
The report argues that the arguments against splitting up Amazon, such as high costs or difficulty of implementation, do not apply. In fact, attempting to control Amazon’s behavior by imposing conditions may even be more expensive and time-consuming. Unbundling Amazon is therefore expedient.
Structural separation should once again be seen as a legitimate and necessary instrument of competition policy. This does not mean that break-ups make regulation superfluous and alone solves all the problems of digital platform power. A combination of regulation such as the Digital Markets Act and structural measures such as break-ups is needed to limit the power of large tech companies for the benefit of the general public. The concentration of power in individual tech companies such as Amazon or Google is a fundamental problem for our democracy that we need to tackle structurally.
Photo: Jennifer Marke
