Wednesday, August 19, 2015

Zombie Publishing Memes #1 - Amazon is a Monopoly

This is the first in an ongoing series that Barry Eisler and I are writing. When we talk about zombie memes, we’re referring to arguments that just won’t die no matter how many times they’re massacred by logic and evidence. Because we’ve been shooting down so many of these memes for so long, and because they just keep reanimating (often repeatedly from the same people), we thought it would be useful to create an online source for easy (and time-saving) reference.

We’ll be tackling these memes one at a time over the course of the next few weeks and then publishing a free downloadable compendium, so if you’ve encountered a zombie meme yourself and don’t see it listed here, please mention it in the comments. And if you’re aware of articles on these or related topics, please refer us to them so we can include links. The complete list of zombie memes we’ve addressed so far appears at the end of this post.

Amazon is a Monopoly.

This meme is incoherent, mistaken, and perverse.

Incoherent, because the “evidence” of Amazon’s monopoly power is always that Amazon is hard on its suppliers, not on its customers (no one can argue with a remotely straight face that Amazon is anything other than exceptionally customer-centric). If the evidence is that a company is squeezing suppliers, it might be evidence of something called monopsony, not of monopoly.

Mistaken, because Amazon has numerous competitors, including Apple, Google, Walmart, Barnes & Noble, Books A Million, Kobo, Smashwords, Scribd, Oyster, and more than 2000 independent bookstores (with new indies opening all the time, and sales at indies strong).

It’s important to remember that US antitrust laws were adopted to protect not competitors but competition. Monopolies (and monopsonies) are not themselves illegal -- what is illegal is abuse or unfair acquisition of monopoly power. Ultimately, antitrust laws are intended to protect the consumer, and it’s difficult to argue that low prices, innovation, and an ever-expanding variety of products are bad for consumers (though valiant efforts are constantly made).

Indeed, the best anyone seems able to come up with in support of the monopoly accusation is what Amazon might do in the future, rather than anything the company is actually doing today. The possibility that a company might one day become a monopoly and abuse its power is no more a crime than is the possibility that a person might one day acquire a gun, might one day get angry, and might one day use the gun in anger to kill someone. Outside Minority Report, the law just doesn’t punish hypothetical future crimes.

Perverse, because it fails to point out there actually is a monopoly in publishing -- or call it a quasi-monopoly, or oligopoly, or cartel. This is the New York Big Five (the cartel is right there in the name). The Big Five actually was prosecuted by the Justice Department for price-fixing under the Sherman Act. The Big Five settled; Apple fought and then lost. For any lawyers out there, note that price fixing is per se illegal under the Sherman Act. Meaning it is the very definition of abuse of monopoly power.

Of course, even if we didn’t know about the per se price collusion, we might surmise by its singular lack of innovation that the Big Five is functionally a single entity. Until Amazon pioneered online bookselling, digital books, and self-publishing, the Big Five was content to subsist on monopoly rents, developing nothing new or disruptive in generations.

In describing the Big Five as a cartel, by the way, we don’t mean to be insulting. We doubt even OPEC looks in the mirror and sees a cartel. Most likely, OPEC perceives itself as a humble organization beneficently managing prices for the good of society overall. This is just human nature, and there’s no reason to believe the Big Five views itself less attractively than does any other cartel.

Moreover, the Big Five has always itself functioned as a monopsony, abusing its author suppliers. How else to explain the forever-term contracts, the twice-yearly annual royalty payments, the lockstep low digital royalties, the outlandish rights grabs and draconian non-compete provisions? Could practices like these persist except by the abuse of vastly asymmetrical take-it-or-leave-it power exercised by a Big-Five controlled system against authors?

One of the more curious aspects of the “Amazon is a monopoly” charge is that it’s rarely made by anyone who’s a lawyer or economist, and indeed the people making the claim almost never bother citing relevant law or even economic theory. Instead, what seems to be happening is that certain people find Amazon both powerful and frightening. They therefore dislike Amazon and know Amazon must be bad. And what do you call a bad company? A monopoly.

A good example is this piece by Matt Stoller, who writes for Salon. In a near 3000-word post arguing that Amazon is a monopoly, Stoller fails to cite any antitrust law. His argument instead rests on his claim that “Amazon is a tyrant, it rules through terror.” This is a strange claim. We suppose it’s possible there are polls demonstrating that the majority of Amazon’s customers shop there because they’ve been terrorized into doing so, but it seems more likely that people shop at Amazon because they like the store’s price, selection, convenience, etc.

Note too, that in lieu of citing any legal basis for his “Amazon is a monopoly” claim, Stoller refers to an equally bombastic and legal-reference-free New Republic article for support. The tendency of some writers to draw support for the validity of a zombie meme by citing previous manifestations of the same meme might offer some insight into the resilience of zombie memes generally. Zombie memes are based on emotion, not on evidence or logic (in fact, they are contravened by evidence and logic). It may be that finding other people who share your fears and prejudices has the effect of validating and reinforcing those fears and prejudices. After all, it’s easier to ignore evidence and logic when you can point to other people who seem to be feeling the same things you are.

For another illustrative example of the inability of people propagating the “Amazon is a monopoly” meme to support their position with references to any relevant laws, we recommend this Paul Krugman piece arguing that Amazon is a monopsony hurting America, authors, and readers because it “has the power to kill the buzz,” and our discussion of it and related matters here.

Negating many of these monopoly claims, and citing US anti-trust precedent, Randall J. Morris has a thoughtful piece that shows how Amazon is in no danger of being sued by the DOJ.

The coherent (though far less scary sounding) version of the “Amazon is a monopoly” argument would be that Amazon has become a kind of utility -- an essential public service, such as electricity and water, for which consumers have no alternative and which therefore must be regulated by the government. While an “Amazon is a utility” argument would at least make some sense in a way the “Amazon is a monopoly” argument never has, it would still be mistaken. Even assuming that books are as essential to life as water and power, if the electricity company cuts off someone's power, that person will have no choice but to sit in a cold, dark house. If a book isn’t available in Amazon, it can instantly be obtained from almost any other bookstore, whether in person, by download, or by mail order. People buy books at Amazon not because they have no choice, but rather because they like the choice Amazon provides them and choose to shop there despite the presence of other available venues. The same can’t be said for, say, water and power. So even the “Amazon is a utility” argument, while somewhat more thoughtful and less incendiary than the “Amazon is a monopoly" version, remains at odds with reality.

Ultimately, the “Amazon is a monopoly” meme is attractive to some because it seems to paint a veneer of objectivity and reason over what is fundamentally a subjective emotional reaction. So just as the US and UK governments tend to call all people they dislike (even journalists) terrorists; just as some people opposed to Obama call him a Marxist/Socialist/Muslim/Kenyan/Anti-Colonialist because they find these labels presumptively bad; so too, in a corporate context, do Amazon detractors reflexively attach the bad word monopoly to the objects of their fears and prejudices. In another culture, this mindset might produce accusations that the hated party is a witch, or an extraterrestrial, or possessed by the devil, or in the grip of a psychological disorder (Google “Snowden Narcissist” to see a pristine example of the “I don’t like what he did so he must have a psychological disorder” reflex). The dynamics are broadly similar; in a corporate context, the reflexive verbal manifestation of hatred and fear just comes out “monopoly.”

Previously addressed zombie memes: