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Tech States Sensemaker

Does Amazon raise prices?

Wednesday 16 June 2021

The e-commerce giant’s days avoiding antitrust regulation may soon be over

Here’s what you need to know this week: 

  • Amazon was accused of raising prices for consumers 

State by state:

  • Facebook refused to compromise with the UK over encryption
  • Apple compromised on privacy in China 
  • Google acted to protect victims of online slander
  • Tencent faced more state control over its data
  • Microsoft admitted that some of its workers slept in data centers

State affairs

“The greatest trick the devil ever pulled was convincing the world he didn’t exist.”

Charles Baudelaire’s phrase – repeated by Kevin Spacey in The Usual Suspects – might help explain why Amazon has successfully avoided regulatory scrutiny in the US. 

For years, Amazon has argued that it isn’t a problem for antitrust regulators. Never mind its size – Amazon drives down prices for customers, it insists, and therefore can’t be seen as anti-competitive. Since US antitrust law focuses narrowly on “consumer welfare,” and doesn’t take into account a company’s effect on suppliers or on the wider market, Amazon’s “nothing to see here” argument has found success. 

Recent events undermine this position, however. They raise the possibility of the e-commerce giant being successfully challenged by antitrust regulators in the US, its biggest market. 

  • US lawmakers introduced several bills last week, which, if passed, would widen the scope of antitrust significantly. One, called the Ending Platform Monopolies Act, would effectively require Amazon and other tech giants to split into two. Another – more likely to be enacted – would bar platforms from conduct that “advantages the platform operator’s own products”.
  • Karl Racine, Washington DC’s attorney general, brought a case against Amazon, accusing the company of raising consumer prices after all. (A similar private case, called Frame-Wilson vs Amazon, was launched last year.)

The Racine case is particularly interesting because it stays within the boundaries of traditional antitrust (one legal expert told us that it was therefore much more likely to succeed). It centres on a 20-word clause signed by all of Amazon’s third-party sellers, forbidding them from offering their own products on competing online platforms – including the sellers’ own websites – at a lower price. 

Matt Stoller, a fellow at the Open Markets Institute, has dug into the case and argues that it’s all about Amazon’s Prime shipping perk. The company makes a big loss shipping its products free to consumers in record time.

Stoller argues that Amazon de facto pays for Prime shipping by charging higher commission fees to third-party sellers. These fees are passed onto consumers through higher prices. Amazon’s T&Cs then prevent the sellers from selling their products at lower prices elsewhere, leading to higher prices across the whole online retail system. You can read more of Stoller’s analysis here. (Unsurprisingly, Amazon disputes these allegations and is fighting the case.) 

Incidentally, antitrust was a big issue at our Responsible AI forum at Waddesdon last week. “EU competition law has always looked not only at harm to consumers but also harm to competitors,” Tom Glocer, co-founder of BlueVoyant, said. “US antitrust law could use a significant doctrinal refresh to include the effects of data monopolies and these large platforms.”

Facebook: security

The UK government is increasingly frustrated at Facebook’s plans to expand encryption. One source close to the government told us that the US tech state wasn’t willing to compromise over planned moves to encrypt Messenger and Instagram. Security officials have proposed a “side-door” mechanism which would, they say, allow the government access to valuable intelligence on paedophiles and terrorists without compromising the privacy of users. Facebook apparently rejected the idea, which appears to be similar to one outlined here. Instead, the tech state’s executives are decrying such requests as Orwellian. 

Microsoft: Workers’ rights

While many tech employees worked from home during the height of the coronavirus pandemic, the opposite was true for some Microsoft workers. According to Kristen Roby Dimlow, a corporate vice president at the company, employees working at Microsoft data centers also slept there to ensure that the infrastructure for online services like Microsoft Teams was maintained. As CNBC points out, data centers are not generally places where people sleep. A Microsoft spokesperson did not elaborate on how many people were LAW (living at work). 

Google: Victim protection

Google has long faced accusations that it perpetuates a “circle of slander”. Someone makes an unfounded accusation against an enemy. The accusation appears anonymously on a website that appears high in Google results for the name of the victim. The website then charges the victim thousands of dollars to take the post down. To tackle this problem, Google has created a concept called “known victims”. When a person reports to the company that they’ve been attacked on such sites, Google will automatically suppress similar content when their names are searched for. The tech can also be used to protect people whose nude photos have been published online without their consent (a big issue in our recent investigation into Pornhub).

Apple: Privacy

Apple’s new TV ads centre around privacy: reflecting Tim Cook’s belief that the issue is a key differentiator. But how far can Apple take the moral high ground? In May, the New York Times revealed that Apple had ceded control of Chinese customers’ personal data to a state-owned company. Now it’s emerged that Apple’s privacy-focused relay feature, which obscures users’ browsing history, won’t be available in China either. Private relay will also be unavailable in Belarus, Colombia, Egypt, Kazakhstan, Saudi Arabia, South Africa, Turkmenistan, Uganda and the Philippines. Will such actions widen the privacy divide between democratic and authoritarian countries?

Tencent: State control

Two new laws, one passed this week and another proposed in April, will significantly increase Chinese state control over home-grown internet giants like Tencent. The Data Security Law (effective from 1 September) gives Beijing power to control private-sector data deemed “essential” to state interests. The second proposed law, known as the Personal Information Protection Law, is modeled on the European Union’s data-protection legislation. But unlike the EU rules, the Chinese version doesn’t restrict what data the government can collect from people’s call logs and contact lists. “China’s push for data privacy strikes me as yet another move to strengthen the role of the government,” one analyst told the WSJ

And finally… The Responsible AI Forum at Waddesdon

Tortoise and Lord Rothschild held an event last week with the aim of setting out an agenda for the development and deployment of AI as a responsible technology. Keynote speakers included Masayoshi Son, founder of Softbank, Demis Hassabis, founder of Deepmind, and Helle Thorning-Schmidt, former prime minister of Denmark and co-chair of the Facebook Oversight Board – among many others.

You can check out our special Sensemaker setting out the summit’s findings here.

To take a seat at the table and become a member of the Tortoise AI Network, just click on the link and we will be in touch. 

Thank you for reading the Tech States Sensemaker. We’re trying to do something new with our tech coverage – and we’d love to hear what you think. Please email opinions, tips or stories to alexi@tortoisemedia.com or luke.gbedemah@tortoisemedia.com.

Alexi Mostrous

Luke Gbedemah