Canada's Condominium Magazine

Report warns that Amazon stifles competition, threatens communities

Chances are that you will do at least some of your Christmas shopping online this year, and that will likely mean at Amazon. One dollar in every two spent by Americans online goes to Amazon, and it can be assumed a similar amount is spent by Canadians. Most people no longer bother to search when they want to buy something online; they go straight to Amazon. The online retailer sells more books, toys and soon apparel and consumer electronics than any other retailer, online or off. It is also investing heavily in the grocery business. Amazon now rivals Walmart in the retail sector and is growing fast. Not a bad growth story for what started out in 1995 as an online book seller.

This might be seen by some as a great success story, but a report from the Institute for Local Self-Reliance ((ILSR) tales a much different view. It sounds a shrill warning about the growing giant that is Amazon. The report’s title gives a good sense of its tone: Amazon’s Stranglehold: How the Company’s Tightening Grip Is Stifling Competition, Eroding Jobs, and Threatening Communities.

The report says that besides its retail operations Amazon also processes payments for other e-commerce businesses, makes restaurant deliveries, rivals HBO and NBC for television and movie production and manufactures thousands of products. It is working on its own autonomous car, and employs more than 1,000 people in artificial intelligence. Its “tentacles” reach into every facet of our lives. The report quotes a New York University professor of business, who said, “Everything you buy, starting with your weekly groceries, will be flowing through one pipe called Amazon.”

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Why does this matter? People obviously like the convenience of shopping at Amazon, and now that they have grown used to doing so, there’s no turning back. But the report’s authors see a much darker vision. Amazon’s dominance comes with “high costs” which include “eroding opportunity and fueling inequality, and it’s concentrating power in ways that endanger competition, community life, and democracy.”

How is this possible? The report’s thesis, which is clearly influenced by the work of urbanologist and long-time Toronto resident Jane Jacobs, not to mention the early labour movement, is that Amazon destroys the age-old relationship between commerce and place. You don’t have to go anywhere to shop at Amazon, and this, the report claims, has played a “key role” in the wave of retail vacancies and dying malls that is “sweeping” the country. More than 135 million square feet of retail space had become vacant by 2015 as a result of Amazon’s activities, it estimates.

The loss of local businesses as retail spending shifts to Amazon also means the loss of a group of people that is critical for the health of place: Small business owners. While Amazon, and companies of similar scale, operate many hundreds of miles and layers of hierarchy away from most of the people they serve, small business owners are deeply connected with their employees, their customers, and their communities. Those connections come with tangible benefits.

One direct impact of this is a drying up of property taxes, the largest single source of revenue for states and municipalities, used to build schools and hospitals. Amazon, the report says, pays no property taxes on “prime commercial properties,” and owns no property at all in twenty states. It collects no sales tax in twenty states either. In fact, Amazon has been on the receiving end of “at least” $613 million in public subsidies for dozens of large fulfillment facilities built between 2005 and 2014. The company uses “elaborate” tax schemes to lower its tax rate even further.

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Empty mall food court is a symptom of economic dislocation caused in part by the rise of online shopping.

On top of that, according to the ILSR report, the company pays workers an average of 26 per cent less than a “living wage” and 22 per cent less than the average warehouse wage in its US facilities. And the catalogue of negatives goes on and on: reduced competition in the retail sector; a less diverse, less innovative economy; fewer opportunities for businesses to start and grow; less choice for consumers; fewer jobs in the economy and lower wages.

The report’s co-author, Stacey Mitchell, said that in their analysis, Amazon represents “nothing less than a new wave of economic dislocation and loss of local ownership following the earlier collapse of manufacturing and small business that devastated so many regions of the country.”

But Amazon, the report concludes, need not be the only model of e-commerce as the digital revolution continues. In fact, say the authors, Amazon resembles more the exploitative Robber Barons of the nineteenth and early twentieth century than a modern, democratic enterprise.

They call on the federal government to remember, and enforce, the anti-trust laws that were enacted in response to unchecked corporate power decades ago. Amazon should even be broken up in order to prevent anti-competitive conflicts of interest. Workers should unionize to improve the “grueling” conditions in which they work, and governments need to rethink the merits of giving “lavish subsidies” and tax advantages to Amazon when it sets up shop in their jurisdictions. Amazon neither needs a handout nor creates the economic benefits that would warrant one, they conclude.

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