If competition would kill Amazon Prime, maybe it’s not that great | Opinion

Among the co-sponsors of the American Innovation and Choice Online Act is Missouri Sen. Josh Hawley

June 13, 2022 5:45 am

If Sen. Amy Klobuchar’s bipartisan bill becomes law, Amazon won’t be able to monopolize shipping for third-party sellers, which account for about half of the items sold on the site (Getty Images).

Amazon and its lobbyists are claiming that passing Sen. Amy Klobuchar’s Big Tech bill would lead to the end of Prime, or at the very least, significantly impair the service. This is such an absurd, desperate lie.

What the bill actually does is force Amazon to compete in ways that will benefit consumers and small businesses. 

The American Innovation and Choice Online Act, which is expected to come to the Senate floor for a vote in the coming weeks, bans self-preferencing. It bars Amazon, Google and other tech giants from giving advantages to their own goods and services — like top billing in search results — ahead of objectively better offerings from other businesses.

The bill is simple, bipartisan, wildly popular with voters, and a good first step toward reining in Big Tech.

It’s also good for Prime members and the many small businesses that have to sell on Amazon’s site. That’s because, under the bill, Amazon would actually have to compete to handle package delivery for those businesses and their Prime customers. 

Right now, Amazon forces its captive base of sellers to use Amazon’s own shipping and storage services. If sellers don’t, then their items aren’t eligible for Prime, which means their sales plummet. Many of these businesses would prefer to use another shipper — like UPS or the U.S. Postal Service — because it would be cheaper or better for their items. But they’re stuck with Amazon’s fulfillment, even as Amazon keeps jacking up the fees it charges them. 

Klobuchar’s bill would change this. If it passes, Amazon won’t be able to monopolize shipping for third-party sellers, which account for about half of the items sold on the site. Sellers will get to choose any shipper that can meet the delivery time frame.

Amazon claims this would lead to late packages and “the degradation of the Prime experience.” This is so absurd — like burst-out-laughing absurd. Here’s why:

First, UPS, FedEx and the Postal Service all have on-time delivery rates exactly in-line with Amazon. In fact, until very recently, Amazon relied on these other carriers for Prime deliveries. Yet suddenly, Amazon now claims with a straight face that the companies that made Prime what it is are somehow no longer able to do 1- and 2-day delivery. This isn’t true. 

What is true is that until 2019, Amazon had something called Seller Fulfilled Prime (SFP). Sellers who consistently met Prime delivery times using other shippers got the Prime label on their items. This worked quite well. 

But in 2019 Amazon moved to shut down SFP. It intimidated and strong-armed sellers into using Amazon’s own shipping service instead. More than 84% of the top 10,000 sellers on Amazon’s site now use its fulfillment services. They have no choice. And, as a result, Amazon’s market share in shipping has soared past FedEx and will soon overtake UPS and the Postal Service as the biggest package shipper in the U.S.

Nothing has changed over at UPS or the Postal Service. What changed is that Amazon decided that it wanted to take over the package delivery market. And since Amazon doesn’t have to compete, it can raise its storage and shipping fees at will. This is bad for the small businesses that have to sell on Amazon. And it’s bad for Prime members who ultimately pay higher prices for the stuff they buy.

And do you know who else gets shortchanged in Amazon’s play for continental logistics domination? Warehouse workers and delivery drivers. Amazon warehouse and delivery jobs are notoriously punishing, but those dangerous jobs have spread like wildfire because of Amazon’s monopoly scheme. Meanwhile, competing fulfillment companies such as UPS and the Postal Service employ unionized workforces with better pay and benefits and safer working conditions than those commonly found at Amazon warehouses.

Klobuchar has pulled together a dozen bipartisan co-sponsors of the American Innovation and Choice Online Act to block Amazon and the other tech giants from this kind of self-preferencing and market manipulation, including Sens. Chuck Grassley, R-Iowa; Cory Booker D-N.J.;  Josh Hawley, R-Mo.; and Mark Warner, D-Va. It is rare to witness this level of consensus in Washington, and that portends well for the bill, the small businesses and third-party sellers on Amazon, and Amazon shoppers. 

And while the legislation may feel like the end of something to Amazon, it is not. It is not the end of Prime nor even “the Prime experience.” It could be the end of some of the most nakedly monopolistic tactics used by Big Tech. 

Now that is one happy ending we could all smile about.

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Stacy Mitchell
Stacy Mitchell

Stacy Mitchell is co-executive director of the Institute for Local Self-Reliance and the author of several in-depth reports about monopoly power and Amazon, including most recently, Amazon’s Toll Road.