Jeff Bezos Mocks France

(BIG issue 8-27-2019)

Hi,

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Some house-keeping. I’m going to be heading to Israel this week for a bunch of meetings and a speech, and then I’ll be on vacation the next week. So this will be the last issue of BIG for until the second week in September, unless I get super-inspired. Also, this issue is late, because I’ve been trying to figure out a monopoly angle to the fires in Brazil. There is one, I just don’t understand the meat industry well enough to construct a coherent story. So instead I’m going to write about a different Amazon, that of Jeff Bezos, and how he’s reacting to a French proposal to tax his company.

(Thank you to AssistedSeniorLiving.net for the photo)

Jeff Bezos Mocks France

Those of you who have read BIG for awhile know that I pay a lot of attention to foreign enforcers. I wrote up how the Russians are actually effective at protecting competition in search, whereas the EU is not. I’m also intrigued by Rod Sims in Australia, who is likely to take significant action.

My favorite enforcer in Europe is the German head of their cartel office, Andreas Mundt. Mundt has been the most aggressive antitrust enforcer in the world when it comes to Facebook. In February, his office attacked the core of its targeted advertising program, ruling “that the company stop automatically sharing data among the services it owns, like Instagram and WhatsApp, or websites that use its “like” and “share” buttons.”

This ruling wasn’t just about privacy. Data is a key input in advertising, so preventing Facebook from using data to undermine its competitors who sell advertising would have a big impact on the market. Mundt is also a fighter. A German court just ruled against Mundt using the rationale that Facebook’s collection of data isn’t a competition problem. And Mundt is appealing.

Mundt, however, is on the leading edge of enforcement. Many European officials are, like center-left Americans in the antitrust bar, still libertarian-leaning, though sort of embarrassed about it. The most recent example of European unwilling to confront power happened last month when the French decided to impose a tax on big tech instead of restructuring market power directly. The tax applies to companies with revenue of higher than 750 million euros and 25 million euros in France.

So what did Jeff Bezos do? His response is almost comical.

Virginie Lemaire recently opened her email to an unsettling message from Amazon: fees for sellers like her in France will be increasing by 3%.

Lemaire, a single mother of two, started her jewelry company Perle d’un jour in 2011. Trained as an artisan jeweler, she makes handmade custom pieces like necklaces, bracelets and rings.

The French small business owner started selling her products on Amazon two years ago and now generates one-fifth of her sales from the e-commerce giant’s marketplace.

So it was an unwelcome surprise when she found out Amazon would be raising seller fees for her and thousands of other small and medium-sized French businesses starting in October. The reason the company cited was simple: a 3% digital tax passed by the French government in July.

Yup, Amazon just passed the tax along to French businesses. That’s monopoly power, baby. Bezos can simply impose private taxes, pretty much at will. The idea of taxing monopolies, instead of breaking them up, is coming from those who like centralized power but are uncomfortable with American control of it.

Another example of this philosophy is the just leaked documents of plans to create a $100 billion European sovereign wealth fund to build European competitors to American and Chinese big tech.

The officials identify Google, Apple, Facebook, Amazon, Microsoft, Baidu, Alibaba and Tencent among the companies Europe needs to rival. “Europe has no such companies,” their document notes.

Europeans are embarrassed they don’t have large tech companies, instead of recognizing the leverage this gives them. Financing competitors to monopolists isn’t likely to work, and it will also violate trade commitments. And conceptually it’s problematic because it mis-frames the problem as Europeans not being innovative enough to compete. But Europeans are just as innovative as anyone else. The problem is that European markets, like markets dominated everyone by big tech, are monopolized by centralized institutions.

This philosophy also misframes leverage. Europe is not some weak set of feckless states who must bow before Google or Amazon. These are countries with sovereign power, and Amazon and Google need European markets a hell of a lot more than these countries need Amazon and Google. Europe should just break these guys up, as Mundt is effectively doing with Facebook.

The reason these officials do not want to break up big tech monopolies is that they don’t fear concentrated power, they just believe that only European leaders should be able to concentrate it. Similarly, some on the left in the U.S. just do not care that Google and Facebook have monopolized advertising, thinking as they do that advertising is a dirty business. They prefer publicly financed media, a sort of ‘we like centralized power but the people in charge have to be nice people.’ This preference for centralized power goes all the way back to Teddy Roosevelt and the New Nationalists, so the debate isn’t new.

Jeff Bezos’s almost casual ability to ward off France’s digital tax shows, however, that the philosophy of ‘concentrate power but in nice peoples’ hands’ is conceptually flawed. The only way to deal with big tech is by going at their monopoly power directly. Doing so will requires more enforcers within the European regulatory apparatus adopting Mundit’s creativity and aggressiveness, and more importantly, his philosophy that concentrations of private power are intrinsically a threat to liberty.

One of the key officials who has to change her mind is Margareth Vestager, the head of the European Competition Authority (though for how much longer it’s not clear). Vestager is somewhat assertive and gets big fines from Google, but on a conceptual level she basically accepts the thinking of big tech lobbyists. This attitude came out when she was asked about Elizabeth Warren’s plan to break up big tech. She said she opposes it, and explained why.

We’re dealing with private property, businesses that are built and invested in and become successful because of their innovation. So to break up a company, to break up private property, would be very far-reaching. And you would need to have a very strong case that it would produce better results for consumers in the marketplace than what you could do with sort of more mainstream tools.

The idea that big tech is private property, as opposed to state chartered corporations, and that these companies have succeeded via innovation, as opposed to market power and merger policy, is a narrative that leads to concentration. It’s not, incidentally, how these companies see themselves. Here’s Mark Zuckerberg:

In a lot of ways Facebook is more like a government than a traditional company. We have this large community of people, and more than other technology companies we’re really setting policies.

The question for enforcers globally is boiling down to whether we govern ourselves as democracies, or whether we are governed by men like Mark Zuckerberg and Jeff Bezos (or far far worse, Xi Jinping). In that, Europeans and Americans have an alignment of interest in taking on Google, Facebook, Amazon, (and Chinese big tech giants). Europe does not need a European Jeff Bezos to compete with Jeff Bezos. They need Jeff Bezos not to have that power in the first place.

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cheers,

Matt Stoller