Monopolies and Market Dominance in the “GIG” eConomy? We are Getting There!
February 19, 2018
REVIEW –
In mid-July of last year (A.D. 2017), I wrote a piece on monopolies and market dominance in the Gig eConomy, and concluded that there wasn’t any “traditional” comparability between the old and new economies, but through a hybridized analysis I did concede that monopoly and market dominance were possible, and could be easily seen when they appeared or threatened to appear.[1] I will now go out on a limb and state that I think one particular entity may well be approaching that line …. Amazon!
SCHEMA –
With specific focus on the FAAAN group of Facebook, Amazon, Alphabet/Google, Apple, and Netflix,[2] I had looked at the standard market sectors and Monopoly / Antitrust analytical frameworks and mixed the old with the new to devise a total of 5 (“five”) hybrid sectors that covered everything from farming, through manufacturing and eCommerce, to such gig economy staples as food delivery, ride-hailing, and cloud services. These 5 sectors (with each one also having several sub-sectors), were as follows:
(1) General Goods and Services Sector;
(2) Specialized Goods and Services Sector;
(3) Digital Tools, Applications, and Services Sector;
(4) Social infotainment Sector;
(5) Gig eConomy Sector.[3]
Next, selecting the Specialized Goods and Services Sector, I had included 8 (“eight”) sub-sectors as follows:
(i) Conglomerates;
(ii) Financial Services;
(iii) Food;
(iv) Health and Wellness;
(v) Information Communications Technologies;
(vi) Information Data Technologies;
(vii) Personal Services;
(viii) Shelter.[4]
ANALYSIS –
Amazon is already a conglomerate, offering Information Communications Technologies (Amazon Web Services); Information and Data Technologies (such as Amazon Echo); other Services (order fulfillment for food and beverages through Fresh and Amazon Restaurants, and for consumer products and general goods through the Amazon.com marketplace); and operating in technology, industry, and manufacturing through the many Amazon and non-Amazon branded products that it owns and regarding which it conducts research and development as through Annapurna Labs for example, or that it otherwise makes available through AmazonBasics and Amazon Private Label),[5] amongst others.[6]
One could always have suspected, but not predicted as to when, that Amazon would expand into other areas. However, within less than 8 (“eight”) months to date, we have heard or seen Amazon’s expansion announcements: further into Transportation, with its own fleet of trucks, planes, and drones destined to pickup and deliver parcels and other goods for both itself and other vendors through Shipping with Amazon (SWA);[7] further into Food, with its purchase of the organic grocer, Whole Foods Market;[8] and initially into Health and Wellness, with its announcement to partner with Berkshire Hathaway and JPMorgan Chase in establishing a healthcare entity to “create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”[9]
It being the case that transportation was already a line item (“Leisure, Property, and Transportation”) within Conglomerates,[10] and because there is no standalone category for it, Amazon gets a pass on that “existing service, line-item”. However, the Whole Foods Market purchase and the healthcare initiative represent new, “standalone divisions” under the schema, and therefore expansions into further sub-sectors under General Goods and Services, as shown.
When one considers the existing ownership by Mr. Bezos of the Washington Post newspaper,[11] under Information Communications Technologies (publishing and printed media), the presence of Amazon Echo within Personal services (virtual assistants), and Amazon Web Services, itself (Information and Data Technologies), we can more clearly see that Amazon and its Chief Executive are now substantially present in 6 (“six”) of the 8 (“eight”) subsectors for Specialized Goods and Services.
Those substantially untouched subsectors, are: (ii) Financial Services; and (viii) Shelter.
If Amazon were to delve further into (or grow its volume or revenue substantially in) banking than its payment services and debit cards (Amazon Cash), or its small business loans that surpassed $3 billion in 2017;[12] or if it bought an established “brick and mortar” or “online” financial services entity outright in the United States or Canada;[13] or if it leveraged block chain technology to form a standalone financial services entity – whether by itself or with one or more partners and regardless of whether it was in the United States or Canada,[14] it would have become firmly and undeniably entrenched in that financial services sector.
Also, if Amazon were, for example, to purchase a major builder or cruise and travel operator, a major hotelier or landlord, or a major building services and maintenance provider,[15] it would have become firmly and undeniably entrenched in that shelter subsector.
Hence, we would see complete sector presence, “sector octo-occupation”, or “sector octopedence”, and the potential for a monopoly – or at the very least a modern Chaebol,[16] Keiretsu,[17] or perhaps even something more.[18]
SUMMARY –
As I had said in the July, 2017 article:
“It is only if, and when, well-funded market operators start to occupy whole sectors (in the new schema laid out here) … that we should start to worry about abuse of dominant positions, monopolies, and over-concentration in the control of personal data”.[19]
Some readers may ask how mere presence in a subsector can equate to monopoly or lead to a dominant market position and its abuse? The answer is that the whole is greater than the sum of its parts, and when a small, mid-size, or large entity is supported by a parent company’s constantly renewable cash hoard, raw analytical and computing power, intimate knowledge of consumer tastes and purchase histories, ancillary and mutually supporting businesses, and a first mover advantage in synergizing all of these, you may have a monopoly right from the gate if others cannot compete with their pricing and service terms, enter the market with a fighting chance, or nimbly adapt and persist once it moves to match or better them at what they do, and what they did, and how.
PREDICTION –
Admittedly, as one notable commentator has said, traditional economic analysis will still find no monopoly or antitrust red flags, or market dominance in the FAAAN entities, as yet,[20] and some readers may disagree with my analysis and conclusions. But, let’s watch this space and see whether or not Amazon and its CEO make decisive and deeper moves into either or both of “Finance” and “Shelter” as outlined above, and sometime within the next 4-6 months, or at least before the close of calendar 2018.
I really think and predict, that we will see such a decisive move or moves from Mr. Bezos and Amazon. But, only time will tell, for certain.[21]
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Author:
Ekundayo George is a lawyer and sociologist. He has also taken courses in organizational and micro-organizational behavior, and gained significant experience in regulatory compliance, litigation, and business law and counseling. He has been licensed to practise law in Ontario and Alberta, Canada, as well as in New York, New Jersey, and Washington, D.C., in the United States of America. See, for example: http://www.ogalaws.com. A writer, blogger, and avid reader, Mr. George has sector experience in Technology (Telecommunications, eCommerce, Outsourcing, Cloud), Financial Services, Healthcare, Entertainment, Real Estate and Zoning, International/cross-border trade, other services, and Environmental Law and Policy; working with equal ease and effectiveness in his transitions to and from the public and private sectors. He is a published author on the National Security aspects of Environmental Law, has represented clients in courts and before regulatory bodies in both Canada and the United States, and he enjoys complex systems analysis in legal, technological, and societal milieux.
Trained in Legal Project Management (and having organized and managed several complex projects before practising law), Mr. George is also an experienced negotiator, facilitator, team leader, and strategic consultant – sourcing, managing, and delivering on complex engagements with multiple stakeholders and multidisciplinary teams. Team consulting competencies include program investigation, sub-contracted procurement of personnel and materials, and such diverse project deliverables as business process re-engineering, devising and delivering tailored training, and other targeted engagements through tapping a highly-credentialed resource pool of contract professionals with several hundred years of combined expertise, in: healthcare; education and training; law and regulation; policy and plans; statistics, economics, and evaluations including feasibility studies and business cases; infrastructure; and information technology/information systems (IT/IS) – also sometimes termed information communications technologies (ICT). See, for example: http://www.simprime-ca.com.
Hyperlinks to external sites are provided to readers of this blog as a courtesy and convenience, only, and no warranty is made or responsibility assumed by either or both of George Law Offices and Strategic IMPRIME Consulting & Advisory, Inc. (“S’imprime-ça”) including employees, agents, directors, officers, successors & assigns, in whole or in part for their content, accuracy, or availability.
This article creates no lawyer-client relationship, and is not intended or deemed legal advice, business advice, the rendering of any professional service, or attorney advertising where restricted or barred. The author and affiliated entities specifically disclaim and reject any and all loss claimed, no matter howsoever resulting as alleged, due to any action or inaction done in reliance on the contents herein. Past results are no guarantee of future success, and specific legal advice should be sought for particular matters through counsel of your choosing, based on such factors as you deem appropriate.
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[1] Ekundayo George. Monopolies and Market Dominance in the “GIG” eConomy: What Might These Look Like / Are We There Yet? Posted July 16, 2017 on ogalaws.wordpress.com. Online: >https://ogalaws.wordpress.com/2017/07/16/monopolies-and-market-dominance-in-the-gig-e-conomy-what-might-this-look-like-are-we-there-yet/<
[2] Id, at Introduction.
[3] Id, at Sectors (Specialized Goods and Services Sector).
[4] Id, at Specialized Goods and Services Sector (Subsectors).
[5] Ibid. Under this schema, Amazon has therefore occupied all 5 of the conglomerate sub-elements or variants. See e.g. Shareen Pathak. In 2018, Amazon will turn to private label goods. Posted December 29, 2017 on digiday.com. Online: >https://digiday.com/marketing/2018-brand-amazon-will-turn-private-label/< See also Leon Doitscher. Why Amazon Paid $350 Million for Annapurna Labs. Posted January 26, 2015 on medium.com. Online: >https://medium.com/chasing-buzzwords/why-amazon-paid-350-million-for-annapurna-labs-9026527d3fb9<
[6] Tara Johnson. The Complete List of Amazon’s Private Label Brands. Posted July 5, 2017 on cpcstrategy.com. Online: >http://www.cpcstrategy.com/blog/2017/07/amazons-private-label-brands/<
[7] Jack Roberts. Amazon Moves to Launch Its Own Delivery Fleet. Posted February 12, 2018 on truckinginfo.com. Online: >http://www.truckinginfo.com/channel/fleet-management/news/story/2018/02/reports-amazon-moves-to-launch-its-own-p-d-fleet.aspx<
[8] Sarah Butler and Zoe Wood. Amazon to buy Whole Foods Market in $13.7bn deal. Posted June 16, 2017 on theguardian.com. Online: >https://www.theguardian.com/business/2017/jun/16/amazon-buy-whole-foods-market-organic-food-fresh<
[9] Tom Murphy – The Associated Press. Amazon to create new health-care company with Berkshire Hathaway, JPMorgan. Posted January 30, 2018 on thestar.com. Online: >https://www.thestar.com/business/2018/01/30/amazon-to-create-new-health-care-company-with-berkshire-hathaway-jpmorgan.html< This quotation in the article headline was attributed to Jamie Dimon, the Chairman and CEO of JP Morgan Chase. Also according to the article, these three companies have a combined U.S. workforce of approximately 1 million, and the U.S. employer-sponsored healthcare market covers some 167 million employees.
[10] Ekundayo George. Monopolies and Market Dominance in the “GIG” eConomy: What Might These Look Like / Are We There Yet? Posted July 16, 2017 on ogalaws.wordpress.com. Online: >https://ogalaws.wordpress.com/2017/07/16/monopolies-and-market-dominance-in-the-gig-e-conomy-what-might-this-look-like-are-we-there-yet/<
[11] Monica Nickelsburg. Washington Post profitable and growing for two years under Jeff Bezos’ ownership. Posted January 9, 2018 on geekwire.com. Online: >https://www.geekwire.com/2018/washington-post-profitable-growing-two-years-jeff-bezos-ownership/<
[12] By Jeffry Pilcher. Amazon Bank: Will Banking’s Worst Nightmare Come True in 2018? Posted January 2, 2018 on thefinancialbrand.com. Online: https://thefinancialbrand.com/69436/amazon-bank/<
[13] Ibid.
[14] See generally World Economic Forum. Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services. Published August 22, 2017 on weforum.org. Online: >https://www.weforum.org/reports/beyond-fintech-a-pragmatic-assessment-of-disruptive-potential-in-financial-services<
[15] Amazon Hub, is actually a locker system that Amazon pays landlords to host with a one-time fee, as a means of facilitating and further securing its package deliveries to customers. Should the payments be reversed and become an “As a Service” offering or otherwise require some periodic fee to Amazon, then yes, Amazon will become the landlord for that limited purpose. See generally Laura Kusisto. Amazon and Big Apartment Landlords Strike Deals on Package Delivery. Posted October 17, 2017 on foxbusiness.com. Online: >http://www.foxbusiness.com/features/2017/10/17/amazon-and-big-apartment-landlords-strike-deals-on-package-delivery-update.html<
[16] Wikipedia. Chaebol. Posted on Wikipedia.com. Online: >https://en.wikipedia.org/wiki/Chaebol<
[17] Wikipedia. Keiretsu. Posted on Wikipedia.com. Online: >https://en.wikipedia.org/wiki/Keiretsu<
[18] I am toying with the words “NeoRetsu” (new age Keiretsu), or “IchiBol”, because “ichi” means “number one”, in Japanese, and IchiBol just so happens to combine both the Korean and Japanese languages, and both business concepts: the Chaebol as a family-owned business with centralized management by family members, and the Keiretsu as a family of businesses with professional managers, centred on a core bank (or a money machine).
[19] Ekundayo George. Monopolies and Market Dominance in the “GIG” eConomy: What Might These Look Like / Are We There Yet? Posted July 16, 2017 on ogalaws.wordpress.com at “Summary” Online: >https://ogalaws.wordpress.com/2017/07/16/monopolies-and-market-dominance-in-the-gig-e-conomy-what-might-this-look-like-are-we-there-yet/< at Summary.
[20] Greg Ip. The Antitrust Case Against Facebook, Google and Amazon. Posted January 16, 2018 on wsj.com. Online: >https://www.wsj.com/articles/the-antitrust-case-against-facebook-google-amazon-and-apple-1516121561<
[21] Ekundayo George. Monopolies and Market Dominance in the “GIG” eConomy: Regulatory Rumblings Rattle the Ranks. Posted July 7, 2019 on ogalaws.wordpress.com. Online: >https://ogalaws.wordpress.com/2019/07/07/monopolies-and-market-dominance-in-the-gig-economy-regulatory-rumblings-rattle-the-ranks/<
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