The Enshittification of Amazon

Amazon is a perfect #enshittification parable - platforms subsidize end users until they're locked in, then make life good for business customers at users' expense, until *they're* locked in, then claw back all the value they can, leaving just enough to keep the lock-in going.
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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Monopolies "grow" by making their customers and suppliers worse off. But they have to be careful about this: if it's obvious that you're using your market power to screw buyers, you can get in trouble with competition regulators.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

That's because the only part of #antitrust law that the neoliberal project left intact is "consumer welfare" - the idea that monopolies should only face enforcement when they raise prices and/or lower quality:https://t.co/tMCTAFNkOH

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

This focus on price-hikes has given monopolists a free hand to squeeze *suppliers* and *workers*, because a monopolist - from #Walmart to Amazon - can claim that squeezing your workers and suppliers is necessary to enhancing consumer welfare.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

The less you pay to produce a product, the cheaper you can price it.

When a company has a lot of seller power, we call it a monopolist. When it has a lot of buying power, we call it a #monopsonist.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

No one ever made a bestselling, family-destroying board game called "#Monopsony" so most people haven't heard of the concept. But monopsony is every bit as dangerous as monopoly, and monopsonists find it far easier to acquire market power than monopolists.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Few suppliers can afford to have even 10% of their sales disappear overnight, so a buyer who accounts for 10% of your sales can demand deep discounts and other favorable terms.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Amazon is a monopolist, but it's also a powerful, ruthless monopsonist. For example, its audiobook division, #Audible, has a 90+% market-share. It used that market-power to steal at least $100m from creators, in a scandal dubbed #Audiblegate:https://t.co/vvk30Kgfl6

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

For Europe's 800k sellers who rely on Amazon to reach their customers, the monoposony conditions are blatant and shameless. Take listing fees: Amazon's "flywheel" pitch claims that as the company grows, it achieves "economies of scale" that can lower its cost basis.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

But Amazon's listing fees haven't changed, even as the company undewent explosive EU growth (remember, sellers whose Amazon fees exceed their margins have to pass those fees onto buyers, and raise their prices everywhere else to satisfy the Most Favored Nation requirement).

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Amazon books the revenues from these fees - and other junk-fees it extracts from sellers - in #Luxembourg, an EU member nation that provides a tax haven to multinational businesses that want to maintain the fiction that they operate their businesses out of the tiny kingdom.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

There is sharp competition in the EU to offer the most servile, corrupt environment for multinationals, and Luxembourg is a leader, along with Cyprus, Malta and, of course, Ireland:https://t.co/qISUEccEZx

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

But at least listing fees haven't gone up, unlike other fees, which have climbed sharply. Amazon falsely claimed that its additional revenues from fees were the result of growth by independent sellers, which Amazon pegged at 65%.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Later, the company admitted that the true growth figure was 22%. Meanwhile, fees are up *85%*.

The true growth figure might be lower still. Amazon refuses to show the math behind its growth figures, or even say which sellers and sales are included in the figure.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

The SOMO report cites research by @juokaz of the e-commerce research firm @MarketplacePuls, who finds that sellers are now giving *50%* of their gross revenues to Amazon, an increase of 10% over the past five years across the whole EU.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

However, different EU (and ex-EU) countries have experienced much steeper increases in fees - in the UK, fees have nearly doubled (up 98%), and in France, fees more than doubled (up 115%).

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Many of these increases come from the #FulfilmentByAmazon (#FBA) program, which is promoted as an optional service, but which is really obligatory.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Careful research shows sellers who warehouse, pack and ship their own goods get banished to the depths of search results, even if they have ratings, costs and times competitive with FBA. This is especially true of the "buy box" that lands at the top of most searches.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

The company refuses to disclose how buy box positioning is determined, but 90% of products in the buy box pay for FBA.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Amazon has used #excuseflation to hike its FBA prices, blaming higher energy prices for price hikes that predated the Russian invasion of Ukraine, and blaming covid for price hikes that predated the pandemic.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Italy's competition authority did yeoman service in uncovering the sleaze of FBA, publishing an investigation showing how Prime and buy box made the notionally "optional" FBA into a must-have for merchants, meaning that Amazon can jack up FBA prices without losing business.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Another notable source of gouging came in response to the UK and France adopting digital services taxes, which were meant to make up for the tax-base erosion enabled by Luxembourg's flouting of EU tax law.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Amazon passed these taxes through to its merchants, without seeing a decrease in the number of sellers using its platform - an unmistakable sign of market power. If you can raise prices without losing customers, then, by definition, your customers have nowhere else to go.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

I've previously written about how Amazon's $31b/year "advertising" market isn't really advertising - rather, it's a payola scheme that auctions off the top of a search-listing to the merchant with the most to spend:https://t.co/lg2CmrycEY

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

This is how you get a simple search like "cat beds" returning results whose first screen is 100% ads, and whose next five screens are 50% ads, many of them for *dog* products:https://t.co/yG3oEWPTDy

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Auctioning off search results means that every time you search for something you want, you have to wade through screen after screen of listings for products whose vendors spent more on advertising, leaving less to spend on making quality goods.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

This is as true in the EU as it is in the US. The report shows that European merchants are required to spend ever-larger sums to show up in results for the exact products they sell, leaving them with a choice between making less money, raising prices, or skimping on quality.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

But even the "winners" of Amazon's gladiatorial combat among vendors still lose. Amazon uses an automated product removal process to delete some or all of a merchant's products, without warning or explanation, and no one at Amazon will explain what a merchant did wrong.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

That remains true even if a vendor pays for Amazon's "marketplace consultant" service - ask these paid Virgils why you've been cast into Amazon's pit, and they'll shrug their shoulders (and bill you for it).

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

And even if you can navigate the junk fees, the Kafka-as-a-service removals, the war of all sellers against all sellers for search primacy...you still lose.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Merchants told SOMO that a product that survives Amazon's gauntlet is likely to be cloned by Amazon and sold as an Amazon Basic or other house-brand product.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Amazon doesn't charge itself 50% junk fees, so it can always underprice the vendors it knocks off, and give its own products permanent top-of-search placement.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Amazon founder Jeff Bezos once testified under oath before Congress that this doesn't happen - and then refused to return to Congress when multiple vendors showed evidence that he'd lied:https://t.co/VyYlZcGp05

He *definitely* lied:https://t.co/fYNv3nIWXf

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Amazon has faced investigations and enforcement in the EU over this, and settled a claim with a promise to "not use non-public seller data to compete with sellers."

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Given the company's record of broken promises on this score and the difficulty of catching them cheating, it's pretty naive to think they'll stick to this.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

The report quotes Thomas Höppner, a lawyer who has represented small businesses that Amazon screwed over. Höppner says the problem is that the EU evaluates Amazon's bad deeds on a "case-by-case" basis, missing the big picture.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

> By the time one identified problem was seemingly solved, Amazon had long made amendments elsewhere with the same effect. We require a more holistic approach that considers the entire Amazon ecosystem and the various interdependencies within.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

But the EU's enforcement approach is about to change significantly. The EU just passed the #DigitalMarketsAct (#DMA), which imposes a bunch of obligations on Amazon:

* allowing sellers to offer their products on other marketplaces at different prices (Article 5.3),

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

* not obliging business users to pay for one of its services in order to use its platform (Article 5.8),

* limiting the way Amazon uses non-public seller data to compete with them (Article 6.2)

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

* preventing Amazon from giving top billing in search results to its own products or sellers that have acquired extra Amazon services (Article 6.5)

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

The report concludes with a suite of recommendations for improving EU enforcement. First, they argue for a return to traditional competition law, abandoning the "consumer welfare standard" that is so friendly to monopsonies and their abuses of suppliers and workers.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

They call for a probe into Amazon's Most Favored Nation deals ("fair pricing policy"), the practice of sponsoring search results, and spiraling fees. They want the EU to adequately fund DMA enforcement, with "measures to prevent regulatory capture."

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

And they want Amazon to publish clear explanations for how search results, buy box placement, and other practices hidden behind a veil of secrecy.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Amazon will doubtless claim that disclosing how those systems work will make it easier for spammers and scammers to game their way to the top of search results.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

We should be skeptical of this claim - content moderation is the last domain where anyone takes the bankrupt idea of #SecurityThroughObscurity seriously:https://t.co/UFSRMhAiOs

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Finally, the report calls for breaking up Amazon, forcing it to choose between being a platform seller or a platform user, calling this the only way to "prevent the conflicts of interest between its role as a platform intermediary, seller, and service provider."

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

The technical term for this measure is "#StructuralSeparation" - a rule that bans platform companies from competing with their business customers.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

This is the principle at work in the US bipartisan #AMERICAAct, which would force Google and Meta to spin off the parts of their ad-tech business that put them in a conflict of interest.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Right now, #Googbook represents both publishers *and* advertisers, while operating the marketplace where ad sales take place, and they take 51% out of every ad dollar:https://t.co/wlkgemxHdR

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Structural separation hasn't really been applied in the US for a generation, but it's gained currency in recent years, for the obvious reason that the referee can't also own one of the teams.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

I was in Germany last week speaking to regulators and politicians, and they espoused skepticism that the EU would embrace structural separation anytime soon.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

But they were wrong! Today, the European Commission announced plans to force Google and Meta to sell off their conflict-of-interest ad-tech lines of business, mirroring the provisions of the US AMERICA Act:https://t.co/uc87cxC7Mx

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

Structural separation really is the policy we need. It's amazing that lawyers who'd never argue a case in front of a judge who was married to the plaintiff will defend the idea that Amazon can fairly operate a marketplace where they compete with other sellers.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

With Amazon dominating online sales, and with in-person retail cratering, Amazon's decisions have the power to determine the outcome of whole swathes of Europe's economy.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023

This is the "planned economy" that the EU claims it detests and seeks to prevent - but it's an economy planned by distant autocrats in a Seattle boardroom, for the purpose of extracting the surpluses needed to launch an endless procession of penis-rockets.

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— Cory Doctorow @pluralistic@mamot.fr Red Team Blues (@doctorow) June 14, 2023