Paul Krugman: Amazon’s Monopsony Is Not O.K.

I've been harping on the lack of concern about market power since I began blogging almost 10 years ago. Nobody much listened or cared -- so this is very welcome:

Amazon’s Monopsony Is Not O.K., by Paul Krugman, Commentary, NY Times: Amazon.com, the giant online retailer, has too much power, and it uses that power in ways that hurt America. ...

If you haven’t been following the recent Amazon news: Back in May a dispute between Amazon and Hachette, a major publishing house, broke out into open commercial warfare. Amazon had been demanding a larger cut of the price of Hachette books it sells; when Hachette balked, Amazon began delaying their delivery, raising their prices, and/or steering customers to other publishers.

You might be tempted to say that this is just business — no different from Standard Oil, back in the days before it was broken up...

Does Amazon really have robber-baron-type market power? When it comes to books, definitely. Amazon overwhelmingly dominates online book sales...

So far Amazon has not tried to exploit consumers. In fact, it has systematically kept prices low, to reinforce its dominance. What it has done, instead, is use its market power to put a squeeze on publishers, in effect driving down the prices it pays for books — hence the fight with Hachette. In economics jargon, Amazon is not, at least so far, acting like a monopolist, a dominant seller with the power to raise prices. Instead, it is acting as a monopsonist, a dominant buyer with the power to push prices down. ...

So can we trust Amazon not to abuse that power? The Hachette dispute has settled that question: no, we can’t. ...

Specifically, the penalty Amazon is imposing on Hachette books is bad in itself, but there’s also a curious selectivity in the way that penalty has been applied. Last month the Times’s Bits blog documented the case of two Hachette books receiving very different treatment. One is Daniel Schulman’s “Sons of Wichita,” a profile of the Koch brothers; the other is “The Way Forward,” by Paul Ryan, who was Mitt Romney’s running mate and is chairman of the House Budget Committee. Both are listed as eligible for Amazon Prime, and for Mr. Ryan’s book Amazon offers the usual free two-day delivery. What about “Sons of Wichita”? As of Sunday, it “usually ships in 2 to 3 weeks.” Uh-huh.

Which brings us back to the key question. Don’t tell me that Amazon is giving consumers what they want, or that it has earned its position. What matters is whether it has too much power, and is abusing that power. Well, it does, and it is.