mostlysignssomeportents:

In 2017, law student Lina Khan shifted the debate on Amazon and antitrust with a seminal paper called Amazon’s Antitrust Paradox, which used Amazon’s abusive market dominance to criticize the Reagan-era shift in antitrust enforcement,
which rewrote the criteria for antitrust enforcement, so that antitrust
no longer concerned itself with preventing monopoly, and only focused
on “consumer harm” in the form of higher prices.

Khan’s paper jumpstarted an important intellectual shift in the global
perception of antitrust and Big Tech. For one thing, it revealed the
thinness of the argument that Big Tech got big because of “network
effects” or “first mover advantages, arguing instead that Big Tech’s
concentration was the result of utterly mundane monopolistic tactics that would be instantly recognizable to Brandeis, Carnegie and other players from the Gilded Age and the age of trustbusting.

Since then, other scholars have performed similar analysis on Big Tech giants like Facebook.

One important focus of this critique is the idea of “monopsony”, when a single entity is the only buyer in a market, meaning that it can put pressure on suppliers, contractors and other parts of the value chain, distorting markets.

Now, Fordham University law student Shaoul Sussman has connected the idea of monopsony with the idea of “consumer harm” in a new paper for the Journal of Antitrust Enforcement: “Prime Predator: Amazon and the Rationale of Below Average Variable Cost Pricing Strategies Among Negative-Cash Flow Firms.

Sussman’s argument is basically that even if you accept the Reaganist
version of anti-trust where the only thing that matters is "consumer
harm,” then you should still be worried about Amazon’s monopsism,
because when Amazon squeezes profits at the expense of its suppliers,
those suppliers lower the quality of their goods in order to stay
profitable despite Amazon’s profit-taking.

Sussman points out that Amazon has been unprofitable (on paper) since
its inception, but it continues to grow, in defiance of market
orthodoxy, which predicts that companies that pursue predatory pricing
schemes where they subsidize each sale will eventually run out of money
and investors, but that this hasn’t happened to Amazon. Sussman
hypothesizes that this the result of Amazon’s monopsony, and that Amazon
can get a discount on its predatory pricing by forcing suppliers to
foot part of the bill.

Sussman proposes regulatory oversight of big companies that grow while
consistently losing money, in the name of preventing the consumer harm
of lowered quality. It’s a really fascinating argument, because it makes
the case that the ideologues who’ve dismantled antitrust over the past
40 years should, by their own lights, regulate companies even when those
companies aren’t raising prices.

But for my money (so to speak), the more important part of the argument
is how it shows that market concentration is harmful even when prices
aren’t going up. If suppliers are getting squeezed and cutting wages,
reducing quality, and cutting costs (through reduced workplace safety,
reduced employee benefits etc), these social harms that are accruing to
people other than consumers tells you that antitrust needs a focus
beyond mere consumer issues.

I’m excited by all the work that these young legal and economic scholars
are putting into the reframing of pre-Reagan antitrust concerns as
“consumer harms” but ultimately, our future rests in abolishing the
“consumer harm” orthodoxy and returning to the idea that market
concentration is always suspect, even when no one can point to prices going up.

https://boingboing.net/2019/05/13/consumer-harms-everywhere.html