Amazon Is Not a Monopoly and Should Not Be Regulated

Amazon Is Not A Monopoly and Should Not be Regulated

Business Writing and Research

BU.001.620.53.

Rensi Zhang

July 28, 2014

Amazon Is Not A Monopoly and Should Not be Regulated

     Recently, Amazon has been widely criticized by the media for "abusing" its "monopolistic" power to control the book market. Since February this year, Amazon has been using certain strategies against Hachette, one of the five biggest publishers. The "war" between Amazon and Hachette is simple as pie: Amazon wants to get a bigger share of e-book market, while Hachette holds its ground, stating that Amazon is trying to take away too much of its profits.

     Authors involved also complain that certain strategies used by Amazon, such as raising prices, lengthening shipping time, and removing buy buttons, make it more difficult for customers to order Hachette titles, thus leading to a decrease in its book sales.

     If you search "Amazon" and "monopolistic" on the internet, you'll find countless articles. Charlie Stross (2014) writes on his blog that "Amazon very nearly gained a monopoly of e-book sales; they're still around the 85-90% mark in the UK, and peaked at over 80% in the USA." Concerned that Amazon may become a monopoly in the future, Rod Dreher (2014) writes that "once they've driven everybody else out of business, there will be nothing to stop Amazon from raising its prices without fear of competition" (p.15). Some authors go even further to push for government regulation.

     Frankly speaking, I think these authors are worrying too much and if they had googled "monopoly" before they wrote these articles, they would find that "monopoly is a situation in which a single company owns all or nearly all of the market for a given type of product". In addition, it would only happen in the case that "there is a barrier to entry into the industry" and "there are no close substitutes". The Oxford English Dictionary defines monopoly thus: "the exclusive possession or control of the supply of or trade in a commodity or service."

     In terms of the definition, we can easily tell that Amazon is not a monopoly. First, it is clear that Amazon is not the only seller in the book market. Second, high barriers to entry is not the case with the book industry, because authors and publishers are free to publish and sell e-books or physical books through their own websites at whatever prices they desire. There's no patents required to enter the industry, the availability of supply is not limited, and the resources and technology are not restricted either(Susie Rodarme, 2014). Third, there're tons of close substitutes there. Those who want e-books can easily order on other online bookstores, such as Google, Apple, Barnes and Noble, and Kobo; while those who want printed books can just go to a physical bookstore or a library. And another interesting fact is that, on May 12th, just one week after Amazon removing pre-order buttons from some Hachette titles, Book-A-Million announced that the company assured its readers "Hachette titles in stock and ready to ship". Isn't that exactly the way free market is expected to work?

     As for authors who blame decreasing book sales on Amazon, I don't see sufficient evidence to support this claim, as not every Hachette title is affected by Amazon's strategies. For example, Donna Tartt's "The Goldfinch" can still be purchased in hardcover, at a 45% discount. And from the table made by Reid Calvin, we can easily refute this charge. Comparing the 100 overall bestselling print titles for weeks 17-22 in 2013 and 2014, we  find that the number of books from Hachette remained relatively flat in that group. What's more, Hachette's bestsellers are even doing better in 2014 than in 2013.

Source: Calvin Reid's calculations based on data from Nielsen Bookscan