by Brad Stone
“Our investigation leaves no doubt that there is a clear and compelling need for Congress and the antitrust enforcement agencies to take action that restores competition…” wrote Cicilline in a joint statement with Judiciary Committee chairman Jerry Nadler. Among the report’s proposed remedies was splitting up Amazon and the other tech companies to eliminate conflicts of interest between their disparate lines of business, such as Amazon’s retail store and third-party marketplace, and its e-commerce and AWS divisions.
While neutral lawmakers and antitrust academics without a stake in the bitter political dogfight agreed with some of these principles, others believed such remedies sounded excessive. Splitting the company apart wouldn’t help Amazon’s sellers, partners, or customers, and there was little legal basis for shutting down private-label lines like AmazonBasics. After all, retailers as far back as the Great A&P had studied what sold well, cultivated house brands at lower prices, and provided customers an additional choice on their shelves.
The report also struggled to establish that Amazon even had the kind of monopoly power that might make certain conduct illegal under U.S. law. The industry’s most widely cited data gatherer, eMarketer, put Amazon’s share of U.S. e-commerce sales at 38.7 percent. The success of Walmart and Target’s websites, as well as the Canadian company Shopify, which developed sites for brands to sell directly to customers, also belied the notion that Amazon had any kind of hammerlock on the industry. (Only Amazon’s utter dominance in the U.S. in books and e-books, estimated at 42 percent and up to 89 percent respectively in 2018, might merit a deeper look.) “While there is no single seller online that can match Amazon, it’s pretty hard under conventional antitrust to find someplace where Amazon has monopoly power,” said Jay Himes, a former antitrust bureau chief in the New York Attorney General’s Office.
But the report also suggested plenty of ways that the government could address Amazon’s market might without resorting to the kind of drawn-out antitrust lawsuit that was directed at AT&T in the 1970s and Microsoft in the 1990s. For example, regulators could examine Amazon’s contracts with sellers and prevent it from penalizing them if they listed a cheaper price elsewhere. They could also restore the ability of sellers to engage in class action lawsuits against Amazon and block the current provisions that force them into a lengthy and secretive arbitration process. The report also proposed that Congress elevate the requirements for big tech companies to get approvals for mergers, so that dominant firms would have to disclose even smaller acquisitions and show how they are “necessary for serving the public interest.”
Not mentioned in the report, to quell the chaos of the Amazon Marketplace, lawmakers could also reform the notorious Section 230 of the Communications Decency Act, which currently holds that internet providers like Amazon are not liable for the legal infractions of their users. Changes to Section 230 could force Amazon to be accountable for fraudulent or unsafe products sold on its site by third-party sellers. Regulators could also compel Amazon to verify sellers with a tax ID number or require them to put down a security deposit, which they’d forfeit with any signs of fraud (Alibaba’s Tmall website does this). Adding significant friction to the process of becoming an Amazon seller would restore balance to a competitive playing field that currently favors sellers in China.
But those remedies only address the most obvious part of the alleged misconduct. The subcommittee also charged Amazon with something more significant: using profits from AWS and advertising to subsidize its retail operation, to undercut rivals on prices, and to finance entry into unrelated markets, and gobble up even more digital real estate. But the report couldn’t prove that charge; it complained that Amazon “failed to produce the financial data that would have enabled Subcommittee staff to make an independent assessment.”
And that’s the most formidable challenge facing the trustbusters. To make a credible case for breaking up Amazon, they will have to answer questions that the company goes to remarkable lengths to obscure. How do its various components interlock? How do you gauge the true profitability of the individual business units when some costs are covered by the subscription fees of services like Amazon Prime? Is it anticompetitive when Amazon increases those fees or seeks to improve its market position by dropping them altogether, as it did in the fall of 2019 when it waived a separate $15 a month charge for grocery delivery?
“There is no company in the world that is more complex and difficult for outsiders to understand than Amazon,” said Kurt Zumwalt, Amazon’s treasurer for fifteen years, before he left in 2019. “This is not a typical corporate conglomerate like Berkshire Hathaway or General Electric. Almost every aspect of Amazon is built around subtly increasing its connection to customers. The power of the business model is the combination of the sum of its self-reinforcing businesses and services, enabled by world-class technology, operational excellence, and a rigorous review and measurement process.”
For now, the highest profile investigation yet into Amazon’s power was over, though troubles certainly lay ahead. “When corporate executives’ emails tell one story and they publicly try to spin another, historically those efforts to deny reality have rarely worked out for the corporation,” said Lina Khan, who President Biden prepared to appoint as one of five FTC commissioners in early 2021. And in Europe, competition chief Margrethe Vestager charged Amazon with damaging retail competition by unfairly using sensitive internal data from third-party sellers to privilege its own products. That case could stretch on for years and result in the kind of large fines that the EU once levied against Google.
Bezos seemed to welcome whatever came next, even hinting that it might actually burnish Amazon’s standing. “One of the unintended consequences often of regulation is that it really favors the incumbents,” he said during an event in Berlin. “Now, Amazon at this point is an incumbent, so maybe I should be happy about that. But I wouldn’t be because I think for society, you really want to see continued progress.” He added, “These are very challenging questions. And we’re not going to answer them, even in a few years. I think it’s going to be an ongoing thing for quite a while.”
That uncertain future hinged on many factors: shifting party control of the U.S. Congress, the relative urgency of addressing the conduct of other technology companies like Google and Facebook first, and the public’s overall sentiment toward Amazon and Bezos. For despite the heightened suspicion of big tech and of Amazon’s tightening grip over Western economies, the company had become a salvation of sorts in the year 2020—a life preserver, thrown to millions of households around the world, as they quarantined amid the relentless assault of the Covid-19 pandemic.
CHAPTER 15 Pandemic
Amazon’s recent challenges seemed like mere speed bumps. The HQ2 misadventure, the drama in Bezos’s personal life, the loss of the JEDI contract, and battles with Donald Trump and antitrust regulators—they barely slowed Amazon’s inexorable rise. Jeff Bezos and his global empire appeared, at least in the moment, totally unbound from the laws of corporate gravity that slowed the growth of large enterprises, inhibited their agility, and clouded the judgment of senior leaders with exorbitant wealth.
New obstacles appeared, of course, but Amazon swiftly navigated those as well. On September 20, 2019, thousands of Amazon employees left their desks to join technology workers and students from around the world in a general climate strike organized by the teenage activist Greta Thunberg. In Seattle, they gathered in front of the Spheres at 11:30 a.m., holding signs that read, “Amazon, Let’s Raise the Bar, Not the Temperature,” and “No AWS for Oil and Gas,” while arguing that the company had to rethink its devotion to greater selection, faster shipping, and delighting customers, regardless of the environmental cost.
It was the day after Jeff Bezos had introduced the Climate Pledge at a press conference in Washington, D.C., promising that Amazon would reach net zero in its carbon emissions by 2040, ten years before the most ambitious goals set by the Paris climate accord. Companies s
uch as Verizon, Microsoft, and Mercedes-Benz would sign on to the initiative, and Amazon would purchase the naming rights to a new sports coliseum in Seattle and call it “Climate Pledge Arena.”
The media around the world covered the employee protests, and in a far more sympathetic way than the hazy and ambitious promises of Amazon’s Climate Pledge. The contrast heralded the emergence of a new kind of political power, one wielded by tech company employees instead of their omnipotent corporate masters. Guarding against this dangerous dissension from within its own ranks would be one of Amazon’s greatest tests during the unexpected trials of the coming year. But attention quickly drifted away from Amazon’s significant carbon output. The company had reassured the world it had a plan.
Bezos himself hovered well above any emerging critique of Amazon and its impact on society and the planet. In November, the political and media elite gathered for the black-tie affair at the Smithsonian’s National Portrait Gallery in Washington, D.C., to celebrate the new portraits added to its collection of distinguished Americans. Bezos, one of the six honorees, brought along a large contingent of supporters, including Amazon board members, executives from the Washington Post, his parents, children, and his girlfriend, Lauren Sanchez.
In his speech, Bezos deployed a few of his well-worn routines, such as ridiculing the Fire Phone and recalling his realization, in Amazon’s earliest years, that they should buy packing tables rather than kneeling on the floor to prepare books for shipment. The audience laughed along. But it was the rare introduction from his oldest son, nineteen-year-old Preston Bezos, that described a dimension to the billionaire that was arguably unknown to the public:
I remember sitting in the kitchen when I was eight years old, watching him slowly wind a piece of wire around a nail. I remember him taking the ends of that wire and touching them to a battery. I remember when he brought that nail close to a piece of metal and they stuck together. I remember the absolute awe in my eyes when he dragged a white board from the basement and tried to explain to me as best you can, to an eight-year-old, the absolute magic that can imbue that nail with magnetic force…. And the reason that memory is so special for me is because he had shown me how to do that maybe a dozen times before. But that was the time that it stuck…. It was that caring compassion, that gleeful pursuit of knowledge, and that patient perseverance, that made it possible. Those are the things that I love about my dad. Those are the things I think are so special about him. And it’s what I hope, at the end of the day, he is remembered by.
Bezos appeared genuinely moved. “I have to recover for a little bit after that,” he said as he took over the lectern. “I did not know what Preston was going to say. He did not want to tell me in advance. He wanted it to be a surprise for me.” It was an impromptu moment for a father, and business titan, who usually sought to script and rehearse every public appearance.
Two months later, Bezos would have another opportunity to cultivate a public profile that was evolving in interesting and unexpected ways. In mid-January, 2020, he visited India, his first trip to the country since his publicity stunt back in 2014 featuring the oversized check on top of a truck. So much had changed since then. On this tour, Bezos and Lauren Sanchez posed for photographs in front of the Taj Mahal, paid their respects at Mahatma Gandhi’s tomb, and dressed in fashionable Indian evening wear to attend a Prime Video premiere in Mumbai. Amazon had been operating in the country for more than half a decade, but Bezos asserted that the company was only getting started. “This country has something special,” Bezos told his senior vice president and former technical advisor, Amit Agarwal, on stage at an Amazon summit for independent merchants. “This is going to be the Indian century.”
But now his brand of techno-optimism and “patient perseverance,” as Preston Bezos had put it, wasn’t nearly as welcome. Coalitions of local merchants protested his arrival, calling him an “economic terrorist,” and waving signs that read: “Jeff Bezos, go back!” Two days before he arrrived, the country’s Competition Commission announced a new probe into anticompetitive discounting on Amazon and its chief rival, the Walmart-owned Flipkart, while government ministers attacked Bezos for articles in his newspaper, the Washington Post, about the country’s persecution of religious and ethnic minorities. Prime Minister Narendra Modi declined to meet with Bezos altogether, and many observers believed the government was tacitly backing the e-commerce efforts of Mukesh Ambani, India’s wealthiest person and the chief of the sprawling telecom and retail conglomerate Reliance Industries.
Still, none of the perennial challenges in India or elsewhere seemed to impede Amazon’s overall business performance. On January 30, after Bezos returned to the U.S., the company announced a gangbuster holiday financial report. The move to deliver packages to Prime members the day after they ordered, instead of two days, had turbocharged sales, and the continued strength of AWS and durable bounty of advertising, the gold mine in the backyard, had minted $3.3 billion in profit, well above Wall Street’s expectations. Amazon also announced that there were 150 million Prime members worldwide, up from 100 million two years before, and that it employed around eight hundred thousand people, solidifying its position as the second largest private employer in the U.S., behind only Walmart.
In the wake of the quarterly earnings announcement, investors bid up Amazon’s stock; its market capitalization leapt over the magical threshold of a trillion dollars and a few weeks later, finally remained there for good. It almost felt like the whole story could have ended right here, with Jeff Bezos worth an astounding $124 billion and Amazon’s aura of invincibility looking more impervious than ever. But it was at this exact moment executives got their first glimpse of the mythological black swan—the rare and unforeseen calamity—spreading its wings over the charred landscape that would soon describe the year 2020.
* * *
Dr. Ian Lipkin, the Columbia University epidemiologist known as the “master virus hunter” for tracking the West Nile virus outbreak in the late nineties and the SARS epidemic in 2003, had seen enough to be disturbed. On a trip to China in January, the streets of Beijing and Guangzhou were deserted, stores vacant, and hospitals overflowing with ill patients. The highly contagious novel coronavirus, which caused the disease Covid-19, was thought to have emerged from an open-air meat and seafood market in the western city of Wuhan and spread across the country in weeks.
On February 5—the day after he returned on the last direct flight from Beijing to Newark and began a two-week quarantine in his apartment on Manhattan’s Upper West Side—Lipkin received a phone call from Katie Hughes, a longtime health and safety manager at Amazon. Like other U.S. companies, Amazon had restricted employee travel to and from China, but it was starting to see the virus spread around Italy, where it had a dozen warehouses and transportation hubs. Hughes asked Lipkin if he could help Amazon analyze its risks and navigate the coming storm.
Lipkin was a Prime member and an admirer of the company, though he lamented its impact on smaller merchants and whenever possible tried to buy from local stores. He also knew enough about the new contagion to recognize that if his worst fears came true, Amazon’s workers faced a serious risk. Other companies could shutter their doors and send employees home. Amazon’s hundreds of densely packed fulfillment centers around the world had the potential to be petri dishes for an infectious virus, while its delivery staff interacted with the public every day. Lipkin agreed to sign on as an advisor.
In regular virtual conversations with Amazon’s HR and operations teams that February, Lipkin doled out advice on everything from how to clean surfaces in the warehouses thoroughly and scrub the air with so-called MERV-13 filters to imposing mask and glove requirements and installing temperature check stations at each site. “These guys are driven by math and technology, and if you make a suggestion that is rigorous and scientific and evidence-based, they will implement it,” Lipkin said. “Cost never came into it, and I can’t say that for every other group I’ve worked with.”
/> On February 27, Lipkin spoke via video to the full S-team. He told Bezos and other senior executives about his recent travels in China and laid out the risks Amazon employees could face. Though it was several weeks before the Trump administration declared a national state of emergency and the epidemiological lexicon officially entered the vocabulary of many Americans, Amazon executives already seemed knowledgeable. They asked him pointed questions about the virus’s incubation period and its R0 or “R naught” potential, the number of people who can be infected by a single individual. Lipkin didn’t recall what Bezos asked, but said, “I remember looking at the guy. He looked pretty fit.”
The day after the S-team meeting with Lipkin, Amazon stopped all nonessential employee travel. On March 4, after a Seattle corporate employee was diagnosed with the virus, the company ordered office workers to work from home for two weeks, then extended the deadline to return in increments, before finally instructing them to stay at home for the rest of the year. A week after that, Amazon canceled all in-person interviews and moved to virtual conversations with most job candidates using its in-house video conferencing software, Amazon Chime. The moves underscored a sharp divide and one of Amazon’s biggest challenges; it was allowing white-collar workers to transition to safe, remote work, while deeming its warehouse employees essential to the business and exposing them to greater risk.
By early March, a subgroup of the S-team was gathering virtually every afternoon at 4 p.m. Seattle time to discuss their response to the crisis. The meetings were run by human resources head Beth Galetti and included Jeff Wilke, Andy Jassy, operations chief Dave Clark, and Bezos. Amazon’s CEO normally spent much of his time on projects whose potential was years in the future. Now he locked his gaze firmly onto the urgent present. He asked questions, made observations, and led brainstorming sessions on new ways to use technology to protect employees while meeting surging demand from quarantined customers.
