Jan 30 2012

Amazon, fast-growing bully

Posted by: Nick Shaxson in: Thoughts

A little while ago, the Tax Justice Network carried a blog (which I wrote) entitled Amazon, Tax Bully, outlining its efforts to browbeat U.S. states into cutting their tax rates for Amazon, enabling them to get a wholly unproductive and economically inefficient subsidy. (A few months later, Salon.com came up with an article with almost the same title, exploring this further.)

Now there’s an important new article about Amazon in the Daily Mail, looking at something which, on the face of it at least, is different. The summary paragraph says:

Online shopping giant Amazon has been accused of artificially inflating prices by banning firms that trade on its website from selling goods more cheaply elsewhere on the internet. . . Under draconian new restrictions introduced by the American corporation, traders who sell products more cheaply on other sites face expulsion from the Amazon catalogue unless they agree to raise their prices.

Now that’s nasty stuff, and the article quotes a lawyer saying:

“potentially anti-competitive behaviour. It has the potential to distort the market, which means consumers are losing out.”

Indeed. Anti-competitive behaviour has the potential to funnel billions away from consumers and towards (mostly wealthy) owners.

What strikes me about all this, though, is that again and again throughout history, we find that the most aggressive players in the field of anti-competitive behaviour always seem to be the ones that work hardest to reduce their tax bills through offshore shenanigans. I wrote a whole chapter in Treasure Islands about the Vestey brothers, food magnates who became pioneers of the global corporation, who made their biggest profits through anti-competitive behaviour, combined with widespread and innovative forms of outright tax abuse.

It’s no coincidence that these two harmful market-distorting shenanigans go together. It comes from the management culture.

Some company managers concentrate on what businesses do best: producing the best products and services, at the cheapest cost. This is true wealth creation. More and more, though, managers do something different: they focus on finding the best ways to extract wealth and value from others – whether from consumers or from taxpayers. That wealth extraction is a zero-sum game — in fact, it’s worse than that, because while no new wealth is created, a lot of time and energy is spent in carrying out these unproductive schemes, diverting attention from where it’s most needed: creating real value.

And so you get this sort of thing, as one online retailer in the UK complains:

Before Christmas I received an email telling me to change some prices on my website as they were cheaper than the  rate at which I sold the goods through Amazon . . .I then received another email three weeks later telling me I had five days to change the prices or I would be delisted.

And hey, guess what? From the same Daily Mail story:

Financial accounts show that Amazon paid no corporation tax at all in Britain in 2010. The last time it reportedly paid the tax here was in 2007, when it is said to have handed over just £19,367 to the Treasury.

Postscript: Yes, I’ve sold a lot of copies of Treasure Islands on Amazon. And I’ve bought books on Amazon too. I’ve even got a Kindle. But that won’t stop my criticising the company. And no, it’s not hypocrisy. It’s increasingly the world we face, and which we have to deal with.

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[…] an entire management ethos – see my comments about the Vesteys and the internet giant Amazon here. Anyway, well said that man […]

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