[After years of pretending that Big Tech was good for "consumers,"
weve not only woken up to how destructive these companies are, but
were also all increasingly in accord about what to do about it. Hot
damn!]
[[link removed]]

HOW AMAZON IS A RIPOFF  
[[link removed]]


 

Cory Doctorow
November 6, 2023
Pluralistic [[link removed]]

*
[[link removed]]
*
[[link removed]]
*
*
[[link removed]]

_ After years of pretending that Big Tech was good for "consumers,"
we've not only woken up to how destructive these companies are, but
we're also all increasingly in accord about what to do about it. Hot
damn! _

Jeff Bezos, Image: Doc Searls, CC BY 2.0, modified

 

There's a cheat-code in US antitrust law, one that's been increasingly
used since the Reagan administration, when the "consumer welfare"
theory ("monopolies are fine, so long as they lower prices") shoved
aside the long-established idea that antitrust law existed to prevent
monopolies from forming _at all_.

The idea that a company can do anything to create or perpetuate a
monopoly so long as its prices go down and/or its quality goes up is
directly to blame for the rise of Big Tech. These companies burned
through their investors' cash for _years_, selling goods and services
below cost, or even giving stuff away for free. Think of Uber, who
lost $0.41 on every dollar they brought in for their first 13 years of
existence, a move that cost their investors (mostly Saudi royals) $31
billion.

The monopoly cheerleaders in the consumer welfare camp understood that
these money-losing orgies could not go on forever, and that the
investors who financed them weren't doing so for charitable purposes.
But they dismissed the possibility that would-be monopolists could
raise prices after attaining dominance, because these prices hikes
would bring new competitors into the market, starting the process over
again.

Well, Uber has doubled the price of a ride and halved the wages of its
drivers (not that consumer welfare theorists care about workers' wages
– they care about _consumer_ welfare, not _worker_ welfare). And
not just Uber: companies that captured whole markets have jacked up
prices and lowered quality across the board, a Great Enshittening
whose playbook has been dubbed "venture predation":

[link removed]

Not only was this turn predictable – it was _predicted_. Back in
2017, Lina Khan – then a law student – published a
earthshaking _Yale Law Journal_ paper, "Amazon's Antitrust Paradox,"
laying out how monopolists would trap their customers and block new
competitors as they raised prices and lowered quality:

[link removed]

Today, Khan is the chair of the FTC, and has brought a case against
Amazon that turns her legal theories into practice, backed by a
cheering chorus of Amazon customers, workers, suppliers and
competitors who've been cheated by the e-commerce giant:

[link removed]

Khan's case argues that Amazon is not the house of bargains that it's
widely billed as. She points to the sky-high fees that Amazon extracts
from its sellers (45-51% of every dollar!) and the company's use of
"most favored nation" deals that force sellers who raise their Amazon
prices to pay those rents to raise their prices everywhere else, too:

[link removed]

Now, a new Amazon Paradox has dropped, and it drills into another way
that Amazon overcharges most of us by as much as 29% on nearly every
purchase, disqualifying it from invoking that consumer welfare cheat
code. The new paper is "Amazon's Pricing Paradox," from law professors
Rory Van Loo and Nikita Aggarwal, for _The Harvard Journal of Law and
Technology_:

[link removed]

The authors concede that while Amazon _does_ have some great
bargains, it goes to enormous lengths to make it nearly impossible
to _get_ those bargains. Drawing from the literature on behavioral
economics, the authors make the reasonable (and experimentally
verified) assumption that shoppers generally assume that the top
results in an Amazon search are the best results, and click on those.

But Amazon's search-ordering is enshittified: it shifts value from
sellers and shoppers (you!) to the company. A combination of
self-preferencing (upranking Amazon's own knock-offs),
pay-for-placement (Amazon ads), other forms of payola (whether a
merchant is paying for Prime), and "junk ads" (that don't match your
search) turn Amazon's search-ordering into a rigged casino game.

The ability to manipulate customers and sellers and get more money
from both is why Amazon has so many incentives to use Amazon's
internal search tool, rather than, say, searching Amazon via Google,
which can yield _far_ superior results. For years, Amazon ran a
program called Amazon Smile, where a share of every purchase you made
would be given to a charity of your choice – but only if you found
that item by searching for it on Amazon, and not via Google or a
direct link:

[link removed]

In their new paper, the authors extract and analyze a large dataset of
common items you might buy on Amazon, determining which result is best
– the lowest price at the highest rating – and then calculating
how much more you'll pay for that item if you click the first relevant
(non-ad) item on the search results.

If you trust Amazon search to find you the best product and click that
first link, _you will pay a 29% premium_ for that item. If you
expand your selection to the "headline" – the first four items,
which are often all that's visible without scrolling – you'll pay an
average of 25% more. That top row accounts for 64% of Amazon's clicks.

On average, the best deal on Amazon is found in the _seventeenth
slot_ in the search results. Seventeen!

Amazon argues that none of this matters, because it allows users to
refine their searches to get the best bargains, but Amazon's search
won't let you factor in "unit pricing" – that is, the price per
unit. So if you order your search by price, the seller who's offering
a single pencil for $10 will show up above a seller who's
offering _ten_ pencils for $10.01.

Here is an iron law of cons: any time someone adds complexity to a
proposition bet, the complexity exists _solely_ to make it hard for
you to figure out if you're getting a good deal. Whether that's the
payout lines on a craps table, the complex interplay of deductibles
and co-pays on your health insurance, the menu of fees your bank
charges, or the add-ons for your cell-phone plan, the complexity
exists to confound your intuition and overwhelm your reason:

[link removed]

And Amazon certainly knows how to pile on the complexity! First,
there's the irrelevant results – AAA batteries that show up in a
search for AA batteries, or dog accessories that show up in a search
for cat accessories:

[link removed]

Then there's the "drip pricing": extra charges that get tacked on at
checkout, like shipping fees. I once found an item on Amazon that
advertised "free shipping" – but at checkout, that "free shipping"
came with a delivery date that was _three months_ in the future.
Upgrading to shipping in the current quarter _doubled_ the price.

Drip pricing makes it hard to figure out if Prime is a good deal, too.
Recall that Amazon already comps shipping on orders over $25, so a
potential Prime purchaser has to evaluate whether they'll place enough
sub-$25 orders in the coming year to justify the price – and also
factor in the fact that Prime items are often more expensive on a
per-unit basis than their non-Prime equivalents. Yes, Prime comes with
other perks – music and videos – but valuing these just adds
complexity to your calculations about whether Prime is a good buy for
you, and requires that you factor in the possibility that Amazon will
enshittify those services and reduce their value in the coming year,
say, by taking away the ability to turn off shuffle when listening to
music:

[link removed]

Or stuffing ads into your videos:

[link removed]

Finally, there's the nonsense labels that Amazon pastes onto its
search results: "Best Seller," "Climate Pledge Friendly," "Highly
Rated," "Top Rated From Our Brands" and other gibberish that doesn't
necessarily mean what it seems like it means. Is an item a "best
seller" because it was briefly price-dropped, or elevated in search
results, or both, or because other shoppers genuinely liked it better?

The authors conclude that getting the best price on Amazon requires
that you "first spend considerable time searching through pages of
results and then utilize, at a minimum, spreadsheet algebraic
capabilities to determine the product’s full price…[and] somehow
de-bias from the psychological effects of anchoring, and labels such
as 'limited time deal' and 'Best Seller,' as well as many other subtle
psychological influences."

Amazon says it's entitled to use the consumer welfare cheat-code to
get out of antitrust enforcement because it has so many bargains. But
to get those bargains, you have to pay such minutely detailed
attention – literally spreadsheeting your options and hand-coding
mathematical formulas to compare them – that you'll almost certainly
fail. The price of failure is incredibly high – a 25-29% overcharge
on every purchase.

Amazon's burying of this vital information will be familiar to Douglas
Adams readers, as the "Beware of the Leopard" tactic. It's not even
the first time Amazon's deployed it:

[link removed]

Another group of scholars recently coined a useful term to describe
this ripoff: in a paper published last week, Tim O'Reilly, Mariana
Mazzucato and Ilan Strauss dubbed the costs of all this complexity
"attention rents":

[link removed]

It's fascinating to see these two different groups of scholars, coming
at this problem from multiple disciplines, all converging on the same
analysis! When technologists, trad economists, behavioral economists,
and antitrust lawyers all study Amazon and come away pointing at the
same sleazy tactic as being at the heart of the scam, it feels like
maybe we're having A Moment. What's more, all of this is so thoroughly
presaged by Khan's 2017 paper that it suggests that she's a bona
fide _prophet_.

The authors of this new paper are pretty confident that this gimmick
violates antitrust law. They point out that it doesn't matter if
Amazon customers feel like they're getting a good deal – just as it
doesn't matter if don't know that you got charged a higher rate for
your mortgage because you're Black, that's still illegal.

What's more, consumer protection law doesn't require that the
merchant _intends_ to rip you off. There's plenty of laws requiring
supermarkets to post unit prices on their shelves. These laws don't
start from the assumption that supermarkets who don't use unit pricing
are trying to scam you! Rather, they start from the assumption that
you will make better-informed purchases if you have that information,
and so you should get it.

Regulating the presentation of prices is firmly in the purview of
antitrust law, especially consumer welfare antitrust, which fetishizes
low prices above all else. The less competitive a market is, the less
pressure a company will feel to offer clear price information to
customers, because those customers will have fewer places to go if
they don't like the company's business practices.

All of this militates for antitrust intervention: rules for how Amazon
must do its business. The authors propose three different kinds of
rules:

I. Force Amazon to halt its most deceptive practices, like hiding the
true price including shipping or chaffing search results with
confusing junk ads. One fascinating tidbit: just a few days after this
paper was published, the FTC revealed that Amazon had
been _deliberately_ cluttering its results with junk ads in order to
juice revenue:

[link removed]

II. Mandate interoperability between Amazon and comparison shopping
sites by forcing the company to publish its pricing data in
machine-readable format, and allowing customers to authorize shopping
bots to access their purchasing data to help them figure out how to
get a better deal. Another fascinating turn – the same week this
paper came out, the CFPB proposed a rule that would force
your _bank_ to do the same thing – let you forward your data to
comparison shopping sites that would tell you which bank you'd get the
best deal from:

[link removed]

The CFPB rule goes one step further, strictly limiting how those
comparison sites can use your data, banning them from retaining,
selling or sharing it or using it to target ads to you. This is the
approach that my EFF colleague Bennett Cyphers and I proposed in our
"Privacy Without Monopoly" paper:

[link removed]

III. Create legal safe harbors for scraping. Scraping is a form of
"adversarial interoperability," the self-help measures that
technologists use to modify and adapt existing services without their
owners' consent. Think of reverse-engineering, bots, etc:

[link removed]

Comparison shopping sites have historically relied on scraping to help
their users get better deals. Amazon almost certainly scrapes its
competitors' sites to figure out if a merchant is selling more cheaply
elsewhere (these merchants are punished by being banished to screen
eleventy-million of the search results, which has the same effect of
just kicking them off of Amazon).

Scraping was once the norm online, then it dwindled, as monopolists
used their cash reserves and market power to get governments to punish
rivals that used it. But scraping is a very important backstop to any
kind of price-analysis. Though Mario Zechner used grocery stores' own
official APIs to prove that they were colluding to rig prices, he has
gone on record to say that he would also use scraping if they shut
down those gateways or denied him access to them:

[link removed]

In my latest nonfiction book, _The Internet Con_, I lay out virtually
the same program for addressing monopoly power in _every_ tech
industry:

[link removed]

I. Start with traditional antitrust remedies (breakups, bans on unfair
or deceptive practices)

II. Mandatory APIs that allow tinkerers, co-ops, nonprofits, and
startups to interface with dominant platforms and offer their users
and suppliers better services and deals;

III. Safe harbors for adversarial interoperability, so that when
companies cheat on their mandatory APIs by blocking or degrading them,
those rival services can keep things going while they wait for
fact-intensive regulatory proceedings to force the big companies back
into compliance.

Reading this new paper, I was struck by how much convergence there is
among different kinds of practitioners, working against the digital
sins of very different kinds of businesses. From the CFPB using
mandates and privacy rules to fight bank ripoffs to behavioral
economists thinking about Amazon's manipulative search results.

This kind of convergence is exciting as hell. After years of
pretending that Big Tech was good for "consumers," we've not only
woken up to how destructive these companies are, but we're also all
increasingly in accord about what to do about it. Hot damn!

_Pluralistic is a feed of daily links from writer Cory Doctorow_

* Amazon
[[link removed]]
* monopolies
[[link removed]]
* Anti-monopoly
[[link removed]]

*
[[link removed]]
*
[[link removed]]
*
*
[[link removed]]

 

 

 

INTERPRET THE WORLD AND CHANGE IT

 

 

Submit via web
[[link removed]]

Submit via email
Frequently asked questions
[[link removed]]

Manage subscription
[[link removed]]

Visit xxxxxx.org
[[link removed]]

Twitter [[link removed]]

Facebook [[link removed]]

 




[link removed]

To unsubscribe, click the following link:
[link removed]