Fordham Law student, Shaoul Sussman ’19, was featured in a New York Magazine article talking about his recent paper, in which he argues that Amazon’s business practices violate antitrust laws.
With its ever-growing dominance of online retail, Amazon has long drawn accusations that it is a monopoly — or at least a monopoly in waiting. When the company acquired Whole Foods last year, that scrutiny only intensified. But maybe “monopoly” isn’t quite the right word for what Amazon is up to. Shaoul Sussman, a Fordham University law student, has a different perspective. In a paper for the Journal of Antitrust Enforcement and in a blog post on the ProMarket website, which have generated buzz in academic circles, he writes that Amazon may be throwing its weight around in a way that consumers might not immediately notice, but which will end up harming them nonetheless. Intelligencer spoke to him about his theory.
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I argue that for many years, Amazon was operating with a negative cash flow, which means that the firm was receiving less money than it was spending. But this business model, which shareholders and investors on Wall Street really love now, doesn’t fit within the way antitrust regulation or law conceives of firms.Conservative antitrust theory has said that predatory pricing — underpricing goods so that other firms can’t compete — is irrational and unsustainable, because shareholders will punish firms that are unprofitable. But with the rise of big unprofitable companies like Amazon and Uber, this kind of market-disciplining effect no longer exists. Traditional orthodox antitrust theory does not map onto current corporate reality.
Also, when a firm operates with a negative cash flow, there is simply no way for us as outsiders to tell whether they’re spending money on fixed assets and R&D and legitimate investments in technology and innovation, or whether they’re using that money to subsidize products to consumers at below cost to corner the market. In other words, we just can’t tell what a firm is doing when it’s spending more than it’s making.
See additional media coverage on this topic:
Is Amazon Violating U.S. Antitrust Laws? This Law Student Thinks He Has Evidence
How low prices could make for an antitrust case against Amazon
