Amazon’s Stranglehold:

How the Company’s Tightening Grip Is

Stifling Competition, Eroding Jobs, and
Threatening Communities

By Olivia LaVecchia and Stacy Mitchell

November 2016
 About the Institute for Local Self-Reliance
The Institute for Local Self-Reliance (ILSR) is a 42-year-old national nonprofit
research and educational organization. ILSR’s mission is to provide innovative
strategies, working models, and timely information to support strong, community
rooted, environmentally sound, and equitable local economies. To this end, ILSR
works with citizens, policymakers, and businesses to design systems, policies,
and enterprises that meet local needs; to maximize human, material, natural, and
financial resources, and to ensure that the benefits of these systems and resources
accrue to all local citizens. More at www.ilsr.org.

About the Authors

Olivia LaVecchia is a researcher with ILSR’s Community-Scaled Economy
Initiative, where she produces reports and articles on concentrated
economic power and locally rooted alternatives. Her work reaches wide
audiences, spurs grassroots action, and influences policy-making. Contact
her at [email protected] or via Twitter at @olavecchia.

Stacy Mitchell is co-director of ILSR and director of its Community-Scaled

Economy Initiative. Her research and writing on the advantages of devolving
economic power have influenced policy-makers and helped guide grassroots
strategies. She has produced numerous reports and written articles for
a variety of national publications, from Bloomberg Businessweek to The
Nation, and is the author of Big-Box Swindle: The True Cost of Mega-Retailers
and the Fight for America’s Independent Businesses. Contact her at
[email protected] or via Twitter at @stacyfmitchell.

The authors would like to thank everyone interviewed for this report for sharing
their insights and experiences, with special thanks to Dan Cullen, John Farrell,
Beth Gutelius, Lina Khan, Barry Lynn, David Morris, and Matt Stoller for their
thoughtful feedback, and to Spencer Cox, who was a fellow at ILSR during the
beginning stages of this report. Any errors are those of the authors.

This report was made possible thanks to financial support from the Nathan
Cummings Foundation, New Visions Foundation, One World Fund, Searle Whitney,
and other donors. Thank you.
This report is licensed under
a Creative Commons
license. You are free to Recent reports from ILSR’s Community-Scaled Economy
replicate and distribute it,
as long as you attribute it
Initiative include:
to ILSR and do not use it for
commercial purposes. Monopoly Power and the Decline North Dakota’s Pharmacy
of Small Business: The Case for Ownership Law: Ensuring Access,
Restoring America’s Once-Robust Competitive Prices, and Quality
Cover Photo: Antitrust Policies (August 2016) Care (October 2014)
Amazon
Affordable Space: How Rising For monthly updates on
Commercial Rents Are Threatening our work, sign up for the
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2 | Amazon’s Stranglehold www.ilsr.org

 Table of Contents
Introduction and Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Timeline of Amazon’s Expansion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Monopolozing the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Blocking Competitors and Locking-In Consumers. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Enclosing and Privatizing the Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Shaking Down Producers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Expanding into Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Fewer Choices and Shrinking Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Amazon’s Monopoly Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Undermining Jobs and Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Dwindling Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Grueling Work for Lower Pay Than Average. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Reliance on “Permatemps”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Shifting to On-Demand “Gig” Jobs and Automation. . . . . . . . . . . . . . . . . . . . . . . 45
Spreading Its Low-Road Model to Package Delivery. . . . . . . . . . . . . . . . . . . . . . . . 48
Enriching the Haves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Weakening Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
A Rising Tide of Vacant Stores. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Declining Public Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
An Existential Threat to the Vitality of Cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Weakening Local Ownership, a Powerful Source of Social Capital. . . . . . . . . . . . . 58
Stealth Invasion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

The Policy Response to Amazon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

A Fulfillment Network Built with Public Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Allowing Amazon to Sidestep Sales Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
“An Extremely Advantageous Tax Rate” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
How Public Policy Should Address Amazon’s Power and Impacts. . . . . . . . . . . . . . 67

Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

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 Introduction & Overview
There are tells, but only if you’re looking for them.
There might be a package on a doorstep, or a pile of
boxes outside on recycling day, or a white truck with an
unassuming black “A” and an orange arrow underneath
stopped at a red light. At coffee shops or libraries, you
can see glimpses of the logo on people’s computer
screens, and if you drive to the industrial office parks on
the outskirts of cities, near freight hubs and airports, you
can find the warehouses, low-slung and sprawling.

For all of its reach, Amazon, the company founded by Jeff Bezos in 1995 as
an online bookstore, is still remarkably invisible. It makes it easy not to notice
how powerful and wide-ranging it has become. But behind the packages
on the doorstep, and behind the inviting interface and seamless service
that has consistently put the company at the top of corporate reputation
rankings,1 Amazon has quietly positioned itself at the center of a growing
share of our daily activities and transactions, extending its tentacles across
our economy, and with it, our lives. Today, half of all U.S. households are
subscribed to the membership program Amazon Prime, half of all online
shopping searches start directly on Amazon, and Amazon captures nearly
one in every two dollars that Americans spend online. Amazon sells more
books, toys, and by next year, apparel and consumer electronics than any
Photo Credit: Jeramey Lende / retailer online or off, and is investing heavily in its grocery business. As a
Shutterstock.com

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 retailer, its market power now rivals or exceeds that to capsize Etsy, and Amazon Business aims to destroy
of Walmart, and it stands only to grow: Within five Staples and independent office suppliers. It’s set up
years, one-fifth of the U.S.’s $3.6 trillion retail market delivery lockers on college campuses across the
will have shifted online, and Amazon is on track to country, and hosts a site that provides lesson plans
capture two-thirds of that share. for teachers. It recently launched a music streaming
service similar to Spotify, and in the last three years,
But describing Amazon’s reach in the retail sector its video streaming has grown from 1 percent to 4
describes only one of the company’s tentacles. Amazon percent of all prime-time internet usage.3 It’s opening
is far more than a big, aggressive retailer. The company hundreds of brick-and-mortar stores, including
is a novel kind of power, a power that, as New Yorker bookstores, small convenience stores for groceries,
writer George Packer has described, is “something new and device showrooms for its Kindle and Echo speaker.
in the history of American business.”2 As we show in this It’s growing rapidly in Europe, India, and China.
report, Amazon increasingly controls the underlying
infrastructure of the economy. Its Marketplace for third-
party sellers has become the dominant platform for This report aims to pull back Amazon’s
digital commerce. Its Amazon Web Services division cloak of invisibility. It presents new data;
provides the cloud computing backbone for much draws on interviews with dozens of
of the country, powering everyone from Netflix to the manufacturers, retailers, and others; and
CIA. Its distribution network includes warehouses and
synthesizes a broad body of previous
delivery stations in nearly every major U.S. city, and it’s
rapidly moving into shipping and package delivery
reporting and scholarship.
for both itself and others. By controlling this critical
infrastructure, Amazon both competes with other
“Everything you buy, starting with your weekly
companies and sets the terms by which these same
groceries, will be flowing through one pipe called
rivals can reach the market.
Amazon,” Scott Galloway, a professor of marketing
at New York University’s Stern School of Business,
Amazon captures nearly one in every has predicted.4
two dollars that Americans spend online.
Amazon’s bet is that as long as consumers are enjoying
But Amazon is far more than a big, one-click ordering and same-day delivery, we won’t
aggressive retailer. pay much attention to the company’s creeping grip.5
Even as consumers, Amazon’s dominance comes
with significant consequences. The company uses
And there’s more still. Amazon now processes its data on what we browse and buy to shape what
payments for other e-commerce businesses; it makes we see and adjust prices accordingly, and its control
restaurant deliveries in more than a dozen cities; and over suppliers and power as a producer itself means
it rivals HBO and NBC in producing television and that it’s increasingly steering our choices, deciding
movies. It manufactures thousands of products, from what products make it to market and what products
blouses to batteries to baby food; it employs more we’re exposed to.
than 1,000 people working on artificial intelligence;
it publishes books and its own titles often dominate But we’re also much more than consumers. We’re
the Kindle bestseller list. It’s taking on Google in people who need to earn a living, who want to have
search and challenging Apple in devices. It owns meaningful jobs, who care about the freedom to
familiar brands like Zappos, Shopbop, and IMDB; its build a business. We’re neighbors and we’re citizens,
Twitch has 100 million users and is one of the largest entrepreneurs and producers, taxpayers and
platforms for video gaming; and its Audible is the top residents, with needs and wants from an economy
purveyor of audio books. Amazon Handmade seeks that go beyond the one-click checkout.

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 As we examine in this report, Amazon’s increasing from its platform to understand its suppliers’
dominance comes with high costs. It’s eroding industries and compete directly against them. Many
opportunity and fueling inequality, and it’s of these Amazon products appear at the top of its
search listings. (Pages 24–25)
concentrating power in ways that endanger
competition, community life, and democracy. And
• Amazon is fueling a sharp decline in the number
yet these consequences have gone largely unnoticed of independent retail businesses, a trend
thanks to Amazon’s remarkable invisibility and the manufacturers say is harming their industries by
way its tentacles have quietly extended their reach. making it harder for new products and new authors
and creators to find an audience. (Pages 25-28)
This report aims to pull back this cloak of invisibility. It
presents new data; draws on interviews with dozens • Amazon poses a particular danger in the book
industry, where its power to manipulate what we
of manufacturers, retailers, labor organizers, and
encounter, remove books from its search results,
others; and synthesizes a broad body of previous and direct our attention to select titles threatens the
reporting and scholarship. It’s organized into four open exchange of ideas and information. (Page 28)
main sections.
• Already there’s evidence that Amazon is using
In the first section, Monopolizing the Economy, its huge trove of data about our buying habits to
we look at how Amazon is using its market power raise prices, and it’s also started blocking access
to certain products, charging higher prices, and
to eliminate competition and take control of one
delaying shipping times for customers who decline
industry after another, leaving us with an economy to join its Prime program. (Pages 29-30)
that is less diverse and innovative, and which affords
fewer opportunities for businesses to start and grow. • To focus too much on prices, though, is to miss the
real costs of monopoly. Amazon’s tightening grip is
• Amazon uses its vast financial resources to sell damaging our ability to earn a living and curtailing
many products below its own cost as a tactic for our freedom as producers of value. New business
both eliminating competitors that lack similarly formation has plummeted over the last decade,
deep pockets and hooking customers into its Prime which economists say is stunting job creation,
ecosystem, which sharply reduces the chances they squeezing the middle class, and worsening income
will shop around in the future. (Pages 15-16) inequality. (Pages 30-31)

In the second section, Undermining Jobs and Wages,

• By using Prime to corral an ever-larger share of
online shoppers, Amazon has left rival retailers we examine Amazon’s labor model and find that
and manufacturers with little choice but to become work inside its 190 distribution facilities resembles
third-party sellers on its platform. In effect, Amazon labor’s distant past more than a promising future,
is supplanting an open market with a privately with many workers performing grueling and under-
controlled one, giving it the power to dictate the paid jobs, getting trapped in precarious temporary
terms by which its competitors can operate, and to positions, or doing on-demand assignments that are
levy a kind of tax on their revenue. (Pages 17-19)
paid by the piece.
• Amazon leverages the interplay between the direct
retail and platform sides of its business to maximize • Amazon has eliminated about 149,000 more jobs in
its dominance over suppliers. As it extracts more retail than it has created in its warehouses, and the
fees from them, it’s hollowing out their companies pace of layoffs is accelerating as Amazon grows. Many
and reducing their ability to invent and develop new jobs are at risk: the retail sector currently accounts
products. (Pages 18-23) for about 1 in every 8 jobs, and unlike Amazon jobs,
these jobs are distributed across virtually every town
• Meanwhile, Amazon is rapidly expanding its own and neighborhood. (Pages 35-36)
product lines, using the trove of data that it gathers

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 • Work in Amazon warehouses is exceptionally become vacant, the equivalent of about 700 empty
grueling, yet the company pays its fulfillment workers big-box stores plus 22,000 shuttered Main Street
15 percent less on average than other warehouse businesses. (Pages 55-56)
workers in the same region earn, according to our
analysis of 11 metro areas. (Pages 36-41) • Property taxes are the leading source of revenue
for state and local governments, and brick-and-
• Many of the workers in Amazon warehouses are mortar retailers shoulder a large share of this tax
subcontracted temporary workers, which the responsibility. As it displaces these businesses,
company refers to as “seasonal,” but are, in many Amazon, which has no property in 20 states and only
cases, year-round “permatemps.” This set-up allows a minimal footprint in the places where it does have
Amazon to skirt responsibility for these workers and warehouses, is not replacing this critical source of
any injuries they suffer on the job, and helps deter revenue. (Pages 56-57)
its direct hires from advocating for better conditions.
(Pages 42-44) • Much of the vitality of our cities is linked to
commerce that is based on the street and the many
• Amazon is expanding its reliance on on-demand encounters with neighbors and friends that occur as
labor. In 30 cities, it’s using freelance delivery drivers we run errands. At Amazon, shopping is a solitary
who take instructions from an app and are paid a activity, and this has profound implications for our
small piece-rate for each package. (Page 45) communities and how we relate to one another.
(Pages 57-58)
• The company is also expanding the frontiers of
automation, installing orange robots in its newest • Local business ownership is a powerful source of
fulfillment centers and developing unmanned drones social capital, as well as an expression of closely-
that could deliver most of the items it ships. Amazon held American values, like personal agency and
appears to be aiming for a future in which it employs community self-determination. In recent surveys,
few workers and instead relies on machines and a locally owned businesses name Amazon as the top
bench of on-demand freelancers. (Pages 46-47) threat to their survival. (Pages 58–59)

• Amazon is spreading its low-wage, precarious labor • Amazon’s invisibility and lack of a physical presence
model to package delivery, threatening the jobs in most places makes it harder to build a grassroots
of nearly one million unionized, middle-income response to its impacts. As it stealthily expands,
workers at UPS and the U.S. Postal Service. Amazon however, it’s important to consider that not all
has leased cargo planes, purchased truck trailers, e-commerce follows its example, and that we could
and lobbied for permission to fly drones as it builds instead support the many local businesses that are
a shipping system that could serve both its own operating online while still rooted deeply in their
needs and those of others. (Pages 48-51) communities. (Page 60)

• As Amazon squeezes its workers, it’s also delivering

enormous wealth to a handful of top executives and In the final section, The Policy Response to Amazon,
shareholders, and exacerbating income inequality. we begin by looking at how Amazon’s rise has been
This year, Jeff Bezos passed Warren Buffett to become heavily assisted by government support, including
the third-richest person in the world. (Pages 51-52)
subsidies and tax advantages worth billions of dollars.
In the third section, Weakening Communities, we
explore how Amazon is upending the longstanding • Amazon has pocketed at least $613 million in public
relationship between commerce and place, changing subsidies for its fulfillment facilities since 2005, our
the way that our communities feel and threatening new research finds, and more than half of the 77
large facilities it built between 2005 and 2014 have
the revenue streams and social capital that they
been subsidized by taxpayers. (Pages 63-64)
depend on to function.
• Dodging sales tax collection was critical to Amazon’s
• Amazon’s growing market share has so far caused early growth and continues to drive sales. Today,
more than 135 million square feet of retail space to Amazon still does not collect sales tax in 16 states,

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 a competitive advantage that recent scholarship When you look past its digital trappings, the way
shows fuels almost 10 percent of its sales in these Amazon operates, and the way it’s changing the
states, at the expense of brick-and-mortar retailers. economy, looks less like the future and more like the
(Pages 65-66)
past. Amazon resembles the 19th century railroad
baron controlling which businesses get to market
• Amazon has used an overseas tax haven to skirt
hundreds of millions of dollars a year in federal and what they have to pay to get there, and like the
taxes. The company’s tax-dodging scheme, which it garment factory owner of that same unequal Gilded
has used for more than a dozen years, is now the Age, who paid laborers a piece rate. Amazon has
subject of multiple investigations. Whatever the monopoly ambitions much as Standard Oil once
outcome of these cases, the scheme has already did, and today controls nearly as much of the book
helped Amazon grow into a formidable market
industry as Standard Oil controlled of the oil industry
power by enabling it to pay a federal tax rate of less
when it was broken up in 1911.
than one-third the average paid by other retailers.
(Pages 66-67)
It’s to this earlier era, with its trust-busters and its
We then sketch the steps policymakers should take to wariness of unchecked corporate power, its fights
check the company’s power and bring about a more for the eight-hour workday and for a measure of self-
competitive and equitable economy. determination on the job, to which we can turn as we
think about the need for public interest-driven policies
• Policymakers should restore the broader range of to shape our digital future.
goals that guided antitrust enforcement for much of
the 20th century, and use these policies to divide Because Amazon’s continued dominance isn’t
Amazon into separate firms, prevent it from using its inevitable. The company’s practices aren’t
financial resources to capsize smaller competitors,
synonymous with digital innovation pointing the
and ensure fair and open competition on its platform.
(Pages 68-69)
way into the future. As we begin to picture what a
different version of e-commerce might look like, it
• Officials should update both state and federal labor can be easy to imagine that Amazon’s vision is the
laws to protect workers’ rights in the digital economy, only one. Next to Amazon, however, is a crowded
including establishing stronger protections for field of independent businesses carving out what
temporary workers and blocking companies from space they can online, and creating models where
classifying workers as independent contractors as
commerce is both digital and place-based, and that
a way of evading wage and hour standards. (Pages
allow customers to shop locally in-person as well as
69-70)
online. Next to Amazon, too, are companies in retail,
• Local and state governments should stop providing distribution, and shipping that pay a middle-income
Amazon with subsidies and tax breaks, and revise wage, as well as emerging models for how digital
their planning and economic development policies platforms could be operated to promote competition
to reflect the fiscal and community benefits of local, and the broader good. But if these other ways of
independent businesses. (Pages 70-71) doing business are to have a chance, we must take
a hard look at Amazon’s growing stranglehold on
commerce and the consequences of that power.

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 Timeline of Amazon’s Expansion
150 Billion
120 Billion
90 Billion
RE VE NUE

60 Billion
30 Billion
500 Thousand
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

1995 2005 2012 2015 2016

Jeff Bezos headquarters Amazon launches Prime. By Amazon buys Kiva, a robotics A survey finds fewer than 1 Amazon is capturing nearly
Amazon in Seattle to avoid 2016, Prime members will company that supplies percent of Prime members $1 of every $2 Americans
collecting sales tax in represent about half of U.S. warehouses everywhere, and visit competing retail sites spend shopping online.
populous California. households. decides not to extend Kiva’s when shopping on Amazon.
other contracts, but to keep In the last year, Amazon
1997 2007 the technology for itself. Amazon passes Walmart in has doubled the number
The temp agency Integrity Amazon unveils Kindle market capitalization, despite of facilities in its U.S.
Staffing Solutions lands the and prices e-books at a 2013 earning only $1 billion distribution network.
first of many contracts to staff loss, deterring competitors Amazon wins a $600 million in profits over 5 years to
Amazon’s warehouses. from entering the market. It contract to build a cloud Walmart’s $80 billion. Some In 16 states, Amazon is still
amasses a 90% share of the system for the U.S.’s 17 speculate Wall Street sees an exempt from sales tax, a
e-book market. intelligence agencies. emerging monopoly. competitive advantage that
2000
an Ohio State study finds
Amazon opens its platform
A temp worker is crushed Amazon launches Amazon boosts its sales by nearly 10%.
to third-party sellers, using 2009
to death at an Amazon Flex, a piece-rate, ‘Uber’
the data their sales generate Amazon acquires Zappos
warehouse and though model in which anyone with a Analysts from Credit Suisse
to master one industry after in a shotgun-wedding after
OSHA issues fines and driver’s license and a car can project soaring layoffs in the
another and expand its own losing $150 million selling
citations for unsafe practices, sign up to deliver packages retail sector as more brick-
retail operations. shoes below cost in order to
Amazon is shielded by to customers. and-mortar stores shutter.
force the rival shoe retailer to
the altar. layers of subcontractors and
2002 Amazon releases a video Research finds that Amazon
staffing agencies.
Amazon launches AWS, showing how its drones has begun selectively
which, by 2016, will control 2010 could deliver up to 86% of raising prices and that it
1/3 of the world’s cloud Amazon embarks on a 2014
its items and predicts that often steers consumers to
computing infrastructure, massive scaling up of its Nearly 40 percent of people
seeing them will “be as its own products or those of
powering everyone from logistics infrastructure, nearly looking to buy something
normal as seeing mail trucks sellers who use its fulfillment
Netflix to Comcast. quintupling the total square online are bypassing search
on the road.” services, even when another
footage of its fulfillment engines and starting on
seller is offering a lower price.
network by 2015. Amazon.
2003 Amazon opens its first
Amazon opens an office brick-and-mortar bookstore. Bezos passes Warren
Amazon’s Tracy, Calif.,
in the tiny tax haven of 2011 Reports later surface that it’s Buffett to become the
facility—an example of its
Luxembourg and, over the Amazon receives $61 million planning 300-400 bookstores planet’s third-richest
8th generation fulfillment
next dozen years, skirts in subsidies to open up a and as many as 2,000 person, with an estimated
centers—is staffed by 3,000
paying at least $1.5 billion fulfillment center in South grocery stores. net worth of $65 billion.
robots, 2,500 temps, and
in U.S. taxes, according to a Carolina, one of dozens of
1,500 regular workers.
claim by the IRS that covers such deals. Amazon’s growing market
just 2 of these years. share has caused more
Retail vacancies triggered
than 135 million square
by Amazon result in a drop
feet of retail space to
of $420 million in property
become vacant.
tax revenue for cities and
counties, the research firm
Civic Economics estimates.

* Projected based on Amazon’s 1st and 2nd quarter results.

Source: Revenue from Amazon’s annual reports. For other sources, see note six.

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 Monopolizing the
Economy
Amazon is Destroying Competition
and Market Diversity, Leaving Us with
Fewer Choices, Less Innovation, and
Diminished Opportunities
We once imagined that the web would be a democratizing force in the
economy, making it easier for anyone with a good idea to start a business,
find an audience, and succeed. “The digital revolution was supposed to
create an age of empowered micro-entrepreneurship, with power devolving
to the masses,” observes Steven Strauss, a visiting professor at Princeton.7

It hasn’t turned out that way. Five years ago, Americans spent $170 billion
shopping online, and Amazon accounted for one in four of those dollars.8
By last year, online spending had ballooned to $343 billion and Amazon’s
share of the market had grown to 40 percent.9 This year, we estimate, it has
soared to 46 percent.10

As retail spending, one of the largest sectors of our economy, rapidly moves
online, it’s even more rapidly becoming the domain of a single company. If

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 the current trends continue, in five years, more than many people still think of the company mainly as a
one-fifth of all the goods we buy will be purchased bookseller, and Amazon does indeed loom large
online, and more than two-thirds of this vast $700 in the book business. Two-thirds of books, both
billion stream of spending—spanning everything from print and digital, are now sold online and Amazon
washing machines to groceries—will be captured by captures nearly 70 percent of those sales.11 This is
Amazon. such a significant share of the market that Amazon
can, at any moment, remove the buy-button from a
As it has grown, Amazon has reached its tentacles particular title on its site and cause overall sales of
into so many different industries that it can be hard that book to plummet by 50 percent or more12 —a
to keep enough of the company in view to grasp how dominance so astounding that it warrants pausing
a moment to consider what it means. We
know Amazon has this power to destroy a
Amazon’s Growing Share of Online book’s prospects because it demonstrated
Retail Sales in the US it two years ago when it suspended pre-
orders and delayed shipping times by
weeks for thousands of books put out by the
publisher Hachette, and modified its search
and recommendation algorithms to direct
shoppers to other books. Amazon reportedly
wanted Hachette to fork over more fees, and
for several months it suppressed the career
prospects and incomes of some 3,000
authors to get its way.13

Among them was Wisconsin Congressman

Paul Ryan, a rising star in the Republican Party,
whose Hachette-published book The Way
Forward had just been released. Appearing
on CNBC, Ryan described his frustration.
“Clearly Amazon’s making kind of a power
play here,” he said.14 Amazon soon restored
Ryan’s book to normal, but other authors,
lacking the same clout, could do little but
watch as their creations floundered.

*Projected based on Amazon’s 1st and 2nd quarter results. As big as Amazon is in the book business
Source: Institute for Local Self-Reliance analysis of data from
though, books are now only of small
Amazon’s annual reports and Channel Advisor.
concern to Amazon, making up less than
7 percent of its revenue.15 The rest comes
from selling a vast array of other goods and
big it is, or take its full measure. Even more striking services. Amazon is on track to be the top seller of
than its scale, though, is its momentum. Amazon apparel by next year, having edged past Walmart and
today has the feel of a jet aircraft at the moment closing in on Macy’s.16 It is the second largest seller of
when it starts to gain lift-off. consumer electronics and will overtake the top seller,
Best Buy, in 2017, according to analysts at Deutsche
For several years after Jeff Bezos made Amazon.com Bank.17 Its share of the toy market has doubled in
live in 1995, the company sold only books. Today, the last four years, putting it on par with Toys R Us

11 | Amazon’s Stranglehold www.ilsr.org

 and Target.18 And Amazon is rapidly expanding into is just one piece of a massive investment Amazon’s
other big baskets of consumer spending, including making in its capacity to move goods from factory
the nation’s huge $800 billion grocery market, where floors to our doorsteps. It’s purchased thousands of
analysts predict its new fresh food delivery service— truck trailers, leased cargo planes, and, in the last
now available in 17 U.S. markets19—and its planned year, doubled the number of warehouses it operates.
network of hundreds of stores and pickup points20
will make it a top player within five years.21 As Amazon grows its logistics empire, it’s also
manufacturing more of the goods that are moving
through it. Earlier this year, the company unveiled 7 of
Even when we think we’re not doing its own fashion lines, offering more than 1,800 items
business with Amazon, sometimes we are. of apparel. It’s added hundreds of new products to
its AmazonBasics brand, which now furnishes a wide
It owns other big e-commerce brands, like
range of household items, from computer cables
Diapers.com, Zappos, Shopbop, to swivel chairs. On Amazon.com, many of these
and Audible. products rank as top sellers in their categories and
show up first in search results. Amazon publishes
books too, and it’s not uncommon for as many as half
Even when we think we’re not doing business of the titles on its Kindle bestseller list to be its own.
with Amazon, sometimes we are. It owns other big
e-commerce brands, like AbeBooks, Woot, and the Last May, Chamath Palihapitiya, a Silicon Valley
fashion powerhouse Shopbop. It owns Zappos and venture capitalist and owner of the Golden State
Diapers.com, both of which Amazon acquired through Warriors, stood before an audience of fellow investors
a shotgun-wedding approach after crippling each in New York City to give a presentation about
company financially. It also owns Twitch, the leading Amazon. He opened with a stunning assessment.
streaming platform for gamers, with 100 million “We believe there is a multi-trillion-dollar monopoly
monthly users, and Audible, the world’s largest audio hiding in plain sight,” he said of the company.23
book company. And its tentacles are reaching ever Calling Amazon a monopoly was not an accusation
deeper into the mechanics of our economy. Amazon or an admonishment. It was a tribute. Investors like
recently obtained an ocean shipping license from Palihapitiya have sent Amazon’s stock soaring in the
the Federal Maritime Commission that will allow it to last two years. Between October 2014 and October
move freight from China to U.S. ports.22 The license 2016, Amazon’s market capitalization—the total value
of its outstanding stock—rose from about $140 billion
to about $380 billion.

In the eyes of investors, Amazon is now worth nearly

twice what Walmart is worth, even though the latter
generated $80 billion in profit over the last 5 years,
while Amazon cleared only a little more than $1
billion.24 It’s obviously not Amazon’s current profits that
have sent investors clamoring to buy its shares. What
they see in Amazon is a company that has attained
such a powerful grip across multiple industries that
it can be counted on to yield spectacular, monopoly-
level returns in the coming years.
Amazon is rapidly expanding into new areas, including the nation’s $800
billion grocery market, with its food delivery service and planned network
of hundreds of stores and pickup points. Photo Credit: Andrew Nash

12 | Amazon’s Stranglehold www.ilsr.org

 In this section, we look at how Amazon has come role in enabling new products to find an audience.
to have so much power, how it uses its position People shopping in a local bookstore, for example,
to eliminate competition and block startups that are about three times more likely to discover a book
might challenge it, and how it exploits and hobbles they’d like to read than when they’re browsing books
manufacturers and then takes control of their on Amazon. The difference, manufacturers say, is that
industries. Amazon presents a vastly more dangerous these stores are run by people who are passionate
threat to competition than Walmart, because its ambition about books or sewing or sports. They create a
is not only to be the biggest player in the market. Its sense of community with customers, and maintain
intention is to own the market itself by providing the physical showrooms. Manufacturers are alarmed at
underlying infrastructure—the online shopping platform, the prospect of a future where this market diversity
the shipping system, the cloud computing backbone— gives way to a single online platform, and they say
that competing firms depend on to transact business. In Amazon’s dominance is already reducing their ability
effect, Amazon is turning an open, public marketplace to invent and launch new products. Consumers have
into a privately controlled one. little way of detecting this. “As a consumer, how
would you even know that something was missing?”
one manufacturer asks.

Jeff Bezos is betting that he can make buying from

Amazon so effortless that we won’t notice the
company’s creeping grip and all that we’re losing as a
result. One of his ongoing preoccupations is finding
ways to remove even the tiniest friction in the buying
process. “People do more of what’s convenient and
friction-free,” he has said.26 When we place an order
with a single click, or casually ask our Amazon Echo
speaker with its built-in voice assistant to send us
Elena Ferrante’s first novel, it can feel like we’re not
even choosing anything at all. Bezos has managed
to make shopping on Amazon “something close to
our unthinking habit,” notes journalist Franklin Foer.27
Amazon is positioning its platform to be as indispensable to commerce
online as our road network is offline. Photo Credit: Álvaro Ibáñez

Amazon has the power to pick winners and

We also examine how much Amazon’s accumulating losers, which is alarming enough in the
power is already costing us, and how much higher
context of toys or fashion, but downright
that cost will rise if we don’t act to check it. As
Amazon expands, the portion of the consumer goods
tyrannical when it comes to the creative,
economy outside of its control is shrinking. Over cultural, and political life of the nation. If
the last fifteen years, the number of independent Amazon can stifle Paul Ryan, then surely it
retailers has fallen by about 108,000.25 This decline can do so to any writer.
has multiple causes, but surveys show that Amazon
is now by far the biggest. As the retail sector
becomes less diverse, we’re losing the invention Already there is evidence that Amazon is using its
and innovation that only a varied marketplace can huge trove of data about our browsing and buying
yield. In our interviews with manufacturers, they all habits to selectively raise prices, and it’s also started
describe local retailers as a kind of keystone species blocking access to certain products and delaying
in their industries. These businesses play an outsized shipping for customers who decline to join its Prime

13 | Amazon’s Stranglehold www.ilsr.org

 farmers and small business people who depended on
the rail lines. Americans responded by launching the
antitrust movement, and it’s to the ideas and policies
they brought forward that we should turn today in the
face of this new colossus.

Blocking Competitors and

Locking-In Consumers
“The fact that it’s always on, you never
have to charge it, and it’s there ready
in your kitchen or your bedroom or
wherever you put it, the fact that you can
talk to it in a natural way—removes a lot
“When you are small, someone else that is bigger can always come along of barriers, a lot of friction,” Bezos said
and take away what you have,” Amazon founder and CEO Jeff Bezos has
said. In July 2016, he became the third-richest person in the world. in October at an event in San Francisco. 28

program. But to focus too much on prices is to miss He was referring to the Echo speaker, Amazon’s latest
the real costs of a monopoly. Amazon increasingly device. Echo is powered by Alexa, an always-listening
controls what products make it to market and appear voice assistant, and it allows people to play music,
before us as we’re browsing. It has the power to pick check sports scores, review a bank balance, adjust the
winners and losers, which is alarming enough in the thermostat, hail an Uber ride, and, of course, order from
context of toys or fashion, but downright tyrannical Amazon, all by speaking. Amazon’s already sold over 5
when it comes to the creative, cultural, and political million Echo speakers,29 which the company prices, as it
life of the nation. If Amazon can stifle Paul Ryan, then does most of its devices, below what it costs to produce
surely it can do so to any writer. them.30 Thousands of companies are now integrating
Alexa into their own products. People will soon be able
And that’s hardly all that’s at stake. Amazon’s to use Alexa to control their GE appliances,31 and they’ll
tightening hold on our economy is damaging be able to call up the voice assistant while driving
our ability to earn a decent living. The rate of new several models of Ford cars.32
business formation has fallen sharply over the last
decade. There are fewer small, young, and growing
businesses, which economists say is stunting job Jeff Bezos is betting that he can make
creation, pushing more people out of the middle buying from Amazon so effortless that we
class, and worsening income inequality. won’t notice the company’s creeping grip.

For all of Bezos’s insistence that Amazon represents a

modern form of commerce, and that to challenge it is Bezos’s idea is to make Alexa the central nervous
to challenge the digital revolution itself, what’s striking system of our daily lives, so that Amazon will always
when we look closer is how much this company seems be at our beck-and-call, mediating our activities and
to belong to the Robber Baron age. Back then, men taking our shopping orders, while our lives, in turn,
like Cornelius Vanderbilt and J.P. Morgan harnessed will always be open to Amazon’s tracking and data-
a new technology, the railroad, to stifle competition gathering. To lure more users to the system, Amazon
across multiple industries and extort money from recently added a perk: anyone who buys an Echo can

14 | Amazon’s Stranglehold www.ilsr.org

 sign up for Amazon’s new music streaming service
for just $3.99 per month.33 That’s less than half the
cost of competing services like Spotify, and analysts
say it’s below what Amazon spends to license and
stream the music, meaning the company plans to
lose money on both the speaker and the service with
each customer who signs up.34

Over the years, Amazon has deliberately incurred

losses like this in one venture after another, and
these losses, together with investors’ willingness to
back the company despite them, form a key part of
the story of how Amazon came to be a “multi-trillion-
dollar monopoly hiding in plain sight.” The company
uses losses as a tactic for wresting market share
Amazon’s idea is to make its Echo speaker, and the always-listening voice from competitors, which are generally smaller and
assistant Alexa, the central nervous system of our daily lives. Photo Credit:
lack the financial backing to match Amazon’s below-
Amazon
cost selling. It also incurs losses to fund perks, like
cheap music and all-you-can-eat shipping for a flat
Share of Online Shoppers Who annual fee, that hook customers, entwine them in the
Amazon ecosystem, and sharply reduce the chances
Begin Their Search on Amazon
they’ll shop anywhere else.

Bezos, who worked on Wall Street before founding

Amazon, has always been candid with investors
about his strategy. In a letter to shareholders after
the company went public in 1997, Bezos wrote
that he would “make investment decisions in light
of long-term market leadership considerations
rather than short-term profitability.”35 In other words,
Amazon would spend as much as it could to grab
market share. Over the next six years Amazon lost a
staggering $3 billion36 and investors barely winced.37

One ongoing target of this strategy has been the book

Sources: “Amazon: Friend Or Foe for Retailers,” Forrester Research, business. “Amazon has sold tens or possibly hundreds
July 26, 2012; “Google Shopping to Counter Amazon: Testing ‘Buy of millions of physical books at or below cost,” Authors
Now’ Button, Other Enhancements to Build Online Commerce Site,” United, a coalition of authors, wrote in a letter to the
Rolfe Winkler and Alistair Barr, Wall Street Journal, Dec. 15, 2014;
head of the Antitrust Division of the U.S. Department
BloomReach via “Amazon Is Absolutely Eviscerating Other Retailers
Online, New Survey Shows,” Jason Del Rey, CNBC, Oct. 6, 2015; of Justice last year.38 When Amazon introduced the
BloomReach via “More Than 50% of Shoppers Turn First to Amazon in Kindle e-book reader in 2007, it extended this practice
Product Search,” Spencer Soper, Bloomberg, Sept. 27, 2016. to e-books, selling many titles for less than it was paying
publishers.39 This drove sales of the Kindle, which in
turn ensured customers would buy virtually all of their
e-books from Amazon. Since potential challengers were
unable or unwilling to incur similar losses, Amazon was
able to amass and hold 90 percent of the market for
e-books.40

15 | Amazon’s Stranglehold www.ilsr.org

 Profits of Amazon How Wall Street Values Amazon
and Walmart, 1997—2015 and Walmart, 1997—2016
$400 Billion
$18 Billion

$15 Billion
$300 Billion

$12 Billion

$200 Billion
$9 Billion

$6 Billion $100 Billion

$3 Billion

$0 Billion
2016*

* As of May 2016.
Sources: “Amazon.com Market Cap,”
Sources: Annual reports of Amazon and
YCharts, accessed May 2016; “Walmart
Walmart.
Market Cap, YCharts, accessed May 2016.

In 2010, publishers pushed back, changing the Amazon has also used its capacity for taking on
terms of their e-book contracts to bar Amazon’s big losses to crush upstart competitors. One such
below-cost pricing. Amazon’s market share dropped challenger was the shoe retailer Zappos. As Zappos
to 65 percent,41 as Apple, Barnes & Noble, and soared in popularity, doubling its sales between
independent bookstores, through a partnership with 2004 and 2007, Amazon offered to buy it. When
Kobo, finally had a chance to compete for e-book Zappos executives refused to sell, Amazon debuted
sales. But the U.S. Department of Justice, prodded a competing shoe site and started selling shoes at a
by Amazon, sued the publishers for collusion,42 and loss, offering free overnight shipping and, later, a $5
Amazon soon regained its footing. In 2011, Borders rebate on every purchase. The site was called Endless.
Books filed for bankruptcy. In 2014, Sony ceased com, perhaps a reference to Amazon’s endlessly
producing its e-reader and shuttered its e-book deep pockets. Straining to keep its customers,
store,43 and Barnes & Noble, which has closed Zappos matched Amazon’s express shipping and
dozens of stores, has shifted resources away from began to lose money itself on every pair of shoes it
its Nook reader.44 Independent bookstores have sold. All told, Amazon lost $150 million on the gambit,
seen a modest resurgence in recent years, and they and it prevailed: in 2009, hemmed in by financial
continue to sell e-books, but their numbers remain constraints, the Zappos board voted to sell.45
well below what they were 15 years ago, according
to the American Booksellers Association. Today,
Amazon’s market share appears to be inching up.

16 | Amazon’s Stranglehold www.ilsr.org

 Similarly, when Quidsi, the innovative e-commerce more one orders from Amazon, the more value in free
firm behind Diapers.com, emerged as a vigorous shipping one derives from the annual fee. Less than
competitor in diaper sales in 2009, Amazon offered 1 percent of Prime members visit competing sites
to the buy the company and, when the founders while shopping on Amazon, and Prime members
refused, slashed its diaper prices to well below its spend almost three times as much with the company
own cost. According to reporting by Brad Stone in his as non-Prime customers do.50
book The Everything Store, Amazon was prepared to
lose $100 million over three months in its bid to force Already, 63 million Americans, representing about
Quidsi to sell.46 It succeeded. Although Diapers.com half of all households, are enrolled in Prime.51 To
and its sister sites, like Soap.com, remain standalone prod the rest to join, Amazon has begun using sticks
online stores, they are now owned by Amazon. as well as carrots. It has slowed shipping times for
non-Prime households52 and made some products,
including popular video games, unavailable for
The point of the membership fee for Prime purchase by non-Prime customers.53
has never been about money. Signing up
Today, 55 percent of people looking to buy
for Prime greatly reduces the chances that
something online are skipping search engines and
a person will shop around.
starting their shopping directly on Amazon’s site.54
The spread of Echo will almost undoubtedly drive
that figure higher. And, in a bid to further minimize
By 2009, Amazon was capturing more than 15 percent
friction and cement Amazon as our unthinking
of online spending. It had begun to post modest
habit, the company recently secured a patent for
profits, but by then had earned only barely enough
“anticipatory shipping,”55 a technique that will enable
to make up for its previous losses. After 13 years in
it to use its extensive cache of data about our habits
business, Amazon had generated virtually no return
to determine what products we need and want even
for investors, but, as Bezos had promised, it had taken
before we know it ourselves.
over a sizeable share of the market and now had a
huge revenue stream to fund further expansion. At
this point analysts began to track an even more telling
metric of its power: In 2009, nearly one in five people
looking to buy something online skipped search Enclosing and Privatizing
engines like Google and headed straight to Amazon.47
the Market
To drive that figure even higher, Amazon had
launched Prime, a program that offers customers “For 37 years, we were constantly
unlimited 2-day shipping, and same-day shipping in reinventing, and we did that over
some cities, along with perks like streaming movies and over again,” says Bill Keller, who,
and television shows, for a $99 annual membership
together with his wife Joan, opened a
fee. Much like Echo, what customers pay for Prime is
less than it costs Amazon, which loses an estimated travel store in San Diego in 1976. 56

$1 billion a year on the shipping perks alone.48 But

the point of the fee has never been about money. They took the business online at LeTravelStore.com
As Vijay Ravindran, a former technical manager at in 1997 and for more than a decade, the Kellers did a
Amazon, explained to Brad Stone: “It was never brisk business on the web, even as they continued to
about [the fee]. It was really about changing people’s run their store. “At our peak, web sales approached 60
mentality so they wouldn’t shop anywhere else.”49 percent of our business,” says Keller. But sales began
Signing up for Prime greatly reduces the chances a steep slide in 2011 as more shoppers stopped
that a person will shop around, in part because the using search engines to find products, which might

17 | Amazon’s Stranglehold www.ilsr.org

 lead them to Le Travel Store, and headed straight for generated, to master one industry after another and
Amazon instead. At that point, Keller says, “It became expand its empire. “That was something we did quite
clear that if you were going to sell online you had well,” Randy Miller, a former merchandising director at
to go [through] Amazon.” Desperate to salvage Amazon, told Brad Stone. “If you don’t know anything
their business, the Kellers enrolled Le Travel Store about the business, launch it through the Marketplace,
as a third-party seller on Amazon’s site. But they bring retailers in, watch what they do and what they
quickly found that what had made their own web sell, understand it, and then get into it.”58
site and store a success—their wealth of knowledge
about world travel and travel gear, and the attentive, Marketplace was more than a transitional strategy
personalized service they provided—was impossible though. Today, nearly half of Amazon’s unit sales
to replicate on Amazon, which restricted their worldwide are generated by third-party sellers, up
interactions with customers. A few months later, the from one-quarter a decade ago.59 Most shoppers
Kellers closed for good. have scarcely noticed this evolution, because Amazon
gives its Marketplace sellers only the barest visibility.
By corralling an ever larger share of the web’s The seller’s name is mentioned just once in small text
shopping traffic, Amazon has forced other retailers on the product page (“sold by such-and-such”), the
and producers who want to sell online to reckon with checkout process is the same, and many sellers use
a Faustian choice. They can either continue to be Fulfillment By Amazon, or FBA, so their products are
independent, hanging their shingles out on search warehoused by the company and shipped from its
engine byways less and less traveled by shoppers, fulfillment centers in Amazon boxes.
or they can set up shop as third-party sellers on
Amazon’s site, forfeiting much of their knowledge,
revenue, and autonomy to their most powerful
By operating as both a direct retailer and
competitor.
a platform for competing sellers, Amazon
Amazon opened its platform to third-party sellers can toggle back and forth, leveraging the
back in 2000 and dubbed the initiative Amazon interplay between these two parts of its
Marketplace. “We wanted to position ourselves as business to maximize its market power.
the place to start for shopping,” Amazon executive
Diego Piacentini explained to the Los Angeles
Times.57 To do this, Amazon would need to offer These inconspicuous sellers, and their dependence
just about anything a shopper might want to buy, on Amazon, form another piece of the story of how
and it would need evolve into an “everything store” Amazon came to be “a multi-trillion-dollar monopoly
quickly, before competitors gained a toehold. At the hiding in plain sight.” By operating as both a direct
time, though, the company understood few product retailer and a platform for competing sellers, Amazon
categories besides books. Rather than hire its own can toggle back and forth, leveraging the interplay
buyers and try to figure out complicated industries between these two parts of its business to maximize
like apparel, Amazon invited other sellers onto its market power. It uses the data it gleans from sellers
its platform. Their arrival began to spin Amazon’s to expand its direct retail operations, picking off the
“flywheel,” which is a favorite Bezos metaphor for most advantageous segments for itself. And it uses
the way each of the company’s strategies feeds the its platform, now the gateway to more than half of
others. As third-party sellers broadened Amazon’s online shoppers, to induce its smaller rivals to supply
selection, more customer traffic migrated to the site, the rest of its selection, while it levies a lucrative tax
which in turn induced more sellers to join, and so on. on their sales.

Along the way, Amazon drew on its sellers’ expertise, At its core, Amazon is an infrastructure company, and
and the immense stream of data their transactions it’s positioning its platform to be as indispensable

18 | Amazon’s Stranglehold www.ilsr.org

 to commerce online as our road network is offline.
Amazon has the same vision for another of its divisions,
Amazon Web Services. AWS controls one-third of the Who Are Amazon’s
world’s public cloud computing capacity, more than Third-Party Sellers?
Microsoft, IBM, and Google combined.60 The list of
companies that rely on it is miles long and includes Because Amazon reveals so little information about third-party
sellers, it’s hard to develop a complete picture of who they are.
Netflix, Dow Jones, and Comcast. In his presentation
Amazon reports that it has 2 million sellers worldwide, but the
last May, as he illustrated Amazon’s potential to vast majority of these are people casually selling a few things,
produce monopoly-level returns, Palihapitiya noted much like people do on eBay or Craigslist. Only a tiny fraction
that AWS amounts to “a tax on the internet.”61 AWS are businesses, in the sense that they generate enough income
to support at least one person. In the U.S., we estimate that
allows Amazon to tax one large segment of the
these number in the thousands.
world’s economic activity; Marketplace allows it to
tax another. Perhaps the largest part of this group, and the mainstay of
Marketplace at least until recently, consists of sellers whose
entire business is selling online, mostly on Amazon. Some
specialize in particular products, but most are retail arbitragers
It would be as if Walmart owned most who offer an ever-changing assortment of goods, often

of our malls and Main Streets, decided acquired from grey-market dealers. To succeed, these sellers
rely on software that adjusts their prices every few minutes,
the terms by which its rivals could with the aim of underpricing other sellers and winning the buy-
rent these spaces, and oversaw box—that is, being selected by Amazon as the default seller on

every sale they made.

a product page. Most have no expertise in the products they
sell and little contact with customers. It’s “like they are trading
stocks,” explains Juozas Kaziukėnas, founder of Marketplace
Pulse.64 “It’s not like traditional retail. If you talk to sellers, they
tend to quote movies like Moneyball.” A growing share of these
In effect, Amazon is supplanting an open, public sellers are based overseas and use Amazon’s logistics network
to get their products to U.S. doorsteps.
marketplace, governed by democratic rules that
facilitate competition and fair play, with a privately As Amazon has siphoned off a larger share of customer
controlled market in which entrepreneurs have to traffic in the last few years, the arbitragers have been joined
abide by Amazon’s rules and pay tribute to it.62 It would by a stream of manufacturers and consumer brands. They
include small businesses like Carved, whose 17 employees
be as if Walmart owned most of our malls and Main
design and produce wooden iPhone cases in Elkhart, Ind., as
Streets, decided the terms by which its rivals could well as industry giants like Levi Strauss and KitchenAid. Many
rent these spaces, and oversaw every sale they made. became Marketplace sellers only reluctantly. “We realized you
are damned if you do, damned if you don’t,” the CEO of a toy
company told us.65
As if keen to divert attention from the existential
threat this poses to a competitive market, Amazon’s Alongside the arbitragers and producers, a small but steady
executives have recently been touting Marketplace trickle of independent retailers are giving in to Amazon
as a cradle of entrepreneurship. In an interview with too. “Philosophically, it is tough, but competitively, you
have to think, how are you going to continue to survive?”
the Seattle Times earlier this year, Peter Faricy, an
the owner of a 31-year-old sporting goods business
Amazon vice president, said of Marketplace: “What with several stores in the Upper Midwest said, referring
this really created is kind of a level playing field for to his recent decision to become an Amazon seller.66 His
entrepreneurs and small-medium businesses.”63 own web site has been generating decent sales, but he
can feel the tide shifting as his customers spend more
time on Amazon and the site becomes their default
This is the fox characterizing his efforts on behalf of provider of everything. Amazon, he says, is now “both a
the hens. Amazon exploits its sellers, benefiting from competitor and an access to the consumer base.” The decision
their product expertise and work, while destabilizing isn’t sitting well, though. “My business model is all about the
customer relationship and I can’t do that on Amazon,” he says.
their businesses. Its market dominance means sellers
have little recourse or alternative, and there’s always
a steady supply of new sellers to take their place.

19 | Amazon’s Stranglehold www.ilsr.org

 Amazon keeps a percentage of each Marketplace But these fees are hardly the most valuable thing
sale; for most products, it’s 15 percent, but can be Amazon takes from sellers. It also appropriates
as high as 50 percent for some items. It gets this their product knowledge. Upstream Commerce
cut “through zero effort,” notes Juozas Kaziukėnas, recently tracked 857 apparel items first offered
founder of Marketplace Pulse, which tracks the for sale by Marketplace sellers and found that,
industry.67 And Amazon takes its piece off the top. within 12 weeks, Amazon began selling 25 percent
If other sellers, or Amazon itself, drive the price of of their top-selling items.69 Another study by
an item down, and a seller is stuck with inventory to researchers at Harvard Business School also looked
unload, the seller can end up losing money while at patterns in Amazon’s entry into new product
Amazon still takes 15 percent. areas and found, “The likelihood of Amazon’s entry
is positively correlated with the popularity and
customer ratings of third-party sellers’ products.”70
The researchers, who described their findings as
a “gloomy picture” for sellers, added, “Results also
show that third-party sellers affected by Amazon’s
entry appear to be discouraged from growing their
businesses.”

Once Amazon brings a seller’s most popular products

into its own inventory, it can lower its price so that it
becomes the default seller, or simply award itself the
buy-box anyway. “In our setting, we observe across
many instances of Amazon entry that Amazon may
present itself as the default seller even when third-
party sellers’ products are offered at lower cost,” the
Harvard researchers report. A ProPublica analysis
this year likewise found: “About three-quarters of the
time, Amazon placed its own products and those of
Amazon is expanding on college campuses. Photo Credit: Charles Jischke
companies that pay for its [FBA] services in [the buy-
box] position even when there were substantially
cheaper offers available from others.”71
On top of this, there are fees for warehousing and
shipping if the seller is using FBA, which Amazon Amazon blocks sellers from building relationships with
strongly encourages by giving FBA sellers a much their customers, which, alongside product expertise,
better shot at the buy-box—that is, being chosen by is another key to being a successful retailer. Amazon
Amazon’s algorithms as the default seller on a product fiercely guards these customers as its own, allowing
page. By inducing sellers to use FBA, Amazon has sellers to communicate with them only through its
upped the volume of packages it handles, which has system. It monitors these exchanges and forbids
given it more leverage to wrest discounts from carriers sellers from, among other things, including links to
like UPS. These discounts have in turn led carriers websites. Doing so prompts an immediate warning. “It
to raise shipping prices for small businesses, some has come to our attention that you may be attempting
evidence suggests, creating a further inducement to redirect Amazon.com buyers to another Web site,”
for them to use FBA.68 (This added package volume read the message Stardust Memorials, a purveyor
has also given Amazon greater scale economies as it of cremation urns, received from Amazon last year
builds out its own package delivery systems, the next after responding to a customer’s question about
piece of its infrastructure empire, which we’ll explore engraving.72 An employee of this Michigan-based
later in this report.) small business had replied that custom engraving

20 | Amazon’s Stranglehold www.ilsr.org

 orders could be made through Stardust Memorials’ their wares on Amazon.com, often at low prices,”
own website. But however helpful that message Internet Retailer reported last December.76 “It’s no
may have been to the customer, it was unwelcome accident: Amazon is actively encouraging Chinese
by Amazon, whose automated system immediately merchants to sell on its sites, and recently unveiled
flagged it. new services designed to increase the selection of
Chinese goods available.”
A violation of this or any of Amazon’s many rules can
lead to the abrupt cancellation of a seller’s account And Amazon remains as remorseless as ever in
and an immediate halt to her income. “The biggest cutting off sellers who displease it. In a story reported
thing everyone is scared of is being suspended,” says by Spencer Soper of Bloomberg, Emad Abukheit
Kaziukėnas. Suspensions are frequent. Amazon seller described building a business in North Carolina
boards on Reddit are filled with frantic sellers trying selling health and beauty products on Amazon, only
to figure out how to get their accounts reinstated. to have his account abruptly suspended, forcing him
A cottage industry of consultants has sprung up to to lay off his employees.77 “It’s been a nightmare,” he
help them. Sellers describe Amazon’s process as told Soper. “They were our partner. You can’t just put
confusing and inconsistent, and they say it’s made your partner out of business.”
harder by the fact that Amazon insists on handling
everything through email.73 In theory, sellers like Abukheit could diversify their
revenue or drop Amazon entirely. But where could
they go? Amazon commands such a large share of
Amazon can upend a seller’s livelihood online shopping traffic that platforms operated by
other companies, including Walmart and eBay, are
by abruptly changing its terms.
only anemic options. According to Kaziukėnas, even
the biggest companies selling on Amazon are almost
wholly dependent on it. “While they are trying to
Short of dismissing a seller, Amazon can also upend sound as if they are diverse and that they are selling
his livelihood by abruptly changing its terms. “You in different places,” he says, “there is no doubt that
completely rely on Amazon’s rules and those rules 90 percent of their sales are Amazon.”
tend to change a lot,” explains Kaziukėnas. He points
to Amazon’s latest round of price hikes for sellers,
announced in May, which sharply raised fees for
FBA.74 “All of the sudden your business model has
changed. You have to change how you manage
Shaking Down Producers
supply and demand,” he says, adding: “No matter
how successful you are, depending on what you do, In July Birkenstock announced that it
it might become impossible for you to do it anymore.” would no longer sell its popular shoes
to Amazon, and that, as of January 1,
Sellers who mistakenly think of Amazon as a partner 2017, it would not authorize third-party
have learned the hard way that it has little interest
in their survival. Competition for the buy-box has
sellers to sell them on the site either.
grown more ruthless in the last year as Amazon
has recruited a new contingent of sellers based in “Amazon direct was one of our largest accounts,”
China, and extended its FBA service into a global David Kahan, CEO of Birkenstock USA, wrote in
logistics network that directly links Asian factories a letter to the company’s retail partners. Giving
with U.S. and European households.75 “U.S. sellers on up the revenue, Kahan explains, was necessary
Amazon.com Inc.’s marketplace have taken note of to protect the 240-year-old company’s reputation
the growing number of Chinese companies offering with customers and ensure “a fair and competitive

21 | Amazon’s Stranglehold www.ilsr.org

 environment” for its retail partners.78 At issue was And Amazon is no help. “They don’t help at all when
Amazon’s refusal to stem a “constant stream of it comes to helping us contact unauthorized sellers,”
unidentifiable unauthorized sellers” who disregard says the CEO of a 20-year-old clothing brand that
Birkenstock’s policies, including “postings by sellers specializes in sustainable, U.S.-made fabrics.80 In
proven to have counterfeit Birkenstock products.” fact, Amazon shields the identities of sellers and
makes it easy for them to open multiple accounts
Kahan goes on to disclose that, in three years under different names. Even the consumer products
of discussions with Amazon’s management, he giant Johnson & Johnson, which makes Tylenol, has
“presented multiple proposals and ‘out-of-the-box’ struggled to get Amazon to take action against sellers
ideas” to address the problem. But Amazon declined peddling damaged and expired medications.81
to act. “Amazon has made it clear that the only way
to achieve a ‘clean’ environment (no counterfeits and
no unauthorized sellers),” Kahan reports, “is to sell Amazon has a long history of retaliating
our complete product offering to Amazon directly.”
against suppliers who resist its ever-
Like many manufacturers, Birkenstock sells its most
mounting demands for bigger discounts
popular shoes through every channel, including mass
retailers like Amazon, while it reserves part of its line, and more fees.
typically new and niche designs, for brick-and-mortar
stores. These stores provide extensive marketing
and customer service for Birkenstock, which helps it This is another way that being both a platform
sell more shoes, and, in exchange, they get to carry a and a direct retailer magnifies Amazon’s market
deeper selection. power: it enhances the company’s ability to bend
manufacturers to its will. For one, Marketplace takes
Amazon would like to take these sales for itself, but it away producers’ only real source of leverage in
needs access to Birkenstock’s entire line of products negotiations: even if they decline to sell to Amazon,
to do it. It’s been using the threat of allowing an at least some of their products will likely still be
unending river of counterfeits on Marketplace to available on the site through unauthorized sellers,
bully Birkenstock into giving in. preserving Amazon’s status as a place one can find
anything. Indeed, Birkenstock’s Kahan expects
As strictly as Amazon patrols the behavior of that shoppers will still be able to find a pair of
Marketplace sellers in some ways, it’s conspicuously Birkenstocks on Amazon next year, but warns: “It may
lax in others. Amazon’s platform has “become a be counterfeit. It may be stolen.”
haven for counterfeiters,” according to reporting this
year by Ari Levy of CNBC. Among his many examples Second, Amazon uses its ability to selectively police
is the story of a California company called Forearm this activity to pressure suppliers into agreeing to
Forklift, which has had to lay off more than half of its its terms. Manufacturers we interviewed described
52 employees as shoddy knock-offs of its patented meetings in which Amazon buyers pressed them
moving tools have proliferated on Amazon, causing aggressively and made direct references to
its sales to plummet. Levy writes that Amazon’s Marketplace. “One of the things they said when
responses to the company’s many complaints have we were leaving was that it would be a wild, wild
“ranged from terse to deflecting.”79 Alongside the West,” an executive with a mid-sized sporting goods
counterfeiters, there are the fly-by-night arbitragers, manufacturer told us, referring to a conversation with
who acquire goods from grey-market dealers, dump Amazon buyers shortly after his company decided to
them on Amazon, and let their pricing bots drive stop selling directly to Amazon. “Sure enough, we
margins to near-zero. For smaller manufacturers saw people [selling our product] all over the place
especially, this is crippling since they suddenly find [on Marketplace].”82
that the retailers they’re counting on to move their
full line are not able to compete on popular items.

22 | Amazon’s Stranglehold www.ilsr.org

 Birkenstock enjoys an exceptional level of brand As Amazon has squeezed bigger fees from
recognition and stature with its customers and, publishers, both authors and readers have paid
perhaps owing to this, its declaration against Amazon a price. Money to invest in “serious fiction and
is unusual for its daring. Most manufacturers can ill nonfiction has eroded dramatically in recent
afford to give up half of the online market, much less years,” writes Packer. Publishers are putting out
risk Amazon’s retaliation by publicly denouncing it. fewer titles,88 while the average’s author’s income
has fallen by about 30 percent since 2009,89
Their fear is well-founded. Amazon has a long history and publishers are focusing more on books by
of retaliating against suppliers who resist its ever- established authors that offer better odds of
mounting demands for bigger discounts and more success. “The quest for publishing profits in an
fees. In the early 2000s, as Amazon solidified its economy of scarcity drives the money toward a
dominance in the book business, Bezos initiated a few big books,” Packer explains.
campaign to squeeze small publishers for better
terms. Inside Amazon, the campaign was dubbed As Amazon expands its grip on other industries,
the “Gazelle Project,” according to Brad Stone, after becoming the dominant seller of clothing and office
Bezos told buyers that they “should approach these supplies, toys and tennis rackets, it’s repeating
small publishers the way a cheetah would pursue the same hardball tactics it first developed in the
a sickly gazelle.”83 One target was Melville House, a book business, and with the same damaging effect
small Brooklyn-based publisher of quality fiction on new product development. “With Amazon as
and non-fiction books. When Amazon approached a customer, every year we would go to sign the
Melville House and demanded it pay another papers, and they would ask for more and more
sizeable fee, its CEO Dennis Johnson bristled at the and more. Every year they would ask for more
shake-down, refused to pay, and called Publishers shipping allowance, more co-op, and so on,” says
Weekly. A story soon appeared and the following the sales manager of a 20-year-old game and
day, Amazon removed the buy-buttons from every puzzle company.90 “So the question becomes, now
Melville House title on its site. At the time, Amazon that you have gotten yourself into this mess, how
represented 8 percent of the company’s sales, which do you get yourself out?”
it couldn’t afford to lose. “I paid that bribe,” Johnson
said, “and the books reappeared.”84 Today, producers find themselves sinking ever
further into Amazon’s quicksand. Amazon uses
“When you are small, someone else that is bigger can the money it extracts from them to fund the
always come along and take away what you have,” many perks it provides Prime members, and to
Bezos has said.85 As Amazon’s share of book sales has cover the losses it incurs enticing more people to
soared, so have its demands for more payments from install Echo speakers in their homes. This in turn
publishers. “Amazon frequently surprises publishers at binds consumers ever more tightly to Amazon’s
the end of the year with a sudden demand to pay a flat ecosystem, which then makes suppliers more
fee equal to a percentage of the previous year’s sales,” dependent on Amazon to reach customers, and
according to Authors United.86 These fees “keep rising, thus even more vulnerable to its demands.
though less for the giant pachyderms than for the sickly
gazelles,” writes George Packer in a 2014 investigation And, as if slowly hollowing out their companies
for The New Yorker.87 If publishers don’t pay up, Amazon were not enough, Amazon is now going a step
pulls their books out of its recommendations algorithms, further: It’s taking their best ideas and competing
so they are no longer promoted to customers. directly against them.
(Unbeknownst to many shoppers, placement is for
sale on Amazon: What shows up in search results and
recommendations is partly determined by payments
extracted from suppliers.)

23 | Amazon’s Stranglehold www.ilsr.org

 exercise ball, or a desk chair, and there at top of
the results will be an item from AmazonBasics.95
Expanding into “When we saw AmazonBasics products as best
sellers in numerous categories, our stomachs
Manufacturing dropped,” Tristan Clausell, a staffer at Skubana,
which sells software for third-party sellers, wrote
After selling their cleverly designed in a post on the company’s blog.96
aluminum laptop stands through
Amazon for more than a decade, Amazon also offers bed linens through its Pinzon
brand, and baby wipes under AmazonElements.
employees at Rain Design, a small
It recently debuted several lines of perishable
business in San Francisco, were foods, including coffee, baby food, and snacks,
dismayed last year when Amazon sold under brands such as Happy Belly and
introduced a nearly identical product. Mama Bear.97

The only visible difference is that Amazon swapped And, early this year, Amazon quietly unveiled
the stand’s iconic rain drop imprint for its own seven separate fashion labels—under names like
smiling arrow logo.91 As of this writing, if you shop Franklin & Freeman and Lark & Ro—offering over
for a laptop stand on Amazon, the first three images 1,800 items of clothing for men, women, and
you see, aside from those in the paid ads, are of the children.98 It’s Amazon’s bid to become both the
company’s own stands.92 Rain Design’s stand, despite apparel industry’s largest retailer and its largest
having a higher rating and more customer reviews manufacturer. The move is “a threat more to us
than Amazon’s, has dropped further down the search because we sell basics with a twist,” the CEO of
results, and its sales have fallen in turn. “We don’t feel the sustainable clothing brand told us.99 “The
good about it,” Harvey Tai, the company’s general brands are bringing as much excitement and
manager, told Bloomberg.93 energy to that site as Amazon itself. If all the
brands are being show-roomed, and Amazon is
By now, Amazon is highly adept at exploiting its using that data to undercut the brands, that’s an
control of one market to move into adjacent markets. unfair market.”
As we’ve seen, through Marketplace, it provides
essential market access for competing retailers and
then uses the data it gleans from them to expand its For manufacturers, the sudden arrival
own retail sales. In a similar way, Amazon has begun of an Amazon-made knockoff
to exploit the data it’s gathered from manufacturers
topping the site’s search results
to compete directly with them by producing the
same products. Amazon has targeted both everyday
can devastate sales.
goods made by large brands like Procter & Gamble
and products dreamed up and produced by small
companies like Rain Design. Store brands are nothing new, of course.
Supermarkets and other retail chains have long
For these manufacturers, the sudden arrival of an offered their own private-label products. But
Amazon-made knockoff topping the site’s search Amazon’s move into manufacturing is different.
results can devastate sales. Amazon’s laptop One reason it’s a bigger threat to competition
stands are part of its AmazonBasics label, a rapidly and consumer choice is the company’s sheer
expanding line that now includes over 900 products, market power. By being the first-destination
nearly one-third of which were introduced just in the for more than half of internet shoppers,
last 18 months.94 Search for batteries, headphones, an Amazon has unprecedented power to direct

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 consumers to its own products and disadvantage the fashion world by sponsoring events like the Met
particular competitors in its search rankings and Ball and New York’s first Men’s Fashion Week,102 all
recommendations. the while building its knowledge and market share
before unveiling its own competing lines.
Another reason that Amazon’s advance into
manufacturing is a more serious threat to competition Amazon followed the same playbook in the book
is the company’s vast trove of data. Unlike Kroger or industry. It cozied up to publishers in the lead up to
CVS, which gather basic sales data on the products the release of its Kindle e-reader in 2007. “Publishers—
they stock, Amazon has data on everything sold on including all the major publishers—have embraced
its platform, and that data is matched to individual Kindle, and we’re thankful for that,” Bezos wrote in
consumers. It knows what we search for, find, don’t find, his letter to shareholders that year. Two years later,
browse, buy, and don’t buy. It also knows much about Amazon became a book publisher itself, launching
what we do when we are not shopping, including how the first of several imprints. Today, books from
we spend our time online, what we watch on Amazon Amazon’s imprints and its self-publishing division
Prime, and what we tell our Echo speakers to do. This are featured prominently on both its site and the
gives Amazon a formidable advantage in going after Kindle platform, and it’s not unusual for as many as
its suppliers’ customers. half of the top 25 titles on the Kindle bestseller list
to be Amazon’s.103 Asked recently about his former
One telling clue as to the scope of Amazon’s partners in the publishing industry, Bezos remarked,
ambitions as a producer is that its own products, “It’s very difficult for incumbents who have a sweet
unlike typical store brands, are not a low-budget thing to accept change.”104
alternative to the leading brands. Many of Amazon’s
wares, including its coffee and baby food, carry
higher price tags than competing premium-brand
products.100 These private-label products earn higher
margins for Amazon than what it makes selling other
Fewer Choices and
firms’ goods. Shrinking Opportunities
That’s not the only advantage. By making its
As the world under Amazon’s umbrella
own products, Amazon also gains leverage in its
negotiations with suppliers; should they resist its
expands, the world outside its control
terms, Amazon can offer consumers a nearly identical is shrinking. Over the last fifteen years,
product. Speaking at a fashion industry event last fall, the number of local, independent retail
Jeff Yurcisin, vice president of clothing at Amazon businesses in the U.S. fell by 108,000—
Fashion, delicately delivered a threat as he explained
a drop of 40 percent when measured
Amazon’s reasons for launching its own clothing lines
to a nervous audience of apparel producers: “When
relative to population. 105

we see gaps, when certain brands have actually

A primary cause of this decline has been consolidation
decided for their own reasons not to sell with us, our
in the retail sector and the increasing dominance of
customer still wants a product like that.”101
a few big retailers, especially Amazon. In a national
survey this year, independent retailers ranked
Independent retailers negotiate vigorously with their
competition from large internet retailers as their top
suppliers, but they also view these relationships as
challenge, identifying Amazon as a far bigger threat
mutually beneficial partnerships. Amazon, on the
to their businesses than anything else, including
other hand, seems intent on weakening all of the
big-box stores, rising health insurance costs, and
other players in each of the industries it enters. It
difficulty obtaining financing.106
starts by courting top brands, as it did for years in

25 | Amazon’s Stranglehold www.ilsr.org

 To many local businesses, going up against Amazon Independents, for one, play a pivotal role in
doesn’t feel like a fair fight. It doesn’t seem that way introducing new products and helping them find
when they have to add sales tax to a customer’s an audience. Almost invariably, they are the ones
purchase while Amazon does not,107 or when they have who provide the initial runway for a new author, an
to scramble to cover the cost of adding inventory or innovative tennis racket, or a toy so ingenious you
bringing on a new employee while Amazon picks up have to play with it to believe it. One reason for this
hundreds of millions of dollars in subsidies to fund is that these stores are owned by people who have
its own growth. a passion for books or sports or toys, a genuine
interest that propels them to search out and feature
new products. Another is that these retailers maintain
Independent retailers play a pivotal role valuable physical spaces to showcase these products
and build a sense of community around reading, or
in helping new products find an audience.
playing sports, or parenting.
Manufacturers are alarmed at the prospect
of a future where this market diversity “When somebody is providing all of this one-on-
gives way to a single online platform. one contact and a place to hang out and be part
of a community of people who also love what you
love, that’s really valuable. That’s where consumers
It’s also not a fair fight when Amazon sells entire product are introduced to our brand,” says the executive at
categories at a loss, or when its third-party arbitragers’ the mid-sized sporting goods manufacturer. Local
pricing bots drive margins to zero. “It really erodes retailers organize meets and races, bring in trainers,
the value [of our product] and makes it harder for the and guide customers taking up a new sport. All of
[brick-and-mortar] sellers that we depend on,” the toy this activity, he says, benefits both the surrounding
company CEO says. The paradox of this race-to-the- community and companies like his. “But if they
bottom pricing, according to the manufacturers we can’t get the margins they need to afford the rent,
spoke with, is that it actually reduces their overall sales. those places will go away,” he adds. Customers
The brick-and-mortar retailers they rely on to sell their may value what these stores provide but they don’t
full line and help them launch new products cannot always connect the dots: “I hear retailers talk about
match the prices on Amazon, because they need to long-time customers who come into their stores
earn at least enough margin to pay the rent
and their employees. As these stores struggle
and disappear, sales on Amazon do not make
The U.S. economy has
up for the losses. “Our product pricing got become less entrepreneurial.
massacred on Amazon and we actually didn’t
Number of new businesses
sell that much either,” says the sales manager
at the game and puzzle company, referring to created each year:
a time when his products were sold by both
Amazon and many third-party sellers.
550,000
2005
Amazon’s platform is a poor substitute for
what independent retailers do for an industry,
according to the manufacturers we spoke
with. They all describe these local, small
400,000
businesses as a kind of keystone species, the 2012
absence of which would deeply damage the Source: “The decline of American entrepreneurship — in five charts,”
ecology of their industries, harming both J.D. Harrison, Washington Post, Feb. 12, 2015 (citing analysis from
the Kauffman Foundation)
producers and consumers.

26 | Amazon’s Stranglehold www.ilsr.org

 for advice and they are wearing a running shoe then I suppose we could do it. We could do a bunch
they didn’t buy there. They say: Oh, I found it on of advertising and build a brand online,” he says.
Amazon for $20 cheaper.”
Manufacturers are alarmed at the prospect of a
For companies just starting out, local retailers are future where the great variety and diversity that
the way to find an audience. “They are on the front independent retailers bring to the market gives way
lines of helping parents find great toys for their to a single online platform. In a diverse retail sector,
kids,” explains Mike Acerra, co-founder of Lux Blox, products can find their way to consumers via any one
a startup toy company in Galesburg, Ill.108 Galesburg of a vast number of streams and tributaries, some
has been hit hard by factory closures, as companies large and many small. When these give way to a
like Maytag, under pressure from big retailers to cut single river, fewer products make it downstream.
costs, have left. Acerra hopes Lux Blox, which makes
its novel building blocks locally, can help reverse the
decline. Lux Blox would never have gotten off the We can’t know how Amazon is using the
ground, though, he says, without independent toy torrent of data it’s gathering as we search,
stores, who have showcased its blocks and offered
browse, and click, but we can be certain the
kids and parents a hands-on chance to try them. “To
see it in person really clinches the sale,” he says.
algorithms that direct and focus our attention
are serving Amazon’s interests, not ours.

Research confirms this. Readers browsing in a

bookstore discover new books they’d like to read at
about three times the rate they do while shopping
on Amazon, according to the market research firm
Codex Group. Even though it dominates the market,
capturing about half of book sales, Amazon accounts
for only 7 percent of new book discovery. Local
bookstores account for 20 percent.110

As more browsing and shopping migrates to Amazon,

the company is gaining unprecedented power to
A growing body of scholarship finds that as small and medium-sized
businesses give way to large companies, the middle class shrinks and decide what products we encounter, and to pick
the gap between rich and poor expands. Photo Credit: Stacy Mitchell which companies, authors, and creators will be
winners, and which will be losers. “Amazon has the
“The cheapest way for us to build a brand is to work ability to promote or destroy a book in the national
closely with our brick-and-mortar stores. They are in marketplace for any reason it chooses, and nobody
a much better position as small retailers to do that outside the company can know why or how—or even
boot-strapping,” says Michael Levins, who founded that it was done,” observes Authors United.111 We also
Innovative Kids, a 27-year-old company that makes can’t know how Amazon is using the torrent of data
books and puzzles for kids.109 Levins and his partner are it’s gathering as we search, browse, and click, but we
in the midst of launching a new toy brand, and all they can be certain the algorithms that direct and focus our
need to get it going are a few enthusiastic toy retailers. attention are serving Amazon’s interests, not ours.
If Amazon succeeds in killing off local stores, he says,
creating a new venture like this would become too As Amazon uses its market power to extract ever
expensive for most entrepreneurs. “If we were owned higher fees from manufacturers, and as it demotes
by a private equity firm with a huge trove of capital, their products in its search rankings in favor of its

27 | Amazon’s Stranglehold www.ilsr.org

 own private-label goods, producers are left with less Bezos is also betting that we’ll mistakenly
revenue to invest and fewer opportunities to compete attribute the effects of Amazon’s power grab
by innovating. “If you can’t make any money, it takes to the digital revolution, and that we can be
away invention and innovation,” the sporting goods hoodwinked into believing that the sharp
executive points out. Indeed, studies have shown decline in competition and market diversity
that industries populated by lots of small businesses are the inevitable price of this new technology.
generate new products at a much faster clip than During an interview on 60 Minutes a few
those dominated by a few large companies.112 years ago, Bezos was asked about all the
small publishers and local bookstores who
The trouble is, as much as this loss of innovation “worry that the power of Amazon gives them
and variety impacts our choices, and as much as it no chance.”116 His response was emphatic:
stunts the economy over the long-term, it’s virtually “Amazon is not happening to book selling; the
impossible for consumers to detect in real time. “As a future is happening to book selling.”
consumer, how would you even know that something
was missing?” asks the sales manager at the game The real future that Bezos has in mind for
and puzzle company. bookstores began to arrive last year. Amazon
opened its first bookstore in Seattle. Clad in
As Amazon reduces the choices available to us as brick and mortar, the store is a cozy simulacrum
consumers, it’s having an even more alarming impact of an independent bookstore. More of these
on our liberty as producers, workers, and people Amazon bookstores are coming: to San Diego,
who need to earn a living. Amazon’s tightening hold Portland, Boston, Chicago, and Washington,
on our economy is narrowing our opportunities, D.C. On a call with investors in February,
eroding our agency and self-determination, and Sandeep Mathrani, CEO of the mall operator
making it harder to earn a decent income. Starting General Growth Properties, revealed that
a new business has become less and less possible: Amazon plans to open between 300 and 400
the number of new businesses launched each year bookstores.117
has plummeted by more than one-quarter in the last
decade,113 a trend many economists say is owed to the
increasing dominance of big companies like Amazon As Amazon reduces the choices
and their ability to crush smaller rivals and block new
available to us as consumers, it’s having
firms from entering markets. This in turn is hobbling
an even more alarming impact on
job growth, because young, growing businesses are
responsible for virtually all net new job creation.114 It’s our liberty as producers, workers, and
also propelling economic inequality, according to a people who need to earn a living.
growing body of scholarship, which has found that,
as small and medium-sized businesses give way to
large companies, the middle class shrinks and the It turns out that Bezos knows what publishers
gap between rich and poor expands.115 and independent booksellers have known
all along: There is nothing obsolete about
Jeff Bezos is counting on us not to notice all that bookstores or even printed books. It is not
we’re losing. His big bet is that we’ll be so charmed the analog nature of these stores that Amazon
by the ease of ordering a book from one of Amazon’s has set out to challenge. Rather, it is their
bestseller lists, or telling our Echo speaker to deliver ownership and their independence.
more Amazon-branded baby food, that we will fail to
see how our freedom and our choices are shrinking—
not only for what to buy and whom to buy it from, but
for how we can earn a living.

28 | Amazon’s Stranglehold www.ilsr.org

 about 190 warehouses and other facilities, forms
a formidably high fortress. It’s “why they have
Amazon’s Monopoly the monopoly,” observes Kaziukėnas. “As a new
Power e-commerce player, how do you get to the same level?
People are used to the speed of Amazon’s deliveries.
Anything else seems so bad.” Amazon’s cache of data
Amazon is indeed a monopoly hiding
adds yet another bulwark, giving it an extraordinary
in plain sight. Monopoly is a word that knowledge advantage over its suppliers, competitors,
seems to belong to another age, but and customers.120
Amazon warrants its resurrection. A
monopoly exists, the conservative More than anything, though, the reason we’ve been
slow to recognize Amazon’s tightening grip is that
economist Milton Friedman wrote,
the company seems so consumer-friendly, and so
when an “enterprise has sufficient unlike our image of a monopolist. We’re too busy
control over a particular product or marveling at Amazon’s effortless check-out and
service to determine significantly the lightning-fast shipping to worry about the vanishing
terms on which other individuals shall competition. But there is every reason to be deeply
concerned about the ways Amazon is already using
have access to it.” Amazon certainly
118

its dominance, and the ways it may do so in the future.

has this power in books, an industry
in which the majority of sales have “There is an assumption that they are treating us the
migrated online and Amazon’s share of consumer fairly and it’s not at all obvious that that
those sales is now larger than Standard is actually the case. And even if they are today, they
might not be tomorrow,” says Sabeel Rahman, a law
Oil’s was in 1911 when it was broken
scholar at Brooklyn Law School and a fellow at the
up by federal regulators. And it is 119
Roosevelt Institute and New American Foundation.
rapidly gaining this ability to dictate “How do we make sure they are not putting their
terms across much of the economy as it thumb on the scale and driving you toward Amazon
comes to control the basic infrastructure goods rather than those from competitors who might
offer a product that is better? How can you be sure
that both producers and competing
that the search is not biased?”121
retailers depend on to access customers
and transact business.

And yet, aside from Amazon’s giddy investors, most

people have been slow to recognize the breadth
of the company’s power and the threat it poses to
competition, open markets, and self-determination.

This is partly because we’re accustomed to thinking

of the web as a highly fluid place where upstarts
can come along at any moment and fundamentally
reorder entire industries. Yet, as the cases of Quidsi
and Zappos make clear, Amazon has the financial
resources to crush and devour would-be competitors.
After years of being dismissive of bookstores, Amazon is now challenging
And that’s not its only weapon against challengers. Its their ownership and independence with its own brick-and-mortar stores.
vast logistics infrastructure, which now encompasses Photo Credit: SEASTOCK / Shutterstock.com

29 | Amazon’s Stranglehold www.ilsr.org

 rather than price. And when it comes to setting
prices, Amazon’s data cache gives it an information
advantage over customers, which it puts to prodigious
use. Amazon adjusts its prices constantly, making at
least two-and-a-half million price changes a day.124
These non-stop price changes, notes Lina Khan, a law
scholar and fellow at New America Foundation, mean
that, for both consumers and regulators, “it may not
be apparent when and by how much Amazon raises
prices.”125 For shoppers who subscribe to monthly
deliveries of supplies like dog food and toilet paper,
New York Times reporter Brian X. Chen found that
these adjustments can result in unexpected price
swings of up to 170 percent.126

When it comes to setting prices, Amazon’s

data cache gives it an information
advantage over customers, which it puts to
prodigious use.

But Amazon’s potential to raise prices is not the

only, or even an especially important, reason to be
Amazon has the potential to raise prices, but that’s not the biggest reason alarmed about its tightening grip. Amazon has the
to be alarmed by its tightening grip. Photo Credit: Amazon power to shape and limit the choices available to us
and, even more worrisome, it is rapidly curtailing our
ability to build a business, engage in commerce, and
Already, there are signs that Amazon has quietly
earn a living independent of its oversight. Although
begun levying its monopoly tax on consumers as
we have largely forgotten this today, concerns about
well as producers. “Now, with Borders dead, Barnes
our liberty and agency as producers of value, not
& Noble struggling and independent booksellers
just as consumers of it, propelled the passage of
greatly diminished… Amazon is, in effect, beginning
our antitrust laws a century ago. At that time, a few
to raise prices,” a 2013 New York Times article reported,
industrialists had harnessed another technological
noting that the increases were mostly on books put
revolution, centered on railroads, to become all-
out by smaller presses, not the bestsellers readers
powerful gatekeepers. We responded with laws that,
could more easily shop around for.122 Another analysis
among other things, bar companies from using their
found that Amazon continues to offer low prices on
dominance in one industry to gain control of another,
high-visibility items like televisions, but charges more
and prohibit them from leveraging their size to sell
than competitors for other goods, like the cables that
goods at a loss with the intention of driving smaller
go along with a new TV.123
competitors out of the market. We also designated
As buying from Amazon becomes habitual, as more railroads, the essential infrastructure of commerce in
households install its Echo speakers and sign up those days, as “common carriers,” a status that entails
for its subscription service, which provides regular strict regulation to ensure open and fair access for
deliveries of household staples, the more the competing businesses.
company can drive sales based on convenience

30 | Amazon’s Stranglehold www.ilsr.org

 About 35 years ago, a radical ideological shift in how With corporate concentration soaring, a growing
these laws are interpreted and enforced took root. number of scholars, policymakers, journalists, and
Codified under Ronald Reagan, and backed by a key public interest advocates are now questioning
block of liberals, these changes stripped antitrust this sharp shift in antitrust oversight, and many are
enforcement policies of their commitment to calling for the restoration of the broader range of
protecting competition and open markets, and limited concerns and values that, for decades, animated
regulatory action to the narrow goal of maximizing these policies. No company better illustrates the
economic efficiency. As this new way of thinking stakes than Amazon, and it’s beginning to draw more
swept in, we came to see antitrust policy as solely scrutiny. Both the European Union and Japan have
about keeping prices low. This has confounded our opened antitrust investigations into Amazon. Former
ability to see Amazon for the monopoly it is, creating Republican Senator Olympia Snowe has described
a pathway for the company to gain a stranglehold on some of Amazon’s tactics as “anti-competitive.”127
our economy with little interference from regulators. In June Democratic Senator Elizabeth Warren gave
“With its missionary zeal for consumers, Amazon has a groundbreaking speech on antitrust, in which
marched toward monopoly by singing the tune of she singled out Amazon as a particular threat. “The
contemporary antitrust,” notes Khan. opportunity to compete,” she said, “must remain
open for new entrants and smaller competitors that
want their chance to change the world again.”128

31 | Amazon’s Stranglehold www.ilsr.org

 Undermining Jobs
and Wages
Amazon is eliminating more jobs
than it is creating, driving down
wages and working conditions, and
spreading its low-road labor model
to other sectors
For a customer looking to buy something online, the experience of
shopping on Amazon is seamless. The Amazon page for an item is one
of the first things that comes up in a Google search, and from there, it
keeps getting easier: There’s the price comparison, the product reviews,
the one-click checkout, and then, in as little as an hour, the box at the door.
It appears as if out of thin air, as if by magic.

Behind that magic is in fact a complex system of warehouses, conveyer

belts, and scanners, of chutes and cubbies and machines that stamp bar
codes on boxes two at a time. There are also people. There are people
unloading toothbrushes, people sorting cell phone chargers into bins,
and people dashing up and down aisles to gather pet food and earbuds,

32 | Amazon’s Stranglehold www.ilsr.org

 canned green beans and the latest John Grisham; to stake their future on Amazon. These are places
there are people matching orders, and people like Madison County, Ill., which was still reeling from
packing boxes, and people loading trucks in the the layoffs of 2,000 workers at U.S. Steel’s idled mill
outgoing bays. Most of this work takes place well out when Amazon rolled in,132 and Baltimore, where
of sight, in nondescript, windowless buildings on the officials lured the company to the site of a former
outskirts of cities or near major rail hubs. General Motors assembly plant with a $43 million
incentive package.133 “Amazon’s continued growth in
Amazon’s been expanding this infrastructure at a Baltimore is an important part of a larger economic
breakneck pace. Between the summer of 2015 and transformation taking place throughout our state,
the summer of 2016, Amazon’s network of distribution where we are working hard to make Maryland a place
facilities doubled in number, as it rolled out 14 of its where businesses choose to invest and create jobs,”
Maryland Gov. Larry Hogan told the Baltimore Sun.134

As it grows, Amazon is indeed transforming the U.S.

economy, the labor market, and the future of work.
As our analysis shows, however, the results are far
from positive. In Illinois, Maryland and almost every
other state, Amazon is destroying more jobs than
it’s creating, undercutting the wages of warehouse
workers, and experimenting with ways to shed its
responsibility for its workforce altogether.

In this section, we present research that finds

that Amazon has eliminated about 150,000
more jobs than it has created; that the average
wages at its warehouses are significantly lower
Most of this work takes place well out of sight, in nondescript,
windowless buildings on the outskirts of cities or near major rail hubs.
than the prevailing wage for comparable work
Photo Credit: Amazon within the same areas; and that it relies heavily on
subcontracted, temporary workers year-round. We
massive fulfillment centers, 11 new sortation centers, delve into Amazon’s investments in automation
and 60 smaller facilities like delivery stations and and new forays into on-demand “flex” labor that
Prime Now hubs. In July, the company announced will allow it to shrink its workforce even further, and
that it would have 18 more new fulfillment centers into how Amazon is spreading its labor model to
up and running by the end of September.129 “It’s the shipping and package delivery. Finally, we examine
biggest expansion of any distribution system for any how, even as Amazon has squeezed its workers,
retailer that we’ve ever seen,” says Mark Meinster, the it’s delivered enormous wealth to a handful of top
executive director of Warehouse Workers for Justice, executives and shareholders.
a worker center based in the Chicago area.130
Though analysts and public officials talk about
As Amazon has arrived in cities and counties Amazon as a leading light of the economy, as
across the country, it’s been hailed as an engine of we pull back Amazon’s cloak of invisibility in this
economic growth and job creation. “There’s not a lot section, we find that there’s nothing innovative
of places in Florida where we’ve added 2,500 jobs about the company’s labor model. At Amazon, the
in the last year and a half,” said Gov. Rick Scott at a future of work looks much like the distant past, with
grand opening ceremony for a new fulfillment center workers paid a piece rate and shouldering all of the
in Ruskin, Fla., in April.131 Communities hit hard by costs and risks of their work, just as they did in 19th-
manufacturing job losses have been especially eager century sweatshops.

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 This version of work is not only low-road, it follows
a steady path of declining returns for workers. It Pushed to the Limit:
starts with fewer jobs overall as Amazon captures
a larger share of spending. Then it moves to jobs Amazon’s White-Collar
that are increasingly precarious, as Amazon has Workers
shown with its temp workforce. It progresses to work
that’s more and more contingent, such as Amazon’s Our analysis focuses on work in Amazon’s warehouses, as
these jobs comprise about 80 percent of the company’s U.S.
“flex” package delivery operation. It ends, finally, workforce, and are the jobs most comparable to the kinds of
with automation, and with Americans’ $4 trillion in jobs that Amazon’s growing footprint is replacing or eliminating.
They’re also the jobs relevant to most of the country, as all but
retail spending increasingly decoupled from any
several hundred of Amazon’s corporate employees are based in
meaningful job creation. just two states — Washington, where it employed approximately
23,000 workers at its Seattle headquarters at the end of 2015,
and California, where it employed about 7,000 non-warehouse
In the story of the widening gulf between haves employees.137 Many of these white-collar jobs are technology
and have-nots in the United States, Amazon is thus roles concentrated not in retail, but in sectors that are new,
a central protagonist. Earlier this year, Jeff Bezos such as Amazon Web Services or Amazon’s artificial intelligence
research division, a project staffed by 1,000 people.138
leapfrogged Warren Buffett to become the planet’s
third wealthiest person, with an estimated net worth Yet, it’s worth noting that Amazon has also come under fire for its
of $65 billion.135 treatment of its white-collar workers. “Employees would stand up
and pose direct questions to the executive team, and often they
inquired about the enormous workload and frenetic pace,” Brad
Back behind the computer, ordering that toothbrush Stone reported in his 2013 book, The Everything Store.139 More
recently, the New York Times published a detailed exposé for
and pet food and cell phone charger, it’s easy for
which it interviewed more than 100 current and former Amazon
a customer to forget that all of this infrastructure employees. The Times called the company’s corporate culture
and all of the people with livelihoods at stake even “bruising,” and described Amazon as, “conducting an experiment
in how far it can push white-collar workers to get them to achieve
exist. That’s because part of Amazon’s magic is in its ever-expanding ambitions.”140
rendering the chain of interactions that make retail
happen invisible, and shifting the retail economy
from one in which workers play critical roles in face-
to-face interactions to one in which they are cogs most central, visible, and meaningful part of the
in Amazon’s flywheel. As New Yorker writer George business. There’s also a model that’s still emerging,
Packer has put it, “Online commerce allows even in which e-commerce becomes an extension of
conscientious consumers to forget that other people this ecosystem. The warehouse work that fuels
are involved.”136 e-commerce is less familiar, but here too there are
better versions than the one Amazon is spreading
across the landscape. “They have a choice when
they set up these warehouses,” says Meinster, of the
In the story of the widening gulf between Chicago worker center.
haves and have-nots in the United States,
Amazon is a central protagonist. Here’s what Amazon has chosen.

This is all in contrast to different models. There’s the

traditional model of retail, where there are strong
connections between a community and a network
of grocers and pharmacies, shoe shops and art
supply stores. This is a face-to-face economy, in
which the person helping a customer find the right
book or try on a pair of shoes is engaged in the

34 | Amazon’s Stranglehold www.ilsr.org

 We analyzed Amazon’s impact on employment and
found that, by the end of 2015, the company had
Dwindling Jobs displaced enough sales at brick-and-mortar stores
to force the elimination of about 295,000 retail
Amazon pulled off a feat in Illinois in jobs.144 We then counted all of the full-time, part-
2014. That year, it sold an estimated time, and temporary employees on Amazon’s payroll
$2 billion worth of goods to Illinois at the end of December, and found that Amazon
had created only 146,000 jobs in the U.S. In other
residents. It did so without employing
141

words, Amazon’s expansion has resulted in a net

a single person in the state. loss of about 149,000 American jobs. Our figure is
conservative: Amazon’s employment is higher in
At the time, Amazon’s desire to avoid collecting sales
December than at other times in the year, and we
tax in this populous state had kept it from building
counted all of the company’s jobs, including those
any facilities there, instead opening a warehouse
in Amazon Web Services and other divisions that are
just across the Wisconsin border and expanding its
not involved in retailing goods.
operations in Indiana. The company finally opened
its first fulfillment center in Illinois in 2015, after
These job losses will only increase if Amazon takes
nearly two decades of sales to state residents, but its
over more of the retail sector. In April, only a day after
job creation has remained paltry relative to its sales.
Amazon announced its plans to open two fulfillment
Last year, Amazon generated about $1.5 million in
centers in New Jersey and touted the creation of
sales in Illinois for every full-time warehouse worker
2,000 full-time jobs, Credit Suisse analysts reported
it employed there.142 By comparison, the state’s brick-
that over 24,000 retail workers had lost their jobs
and-mortar retail stores employ about seven people
in the first three months of the year and projected
to accomplish the same sales.143
that 2016 would produce at least twice the number
of retail layoffs as the year before. “These layoffs are
Until now, retail sector jobs have been widely
clearly an attempt to deal with the decline in brick-
dispersed across the country, with virtually every town
and-mortar productivity, as brick-and-mortar sales
and neighborhood claiming at least a few. Retail jobs
are lost to e-commerce,” the analysts wrote.145
account for 13 percent of all employment, which means,
in most cities and towns, that about one in every eight
jobs is in retail. Now, this mainstay of local employment Amazon’s Net Job
is beginning to unravel. Amazon is causing widespread
job losses in retail, and not creating nearly enough new
Impact in the U.S.
jobs to fill the gaps. The few positions it does create,
moreover, are clustered in just a few locations, which
Full-time, part-time, and
temporary employees on 145,800
means that as its sales expand, most communities are Amazon’s payroll in the U.S.
only experiencing layoffs. Displaced jobs at
brick-and-mortar stores -294, 574
Illinois is just one example of what adds up to tens of

-148,774
thousands of missing jobs across the country. While
Amazon often paves its way into communities, and
into taxpayer subsidies, with promises of all of the
people it will hire, the company in fact uses its scale
as a distraction from the fact that it destroys more Net job losses at the end of 2015
jobs than it creates.
Sources: Institute for Local Self-Reliance analysis, drawing on Amazon’s annual
reports, U.S. Census data, and data disclosed by Amazon on its website, available at
“Economic Impact — About Amazon,” Amazon, accessed May 2016.

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 Even though the gains in places like New Jersey it’s not correct to picture Marketplace as an entirely
aren’t enough to offset the losses, many parts of new world of business ventures. Rather, Marketplace
the country are experiencing Amazon-induced is the capture of much of the existing business
layoffs without any offsetting gains at all. There are ecosystem by Amazon. Many Marketplace sellers
20 states in which, as of July 2016, Amazon has no are established retailers and manufacturers whose
physical presence, and no employees.146 In Missouri, companies have existed separate from Amazon’s
for instance, Amazon generated nearly $1 billion in platform. And many of these businesses will confide
sales in 2015, and didn’t employ a single person. privately that Amazon is having a negative impact on
their ability to invest and grow.
Some hail this type of job destruction as efficiency.147
As we’ll see on the following pages though, As these jobs figures make clear, Amazon is at the
Amazon gets by with so few employees by setting center of a collapse in job creation in one of the
largest sectors in the U.S. economy. Such stark job
losses are not an inevitable part of e-commerce
and the evolution of the retail sector. Rather, they
are specific to Amazon’s consolidation of retailing
and distribution, and the way the company is using
its market power to stifle opportunity for workers
and for young and growing businesses, which as
discussed in the previous section, create the lion’s
share of jobs.

Grueling Work for

Amazon’s been expanding its infrastructure at a breakneck pace. Lower Pay Than Average
Photo Credit: Shutterstock.com
a punishing pace within its warehouses and taking
Amazon’s job postings are full of upbeat
advantage of a bottomless supply of temporary
workers and on-demand freelancers who lack even
language. “Our fulfillment centers
the most basic protections of regular employment. are where Amazon orders come to
What might look at first like efficiency devolves into life, where we focus on delighting our
simple exploitation, a means of squeezing as much customers by delivering smiling boxes
labor as it can from workers while denying them
filled with everything under the sun,”
a fair share of the gains. By supporting this model
with tax breaks and subsidies, elected officials are
reads one typical posting for a job in a
encouraging a widening of income inequality rather Joliet, Ill., fulfillment center.
than broadening opportunity.
Beneath that sugar-coated opening comes the actual
As if uneasy about how few jobs his company job description. “Temperature in the fulfillment
creates, Jeff Bezos has started taking credit for the center may vary between 60 and 90 degrees and will
people employed by Amazon’s Marketplace sellers. occasionally exceed 90 degrees,” the Joliet posting
Worldwide, these sellers have “created over 600,000 continues. “You’ll stand in one place for extended
new jobs,” Bezos announced in his most recent letter periods of time, and be walking a good distance
to shareholders.148 This is highly misleading though. around the facility… you are willing and able to work
As we discuss in the previous section of this report, all shifts… you are willing and able to work overtime

36 | Amazon’s Stranglehold www.ilsr.org

 as required, bringing smiles to our customers doesn’t hour. Then 125 pieces an hour. They just got faster
take time off… you must be able to lift up to 49 and faster and faster.”154 As Beth Gutelius, a researcher
pounds with or without reasonable accommodation, who has looked extensively at Amazon, told us, “It’s
stand/walk for up to 10-12 hours, and be able to actually impossible to meet the productivity standards
frequently push, pull, squat, bend, and reach.”149 and do so safely.”155 The International Business Times
has reported that these production quotas are
This is how Amazon advertises its warehouse jobs, set intentionally too high. “Amazon’s productivity
and the reality is even more grueling. Employees numbers are apparently purposely designed to be
describe running across warehouses that sprawl the unattainable for most workers so that employees feel
distance of 17 football fields; production quotas, or that they are falling down on the job and push harder
“rates,” that can be set 60 percent higher than the to hit the impracticable levels,” IBTimes wrote. “This
industry standard;150 and a disciplinary system that strategy [is] known as management by stress.”156
tracks workers’ every action and inflicts “points” for
any deviation from Amazon’s standard. Underlying
these conditions is Amazon’s fundamental approach Amazon’s warehouses are finely-tuned
to its warehouse workers. The company’s warehouses machines, and the company creates
are finely-tuned machines, and the company creates
conditions that make its workers parts of
conditions such that its workers are expected to be
that machine.
parts of that machine. The result is a work environment
that is profoundly dehumanizing.

“There’s no way for me to fully describe the size of this Failure to hit these quotas (“make rate”)—or failure to
place,” one fulfillment center employee in Tennessee comply with mandatory overtime, or failure to register
told Gawker. “There are over seven miles of conveyor a new pick on a scanner within one minute of ending
belts.”151 Many workers describe the physical strain a break—results in discipline. Amazon uses a point
of criss-crossing such vast facilities. “If you’re a system. Even if workers are not at fault for a slowdown
picker you have this scanner gun that counts down in their rate, they’re still held responsible. A supervisor
22-seconds between every pick and you’re running in Amazon’s Sumner, Wash., warehouse told the
sometimes to the other side of the warehouse to get Seattle Times that the company, “penalizes workers
that pick,” explains Meinster, of the Chicago worker for errors such as not properly scanning merchandise,
center, who works with employees in Amazon’s Joliet, even if the scanner itself caused the problem.”157 This
Ill., and Kenosha, Wisc., warehouses. “The worst part workplace surveillance extends to management
was getting on my hands and knees 250 to 300 calling out the names of the select workers who have
times a day,” an employee working as a “picker” told been successful at making rate during the twice-daily
the paper The Morning Call,152 adding that he was breaks,158 and to employees getting pinged with a text
expected to “pick” 1,200 items in a 10-hour shift, and message if they’re falling behind.159
that picking often involved reaching into low bins on
the floor. Other reports suggest that the point system is also
used as retaliation against those who speak up. “After
The handheld scanners that workers use to track nearly two years on the job, one former manager was
inventory also allow managers to monitor them, and to troubled enough about conditions to write an email
set ever higher targets. “One day we came in to work to an Amazon regional vice president,” the Seattle
and they said, ‘Your rate is now 500 units per hour,’” Times has reported. “A week later, the former manager
one 22-year-old who worked receiving incoming says, he was accused of a minor rules infraction and
inventory told The Morning Call.153 Another worker, given the choice of leaving the company or getting
this one assigned to be a “picker,” told the paper, “It fired.”160
started with 75 pieces an hour. Then 100 pieces an

37 | Amazon’s Stranglehold www.ilsr.org

 One result of such grueling conditions is high (OSHA), that rate is partly a result of the company
turnover. “Many hires don’t last more than a few outsourcing liability to subcontractors, and also a
months,” reports The Morning Call.161 “I had training result of closely managing workers’ injuries so that
with a group of seven other people, two girls and five they don’t get reported. For instance, “A former
men. None of us lasted longer than four months,” one warehouse safety official said in-house medical staff
Amazon fulfillment center employee told Gawker. A were asked to treat wounds, when possible, with
survey of 250,000 workers at Fortune 500 companies bandages rather than refer workers to a doctor for
by the firm PayScale found that Amazon was in the stitches that could trigger federal reports,” a Seattle
top three for high turnover, with median tenure of just Times investigation found.164 In January 2016, OSHA
one year.162 While the PayScale survey doesn’t control fined Amazon for failing to record work-related
for the pace of hiring and also includes white-collar injuries, as well as for the on-site medical unit
workers, it describes a company-wide attitude. This overseeing care, “beyond what is allowed by their
model of churning through workers is in keeping licensing and certification.”165 Among the injuries that
with Amazon’s approach to workers simply as parts Amazon failed to report to OSHA were severe ones,
in the machinery of its warehouses, to be replaced such as an employee who, after being injured by a
when necessary. “It’s really about investing in workers falling box, was placed on work-restricted light duty
as little as possible,” says Erin Hatton, a professor at for 56 days and issued a prescription.166
SUNY Buffalo and the author of The Temp Economy:
From Kelly Girls to Permatemps in Postwar America.163 Amazon would have the public believe that in
exchange for enduring these conditions, it pays its
Another result is injury. While Amazon has a low workers well. Our analysis finds that this is not the
annual “incidence rate” according to the federal case. Drawing on more than 1,300 wage postings
Occupational Safety and Health Administration on Glassdoor.com, we found that that Amazon’s
fulfillment center positions pay an hourly mean wage
of $12.32,167 which is 9 percent less than the industry
average for comparable work, according to Bureau
of Labor Statistics (BLS) data.

The national figures are somewhat misleading,

however, in that labor markets are regional, rather
than national. When we drilled into eleven metro
areas where Amazon has a significant presence, we
found an even larger difference between its average
wage and the prevailing local wage for warehouse
work in all but one metro area. In the Dallas-Fort
Worth area, where Amazon has seven large facilities,
its mean hourly wages were 11 percent lower; in
Seattle-Tacoma, where Amazon has five warehouse
facilities, wages were 18 percent lower. The smallest
gap was in the Phoenix metro area, where Amazon
workers make an average of 6 percent less than other
warehouse workers. The largest gap was in Kenosha,
Wisc., where Amazon has one fulfillment center and
one sortation center, and pays an average wage of
$12.23—22 percent less than the average wage for
“As a ‘picker,’ you are sometimes walking the entire way across all three comparable work, and 26 percent less than the living
connected warehouses, for one item,” says one Amazon fulfillment center wage for the county.168
worker. Photo Credit: Scottish Government

38 | Amazon’s Stranglehold www.ilsr.org

 How Amazon’s Wages Stack Up in 11 Metro Areas
METRO AREA NUMBER OF RECEIVED LIVING WAGE IN AVERAGE AVERAGE DIFFERENCE
LARGE AMAZON SUBSIDIES METRO AREA WAREHOUSE WAREHOUSE BETWEEN
FACILITIES IN WAGE IN METRO WAGE AT AVERAGE WAGE
METRO AREA* AREA AMAZON IN AND AMAZON
METRO AREA WAGE

Atlanta 3 No† $14.62 $13.03 $10.55 -19%

Cincinnati 4 Yes $14.25 $14.34 $12.18 -15%
Columbia, S.C. 1 Yes $13.19 $13.69 $11.22 -18%
Dallas-Fort Worth 7 Yes $13.87 $12.78 $11.36 -11%
Harrisburg-Carlisle, Pa. 6 Yes $14.39 $15.84 $12.72 -20%
Inland Empire, Calif. 9 Yes $16.08 $13.64 $12.18 -11%
Kenosha, Wis. 2 Yes $16.49 $15.60 $12.23 -22%
Louisville, Ky. 6 Yes $14.39 $13.97 $11.65 -17%
Nashville, Tenn. 4 Yes $13.07 $12.98 $11.74 -10%
Phoenix 4 Yes $15.67 $13.39 $12.56 -6%
Seattle 5 Yes $16.29 $16.02 $13.16 -18%

Average $14.76 $14.01 $11.96 -15%

*In addition to these, Amazon also has a number of delivery stations, Prime Now Hubs, and other smaller facilities in these metro areas.
†We did not find record of a subsidy award at these three Atlanta locations, but publicly available information is incomplete.

Data and Methodology: We defined comparable work to be the Bureau of Labor Statistics (BLS) occupation, “Laborers and Freight, Stock, and Material Movers, Hand (SOC 537062),” and then
looked at that occupation across these eleven statistical areas. We chose to focus on statistical areas where Amazon has a large presence, where the company received particular subsidies, where
the data was robust, or all of the above. We adjusted the BLS wage data to 2016. For Amazon’s wages, we relied on more than 450 wage postings submitted to Glassdoor.com across eleven
Amazon warehouse job types, which we accessed in June 2016. For the living wage in these metro areas, we relied on the calculator from the Massachusetts Institute of Technology.

Sources: “Living Wage Calculator,” Massachusetts Institute of Technology, accessed August 2016; Bureau of Labor Statistics, May 2015, extracted June 2016; Glassdoor.com, accessed June 2016.

saying that average pay at its fulfillment centers is

Across these eleven metro areas, we found that “30 percent higher than employees’ pay in traditional
Amazon wages were an average of 15 percent below retail stores.”171 That claim, however, doesn’t line up
the wages for comparable positions. It’s important to with any of the available data. The average hourly
note here that though there are examples of better pay for the nation’s 7.5 million retail sales workers
warehouse jobs, much warehouse work is not very was $11.72 in 2015, according to BLS data; adjusted
well-paid to begin with,169 and Amazon is dragging for inflation to 2016, that means Amazon paid just 3
those low wages down further. Amazon is paying 15 percent more. Meanwhile, work in its warehouses is
percent less than an already low-wage job. These low considerably more physically demanding than work
wages disproportionately affect African-American on a retail sales floor, and these wage figures don’t
and Latino workers, who comprise 45 percent of capture the large number of lower-wage workers
Amazon’s warehouse workforce, but only 8 percent who work in Amazon’s warehouses but are employed
of the company’s management.170 through staffing agencies and subcontractors.

“The big issue that we hear is pay,” says Meinster. There’s also the question of benefits. Amazon misses
“People aren’t being paid minimum wage, but there no opportunity to talk about the benefits it offers
is the feeling that people aren’t being paid in a way its warehouse workers,172 which it bills as health
that’s commensurate with the work. Most workers care “starting day one,” a 401(k) with a company
tend to be the max $12, $13 an hour range, for match, and educational assistance through its Career
really grueling work, and with a lack of regular wage Choice program. What it doesn’t mention are that
increases.” the premiums and deductibles for its medical plan
options may be beyond the means of a worker
Amazon often defends its wages by talking not making $12 per hour,173 that the company match
about warehouse work, but about retail jobs, and doesn’t vest until after an employee has been with
39 | Amazon’s Stranglehold www.ilsr.org
 the company for multiple years, and that the Career warehouse for Stater Bros. Markets, a regional chain
Choice program is only open to employees who have of discount supermarkets, where workers earn an
lasted one continuous year at the company. It also hourly rate of $24.59, according to a two-year union
takes pains to avoid disclosing that a large share of contract ending in spring 2016.176
its workforce—part-time workers, temp workers, and
seasonal workers—aren’t eligible to receive these The grueling conditions for which Amazon is paying
benefits. For part-time and seasonal workers, for this lower wage aren’t the norm. Though warehouse
instance, Amazon’s much-touted “day one” promise work is hard, “pretty much no matter where you
doesn’t apply: These employees are only eligible for are,” says Meinster, Amazon is “unique.” Part of
health care after 90 days,174 and given the turnover this is e-commerce in general. While warehouses
cycles at Amazon’s warehouses, many don’t make it that distribute goods to brick-and-mortar retailers
that long. are able to work mostly with goods that are still
on pallets, in e-commerce, workers have to sort,
Amazon could pay more. Some of its competitors pick, and pack individual orders. Even within the
do. At Associated Wholesale Grocers, for instance, world of e-commerce, though, Amazon squeezes
a wholesale grocery cooperative owned by its its workers harder than other companies. As the
members, many of whom are independent grocers journalist Spencer Soper reported for The Morning
and local chains, a small sample of salaries shows Call: “One staffing industry recruiter whose company
an average wage of $15.27 per hour for a picker.175 serves the Lehigh Valley shipping industry said he
Or take Amazon’s closest neighbor at one of its has interviewed roughly 40 job applicants who
fulfillment centers in San Bernardino, Calif. From the complained of difficult working conditions at the
back of Amazon’s facility there, workers can see a Amazon warehouse. Ordinarily, if someone only

How Amazon’s Wages Stack Up in 11 Metro Area

Sources: See table in this section.

40 | Amazon’s Stranglehold www.ilsr.org

 lasted a few months in a warehouse job, it would
raise questions about their abilities, he said. But he
has placed former Amazon warehouse workers in Amazon Workers
other warehouse jobs and they were able to meet
expectations, he said.”177
Speak Out
“I have never felt more disposable or meaningless than I do at
Amazon… In Prep, more than a hundred of us were put in front of
stations with computers, scan guns, and full pallets of products. Full,
Amazon could pay more. Some of its six-feet-tall pallets of all sorts of things. For instance, deodorant.
competitors do. Workers at an Amazon We’d unpack box after box of Right Guard six packs, put two of
them into another bag, put that bag into a yellow tote bin, and
warehouse in San Bernardino, Calif., can keep going until the entire pallet of hundreds of deodorants was
see across to a regional supermarket empty. Then another pallet would be put in front of us… We had
to unpack and repack a certain number of product per hour. Our
chain’s warehouse, where the workers UPH, or units per hour, was what determined whether or not we’d

earn twice the hourly rate that they do. get a talking to by one of our many bosses. When I first got hired
on, we had to make a Rate of 85, which was doable, if challenging at
first. By the time Peak season came around the rate was about 180.
After Peak, it stayed at 180. That meant that we had to Prep about
One of the best ways to improve the conditions and 3 units per minute, which was fine if the product had no Prep to be
done to it, but not easy at all if the product had to be bagged, and
wages in Amazon warehouses would be for workers bubble wrapped, and then boxed up.” — Amazon fulfillment center
to join a union. Amazon, however, has blocked employee in Moreno Valley, Calif., as published by Gawker in June
collective organizing at every turn, and has a history of 2016.181

employing “union avoidance” tactics.178 Amid a 2001 “Rate: you have to hit 100 percent, not 99 or 98, 100 percent. For
effort to organize an Amazon call center in Seattle, the my job this meant sorting either 12 items a minute(mediums) or 15
items(small). This can sometimes be grueling depending on the
center was shut down and 400 workers were laid off,
size of the items; smalls ranging from cell phone covers to huge
though Amazon attributed the decision to a company- textbooks and mediums from iPads to crystal cat dishes. Every day,
wide restructuring.179 Even in Germany, where Amazon non stop and if you are not making it for the week you are written up.
Get three of those and you do not have a job anymore.” — Amazon
has operated warehouses since 1998 and where fulfillment center employee in Hebron, Kentucky, as published by
unions continue to have significant influence, Amazon Gawker in Oct. 2014.182
has defied the country’s labor model.180
“As a ‘picker,’ you are sometimes walking the entire way across all
three connected warehouses, for one item. They say you should be
Part of Amazon’s ongoing ability to resist unions walking this quarter-of-a-mile in three minutes or less. It would take
is that its warehouses are the most difficult kind of me five.” — Amazon fulfillment center employee, as published by
Gawker in July 2014.183
organizing project. There’s the invisibility of them,
which makes it hard to engage public support.
There’s the scale of them, and the capacity issues
that come with organizing 1,000-plus workers. And
there’s also the high turnover. “It’s a very good
perk for anti-union employers,” says Hatton, of high
turnover. “The workers generally aren’t around long
enough to organize.”

As over-worked and under-paid as these Amazon

employees are, there’s also another kind of worker
who Amazon relies on, and who it treats even more
Photo Credit: Álvaro Ibáñez
poorly: the temp worker. And at Amazon warehouses,
there are a lot of temps.

41 | Amazon’s Stranglehold www.ilsr.org

 Reliance on “Permatemps” The use of temporary workers is a model that’s boomed
across the U.S. economy in recent years, more than
doubling from 1.2 million workers in 2005 to 2.7
They spring up wherever Amazon
million workers in 2014.188 It’s particularly taken hold
announces a new fulfillment center. in the warehouse industry. In May 2015, according to
There’s the one in Joliet, Ill., a 17-minute data from the Bureau of Labor Statistics, nearly 1 in
drive from the Amazon warehouse every 5 workers who moved freight and stock by hand—
on East Laraway Road, or the ones in the largest occupation in the warehousing industry—
was a temp, and those workers also comprised 16
Windsor, Conn., or Kenosha, Wisc.,
percent of the entire temp industry, by far the largest
that are housed inside the Amazon share of all occupations.189 “In this latest recovery, the
fulfillment centers themselves. temp industry was the fastest growing sector in the
economy,” says Erin Hatton, a professor of sociology
They’re the offices of the temporary staffing agencies at SUNY Buffalo and expert on the temp industry.
that employ as many as half of the workers in Amazon’s
warehouses at any given time and as many as three- Amazon has been a leader in this shift. “Amazon has
quarters of workers in the final two months of the year.184 done nothing to change the model, and has really
Amazon often calls these workers “seasonal,” as if to adopted it,” says Meinster. It’s difficult to know just
imply that it uses temporary workers only during the how many temp employees are working in Amazon
peak holiday season, but the term is a dodge. In fact, warehouses. The company claims, “Throughout the
Amazon relies on temps year-round. While Amazon year on average, nearly 90 percent of associates
does hire some of these temps directly—and in the past across the company’s US fulfillment network are
has even made them sign 18-month non-compete regular, full-time employees.”190 It’s hard to say how
agreements185—it has also outsourced a large portion Amazon arrived at this statement, but it doesn’t line
of its staffing needs to two temporary staffing firms, up with anything else. In October 2015, for instance,
Integrity Staffing Solutions and Staff Management, Amazon announced that it would employ 100,000
known as SMX. These firms have come to serve as seasonal workers nationally to augment its 90,000 full-
human resources arms for the company, allowing time permanent workers during the rush of holiday
Amazon to distance itself from the responsibilities orders.191 Amazon’s statement also doesn’t square
and liabilities that come with the standard employer- with other figures it has released to news media about
employee relationship. Nor are all of these workers staffing at individual warehouses, which indicate that
doing only brief stints in Amazon’s warehouses. Many temps account for more than half of the workforce
are assigned to Amazon indefinitely as a new class of during much of the year, and up to 75 percent during
worker: the “permatemp.”186 the holiday peak.192 Within warehouse work generally,
many estimate a rough split of 60 percent direct hire
Within any given Amazon warehouse, there are two to 40 percent temp.193 Our review of the available
tiers of workers. One group is the direct hires, the information suggests that this breakdown is roughly
full-time and part-time workers who are employed accurate for Amazon year-round.
directly by Amazon. The second group is the temps,
the full-time and part-time workers employed through A primary reason that Amazon and other companies
the staffing agency. “There’s a class structure,” says have so completely incorporated temp work into
John Getz, an organizer with the United Food and their businesses is that the model allows them to
Commercial Workers International Union.187 The two thoroughly distance themselves from the workers,
groups generally perform the same tasks, and might absolving them of responsibility and liability.
work at the warehouse for the same period of time, “Firms often work hard to isolate the employment
but they’re easy to tell apart: The Amazon hires wear relationship to the subcontractor or staffing agency
blue badges; the temps wear white. only,” finds the UC Berkeley Labor Center.194

42 | Amazon’s Stranglehold www.ilsr.org

 The largest temporary staffing firm that Amazon uses and center. Along with the public relations benefit,
in this process is Integrity Staffing Solutions, which there’s also a cost savings for Amazon that comes
has contracts with Amazon to staff its fulfillment with shifting this liability. It’s Integrity that would have
centers in at least 48 locations.195 Integrity was been on the hook financially had the appeals court
founded in 1997, just two years after Amazon, and ruling stood.
started contracting with it that year. “We did things
others weren’t willing to do,” CEO Todd Bavol has Another example is in liability for the safety and training
said.196 Today, the company handles functions from of workers, on which temp agencies notoriously
recruitment to background checks to tax filings, and skimp. For instance, when temporary worker Ronald
not just for the workers it employs, but for a portion Smith was crushed to death by a conveyor system at
of Amazon’s direct hires as well. an Amazon fulfillment center in Avenel, N.J., OSHA
cited and fined four temporary staffing agencies and
One example of how this arrangement allows Amazon the third-party logistics company with which Amazon
to outsource liability to Integrity is the case Integrity had contracted to manage the warehouse, but not
Staffing Solutions, Inc. v. Jesse Busk and Laurie Castro, Amazon itself.198
which went up to the U.S. Supreme court. Busk and
Castro were two Integrity employees who worked at This distancing also works when it comes to wages
Amazon warehouses in Nevada, picking and packing and benefits, and the temp model allows Amazon
goods. In 2010, Busk and Castro sued Integrity and others to more readily get away with paying
for back wages and overtime pay, on behalf of lower wages with fewer benefits. In general, the
employees in the Nevada warehouses. They argued warehouse worker in the industries Amazon’s
that they should be compensated for the time they warehouses are impacting—wholesaling, retailing,
spent going through security checks, which they said and warehousing—makes a mean hourly wage of
added up to roughly 25 minutes every day.197 The $13.41; the same worker in the temp industry earns
9th U.S. Circuit Court of Appeals ruled in favor of the just $11.56, according to BLS data, or 14 percent
workers, but in December 2014, the U.S. Supreme less.199
Court reversed the decision. Though Amazon’s name
often appeared alongside Integrity’s in the ensuing Our review of about 50 job postings for temporary
news coverage and backlash, Integrity was front work at Amazon warehouses indicates that Amazon’s

Amazon’s Logistics Network

To see the map in more detail, go to:

ilsr.org/amazon-logistics-map

43 | Amazon’s Stranglehold www.ilsr.org

 temp positions pay about $0.50 to $1.00 less per in these areas. One story in The Morning Call details
hour than its direct hires make.200 With temp workers, the struggle of a former Amazon warehouse worker
there’s also no upward pressure on wages over time, to secure unemployment benefits: “Months after
and these positions further contribute to the high she suffered heat exhaustion and lost her job in an
employee turnover that adds to Amazon’s ability Amazon.com warehouse in Breinigsville, Rosemarie
to dodge accountability. And unlike with direct Fritchman sat in a small conference room pleading
hires, Amazon doesn’t have to provide temporary for unemployment benefits of about $160 a week…
employees with any benefits. Amazon’s primary the human resources agent is not from Amazon.
staffing agency offers only a vague promise, “As She works for Integrity Staffing Solutions.” The story
an employee of Integrity Staffing you may also be goes on to report that Integrity is involved in more
eligible for medical and dental benefits.” unemployment compensation appeal hearings than
almost all other employers in Pennsylvania, and even
Along with wages and benefits, the temp agencies surpasses Walmart, the state’s largest private-sector
also handle myriad other HR responsibilities, and part employer. “The practice reveals one of the ways
of how they earn their keep is by squeezing savings Amazon keeps costs down and one tactic used by a
temporary staffing firm to win Amazon’s continued
business,” the story finds.201

Companies often talk about flexibility, and what

workers get out of the temp model. Talk to actual
workers, though, and an overwhelming majority
of them would prefer to be a direct hire. “A full 96
percent of workers interviewed said they would
prefer a direct hire position, while 1 percent stated a
preference for temp work through a staffing agency,”
found a survey of 319 warehouse workers.202

“These are people who really want to work. They by

and large want secure employment,” says Hatton, the
SUNY Buffalo professor. Temps, however, provide
Amazon with advantages the company is loath to
give up, including a helping hand in keeping its direct
hires in line. “The very clear and occasionally explicit
message to employees is that you’re replaceable, you
should be thankful for what you have, and if you’re
going to ask for one penny more, one ounce more
security… they can replace you,” says Hatton.

Amazon often calls temp workers “seasonal,” but in fact, it relies on

them year-round, and has outsourced many of the responsibilities
and liabilities of being an employer to temporary staffing firms.
Photo Credit: Scott Lewis

44 | Amazon’s Stranglehold www.ilsr.org

 and as independent contractors, they have to cover
their own expenses, including fuel, maintenance,
Shifting to On-Demand and insurance. By the end of the day—or, as it were,
“Gig” Jobs and Automation the two-hour shift—that $18 starting hourly wage is
suddenly a lot lower. Amazon’s focus on “flexibility”
is also questionable. It looks for drivers who are
In September of 2015, Amazon
interested in picking up work in “their spare time,” as
started testing a new service in its it described Flex when it expanded the program to
hometown of Seattle. Called Amazon Britain in July 2016.204 However, Amazon is actively
Flex, it let anyone over age 21 with a participating in creating a labor market where a Flex
driver’s license and a car sign up to job isn’t work that a person takes on to supplement
a stable job, but work a person takes on because it’s
be an Amazon delivery driver. Drivers
the only job she can find.205
had to pass a background check and
download an app, and from there, they Flex is Amazon’s latest foray into what’s alternately
could start signing up for two-hour termed the “sharing” economy, the on-demand
shifts to pick up packages from economy, or perhaps most aptly, the gig economy, in
which companies contract with workers to perform
Amazon’s hubs, plus orders from
individual tasks (gigs) on an as-needed basis. The
restaurants and stores participating in number of people working in alternative work
the company’s delivery service, and arrangements—which includes part-time, temp, and
deliver them to customers. One month other contracted workers, as well as those in the gig
later, Amazon expanded the program economy—soared from 10 percent to 16 percent of
the U.S. workforce between 2005 and 2015,206 and
beyond Seattle, and by February, it
Amazon’s been a powerful agent of this profound shift
was in 14 cities and Amazon had in employment. In 2005, three years before the ride-
started using Flex drivers not just for hailing company Uber was founded, Amazon rolled
Prime Now, a more niche service that out Mechanical Turk, a platform that connects people
offers two-hour delivery of groceries listing “micro-tasks,” such as data entry, with workers
willing to perform them. As of 2015, it had about half
and household staples, but for regular
a million workers signed up.207 Though it’s difficult to
Amazon deliveries as well. By August 203
come up with an hourly wage figure for workers who
2016, people could sign up to be Flex use the platform, The Verge has reported an average
drivers in 30 cities. of $2 to $3;208 in 2014, users of the service started a
letter writing campaign asking Jeff Bezos to recognize
In its pitch to new drivers, Amazon emphasizes the them as “actual human beings”; and in 2015, Amazon
pay and the flexibility. “Make $18 to $25 an hour,” increased its commission from 10 percent to 20
its copy reads. “Be your own boss.” In fact, however, percent of every task.209 “Amazon’s platform enables an
Amazon Flex is another step down in the sequence array of companies to access digital labor at low cost
of Amazon’s model of increasingly degraded work. and without any of the associated social protection or
As it expands its Flex program, Amazon increasingly moral obligation,” researchers have written.210
shifts responsibility away from itself, and replaces
jobs that were formerly stable and full-time with work Now, Amazon is continuing to escalate its role in the
that drivers can’t rely on or build a life around. gig economy, and analysts project that it will persist in
its rapid expansion of Flex. “We think Amazon is likely
What Amazon shies away from in its pitch is that drivers to expand its use of on-demand delivery over the next
are paid not by the hour, but by individual delivery, 5-10 years,” Deutsche Bank found in a recent report.211

45 | Amazon’s Stranglehold www.ilsr.org

 Here’s how MIT Technology Review describes the
robots themselves: “At the center of the warehouse
is a storage space containing square shelves packed
with countless products from Amazon’s inventory.
In previous generations of its fulfillment center,
Amazon’s workers would have roamed these shelves
searching for the products needed to fulfill each new
order. Now the shelves themselves glide quickly
across the floor carried atop robots about the size
and shape of footstools. In a carefully choreographed
dance, these robots either rearrange the shelves in
neatly packed rows, or bring them over to human
workers, who stack them with new products or
retrieve goods for packaging.”218

Photo Credit: Álvaro Ibáñez There’s not yet technology that gives robots the
dexterity or object recognition to do that picking
themselves, but Amazon is working to change that.
As precarious and arduous as jobs like a fulfillment The company has sponsored two robotics contests
center worker for Integrity Staffing Solutions or an that it’s called the “Picking Challenge,” where it
independent contractor for Amazon Flex are, they’re awards the team that can design the best warehouse
still paid work. Through them, Amazon continues to “picker.” The challenges have drawn entrants from
have to share at least a small portion of the wealth robotics teams around the world, and in the summer
that it’s generating to a work force, instead of entirely of 2016, researchers from TU Delft Robotics Institute
to executives and shareholders. But this is changing. and Delft Robotics, in the Netherlands, took home
At the same time that Amazon is pushing at the the prize.219 Their winning robot’s edge came from
boundaries of the employee-employer relationship, the artificial intelligence it used to analyze the
it’s also expanding the frontiers of automation. objects that it had to pick,220 and artificial intelligence
is itself an area in which Amazon’s investing
In 2012, Amazon bought Kiva Systems, a robotics heavily. In 2015, Amazon acquired the AI startup
company that at the time supplied warehouses Orbeus,221 and since then, Jeff Bezos has disclosed
everywhere. “The acquisition effectively gave Jeff that the company has more than 1,000 employees
Bezos command of an entire industry,” Bloomberg working on artificial intelligence projects, which
has reported, and Bezos decided not to extend includes its Alexa voice assistant platform. 222
Kiva’s other contracts, but to use the technology
for Amazon’s warehouses alone.212 In 2014, Amazon
started building its eighth generation of fulfillment The acquisition of the robotics
centers, fully integrated with Kiva, and a year later, company Kiva, “effectively gave Jeff
it renamed Kiva as Amazon Robotics. Amazon
Bezos command of an entire industry,”
now has about 30,000 213 of the 320-pound orange
robots 214—double the number it had in 2014215 —in its
Bloomberg has reported.
warehouses around the world, and Deutsche Bank
analysts have found that Amazon saves $22 million in
When it talks about its robotics initiatives, Amazon’s
payroll and other costs at every warehouse where it
careful to note that its current systems rely on human-
deploys the technology.216 To this day, as Bloomberg
robot interactions, and that it hasn’t laid off workers
reports, “it’s really only Amazon that has this kind of
as it has expanded its use of robots. Like many
technology at scale.”217

46 | Amazon’s Stranglehold www.ilsr.org

 these jobs,” analyst Michael Pachter told the Los
Angeles Times. “There will be exactly the same impact
on retail as robots have had on manufacturing.”223 As
Amazon scales its use of technology, and implements
new technology, these impacts will scale too.

Amazon’s also working on automation as a tool to

enter sectors that it does not yet control, including
package delivery. As early as 2013, Jeff Bezos
revealed that Amazon was working on technology
to deliver packages by drone. “I know this looks
like science fiction. It’s not,” Bezos said on 60
Minutes, adding that its drones can carry up to 5
pounds, “which covers 86 percent of the items that
we deliver.”224 An Amazon web page reports that its
drones can make deliveries in under 30 minutes and
predicts: “One day, seeing Prime Air vehicles will
be as normal as seeing mail trucks on the road.”225
Between 2014 and 2015, Amazon increased its
lobbying expenditures by 91 percent as it sought to
influence the U.S. Federal Aviation Administration’s
rules for unmanned aircraft,226 and in July 2016, it
announced a partnership with the British government
to conduct drone test flights.227

In a report on Amazon’s expanding influence in

logistics, Deutsche Bank analysts noted that as
Amazon cuts workers, and their wages and benefits,
out of the delivery chain, “full automation from self-
driving trucks to delivery robots and drones should
bring unit cost to near $0.”228

To be clear, automating jobs that are grueling and

dehumanizing is not a bad thing. What Amazon is
doing, however, is taking work that has historically
Robots like this one are already performing tasks that in other warehouses provided routes to a prosperous, satisfying life,
are done by human workers. Photo Credit: Amazon degrading those jobs, and meanwhile, planning
to automate them. As we grapple with the impact
and influence of the company, we also must think
of Amazon’s framings, though, this one uses the critically about the loss of jobs and the distribution
company’s scale and rate of expansion to obscure of benefits to the top that go hand-in-hand with its
what’s really happening. The company’s use of its rise. Because this is the furthest point in Amazon’s
robotics fleet has so far been limited, and just 13 of its sequential model of work. In the Amazon world, the
facilities are equipped with the orange bots. In those future of work has robots and drones. What it doesn’t
facilities, however, the robots are already performing have are locally owned retailers or long-time shop
tasks that in other warehouses are done by human employees, packers or sorters or delivery drivers. It
workers. “It’s obvious that humans are going to lose doesn’t have very many people at all.

47 | Amazon’s Stranglehold www.ilsr.org

 the country, where it sorts packages by ZIP code
and feeds them directly into the postal system. As
Spreading Its Low-Road Amazon has increasingly taken the sortation process
Model to Package Delivery in-house, it’s cut business it once gave to national
carriers, mainly UPS. Over the last three years, the
share of Amazon packages delivered by UPS and
As Amazon expands its scale and its
others has fallen from 49 to 36 percent.234
ambitions, it’s spreading its model
of increasingly devalued work into Now, Amazon is testing ways to take over the
sectors of the economy that have “last mile” between the sortation center and the
traditionally provided stable, well-paid customers’ doors. Just as it learns about a new
product category from Marketplace sellers and then
jobs. Nowhere is this more clear than
brings that category into its own inventory, so too
in the logistics sector. has Amazon learned from UPS and USPS how the
logistics industry works. It’s relying more and more
For years, the United States Postal Service (USPS) and
on Flex drivers and on regional couriers that contract
UPS have handled a majority of Amazon’s deliveries.
with freelance drivers to make deliveries. Since 2014,
UPS has 362,000 employees in the U.S.,229 and for
these couriers have seen their share of Amazon
the Postal Service the number is 493,000 workers
deliveries triple from 5 percent to 15 percent.235
who are “career” employees, i.e., full-time.230 For
the most part, as “career” implies, these are stable
jobs with union representation and the benefits
and protections of a regulated employer-employee In a bid to reduce its shipping costs,
relationship. According to the Teamsters’ current Amazon has taken aim at this surviving
master agreement with UPS, which runs through corner of the middle class.
2018, the hourly wage for a delivery driver starts at
$18.75.231 For Postal Service city letter carriers, the
February 2016 National Association of Letter Carriers These couriers, which Amazon relies on particularly
contract has hourly wages starting at $17.70 and for its Prime and Prime Now deliveries, distinguish
going to $30.55, and annual salaries ranging from themselves largely by being willing to meet same-
$36,814 to $61,097.232 day, two-hour, and even one-hour delivery windows,
and being willing to do so on the cheap. They’re able
In a bid to reduce its shipping costs, Amazon has taken to do this, in large part, by shifting costs onto their
aim at this surviving corner of the middle class, and its drivers, who are in many cases treated like employees
actions threaten to drag down labor standards across but denied the benefits and security of the employer–
the logistics industry. Already, it’s used its leverage as employee relationship. Take, for instance, the southern
one of the largest buyers of package delivery services California courier company called Scoobeez, which
to undermine work standards. Its contract with USPS is operated by ABT Holdings, Inc., and is one of the
for Sunday package delivery, for instance, has resulted many subcontractors that Amazon uses for deliveries.
in Postal Service workers having to work more than In October 2015, four former delivery drivers for
seven consecutive work days.233 Prime Now filed a class action lawsuit against all
three entities, which the drivers alleged had “willfully
At the same time as Amazon is undermining work deprived” them of their rights and protections under
standards at the major carriers, it’s also been California law.236
building out its own shipping infrastructure. It now
has more than 20 sortation centers and dozens of As couriers for Scoobeez, the drivers’ jobs had been
delivery hubs scattered in and around cities across a lot like those of full-time employees: They had

48 | Amazon’s Stranglehold www.ilsr.org

 worn uniforms identifying them as representatives $11 per hour, plus $2.50 per delivery drop and tips,
of Amazon Prime Now. They had reported for shifts but shortly after they started, Scoobeez changed
at an Amazon warehouse. They had been closely their contract to eliminate the per drop bonus, and
managed, down to the level of receiving text the drivers allege that they didn’t receive tips that
messages from their dispatchers alerting them when customers designated for them. The drivers’ net
they were behind schedule. Scoobeez, however, compensation was at times less than the $7.25
had classified the drivers not as employees, but as minimum wage, the complaint alleges. In their suit,
independent contractors. As a result, the drivers the drivers argue that they were misclassified, and
hadn’t been eligible to receive standard labor law seek back wages and other restitution.
protections. They “not infrequently” were scheduled
to work six or seven consecutive days, according to This kind of misclassification allows companies to save
the complaint, and couldn’t turn down shifts without on workers’ compensation insurance and payroll taxes,
discipline, but didn’t qualify for overtime pay. They and in many cases, other protections too, like time-
had to use their personal vehicles, and often drive and-a-half pay for overtime. On the flip side, workers
“100 miles or more in a day,” but weren’t reimbursed themselves get saddled with more expenses, including
for fuel, insurance, maintenance, or tolls. They were self-employment tax and health insurance. As
told when they were hired that they would be paid the Huffington Post reporter Dave Jamieson

Amazon’s Expanding Footprint

125 Million
By the end of 2015, Amazon’s global
100 Million warehouse and fulfillment infrastructure
spanned 120 million square feet.
SQUARE FEET

75 Million

50 Million

25 Million

Amazon launches Prime.

Amazon buys the
warehouse robotics
company Kiva Systems.
Amazon begins contracting
Amazon launches
with Integrity Staffing
Fulfillment by Amazon
Solutions to supply temp
for Marketplace sellers.
workers for its warehouses.

Amazon kicks off a 3-year, $14

billion building spree that nearly
Sources: Amazon’s annual reports; “Amazon Ramps Up $13.9 Billion Warehouse Building quadruples the square footage of its As it looks totake
fulfillment network. more of the delivery
Spree,” Danielle Kucera, Bloomberg, Aug. 21, 2013; “Amazon Goes After ‘Small and Light’
Online Sales,” Loretta Chao, Wall Street Journal, June 2, 2015; “Amazon’s Net Shipping Costs process in-house,
Amazon introduces
Top $5B for First Time,” Madeline Vuong, GeekWire, Feb. 4, 2016.
sortation centers.

49 | Amazon’s Stranglehold www.ilsr.org

 has explained it, it’s “a system that shifts the In order to keep their contracts with Amazon, these
costs associated with employment away courier companies have to keep their costs down. As
from the company and onto the worker… Jamieson reported, LaserShip co-founder Farhang
that’s partly why the service is so cheap for retailers, Aryan said in a deposition related to the Massachusetts
and, ultimately, for customers as well.”237 case over misclassification, “‘I know of situations
[where] a customer says, ‘If you do not increase the
Among the courier services that Amazon relies rates, I will give you [an] additional year of contract,
on, Scoobeez’s treatment of its drivers is not an and if you do want to do any increases, this has to go
exception. In Arizona, Prime Now drivers have filed to a bidding process.’” One of the plaintiffs in that
a similar suit over misclassification against Amazon case, Milton Sanchez, testified that like the workers
and the subcontractor Courier Logistics Service.238 at Scoobeez, LaserShip would change his contract to
In Massachusetts, the state attorney general reduce his pay. “At the beginning we were making
fined one Amazon subcontractor, VHU Express, decent pay, and then they started cutting, cutting…
$80,000 for failing to pay drivers for completed They couldn’t make money with the client, so they
deliveries,239 and in another case in the state, the make money with us.”244
Amazon subcontractor LaserShip was required to
pay $800,000 for classifying drivers as independent Amazon’s not alone in using subcontractors and
contractors instead of employees.240 independent contractors to its advantage. It’s a gray
area of labor law that Amazon along with other tech
titans, like Uber, have figured out how to exploit.
Amazon is increasingly relying on regional For Amazon, legal experts suggest, the calculus
may be that what it can squeeze out of workers will
courier companies, which are able to meet
be greater than any penalties it faces as the issue
one-hour delivery windows on the cheap
winds its way through the courts.245 While the issue
by shifting costs onto their drivers. is garnering more attention from policymakers, by
the time regulations around how companies classify
their workers have caught up to the gig economy,
LaserShip, which is based in Virginia and serves Amazon may have grown beyond needing to use
the east coast, is one of the biggest couriers that couriers and subcontractors as a stop-gap. Because
Amazon contracts with, along with OnTrac, which here too, the bottom rung in the ladder of Amazon’s
is headquartered in Arizona and works in the west. labor model is automation. “By then,” Bloomberg
Both are privately held, and details are scarce, but notes of better policy for the gig economy, “Amazon
the companies are growing and thriving; in 2013, may be using drones for deliveries.”246
LaserShip’s e-commerce delivery business grew by
more than 30 percent.241 Like Scoobeez, both classify At the same time as it’s pushing down work
their delivery drivers as independent contractors, standards, Amazon is also building out additional
not employees. OnTrac’s job postings specify capacity within its logistics empire. The company
that its contractors must own personal vehicles has recently purchased 4,000 trailers to move
“equipped with lift gates and measuring at least 24 its goods,247 leased a fleet of air cargo planes,248
feet in length.”242 At LaserShip, drivers are paid not and registered a U.S. maritime license for freight
by the hour but by the delivery. One example from forwarding.249
Washington, D.C., in 2014 had a LaserShip driver
making $1.50 per Amazon delivery, or $225 at 150 Amazon has a record of building capacity for itself
deliveries per day.243 Much of that went to repay the and then selling that capacity to other companies. It’s
driver’s own expenses, from his personal cargo van what it did with Mechanical Turk, and, most notably,
to his gas and insurance. Amazon Web Services. Now, it’s beginning to do

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 Enriching the Haves
At the end of July 2016, Jeff Bezos
vaulted past Warren Buffett to become
the third-richest person in the world. 250

Amazon’s stock had continued its run

as a market darling and Bezos, who
owns about 17 percent of the company,
became worth $65.3 billion. It was a
new high, and put him behind only Bill
Gates and Spanish mogul Amancio
Ortega on the list of the world’s
billionaires.

Bezos offers the most striking example, but there are

other numbers. Amazon has spent at least $4 billion
building its sprawling corporate headquarters in
Seattle,251 with its three biospheres, for instance.
Amazon is building out capacity within its logistics empire, including with The company spent $1.5 billion acquiring other
a fleet of air cargo planes. Photo Credit: Amazon companies in 2014 and 2015, including $842 million
in cash for the video gaming site Twitch, and at the
end of 2015, just four top executives, not including
Amazon recently purchased 4,000 trailers Bezos, held $171 million worth of non-vested
to move its goods, leased a fleet of restricted stock.252
air cargo planes, and registered a U.S.
maritime license for freight forwarding. In the story of the widening gulf between haves
and have-nots in the United States, Amazon is a
central character. As the company has squeezed the
workers who sort inventory, pack boxes, and deliver
this with delivery. For Marketplace sellers who sign packages, repeatedly and rigorously distanced itself
on for Fulfillment by Amazon, Amazon handles all from responsibility, and implemented increasingly
of the logistics, and even retailers that sell through precarious work arrangements, Amazon has also
their own sites can contract with Amazon to pack delivered enormous wealth to a handful of its top
and deliver their goods in unmarked, non-Amazon executives and shareholders. From its reliance
boxes. Amazon is building out its new infrastructure on temp workers to its investment in automation,
big enough, and with enough specialty features like Amazon’s vision of labor is one that seeks to shift
tracking, that it seems to intend down the road to its profits to an ever-smaller group. A century ago,
offer shipping services to other companies more workers and unions waged hard-fought battles
widely, eventually taking away business from national to end piece work and win reliable wages and
carriers like UPS and USPS. As it does so, it will take salaries. Today, though, Amazon is eroding this basic
with it the middle class wages, benefits, and life of a agreement, and moving backward to adopt a 19th
significant population of workers. century labor model that drives returns to the top at
the expense of the rest.

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 growing monopoly power is allowing a few dominant
firms to extract more income than they would earn
in a truly competitive market, and allowing them to
distribute those returns to their shareholders and
top-level employees.255

Every year in his letter to shareholders, Bezos

includes a copy of the shareholder letter he wrote
in 1997, Amazon’s first year as a publicly traded
company. It’s often held up as an example of the
clarity of Bezos’s vision even early on. “We believe
that a fundamental measure of our success will be
the shareholder value we create over the long term,”
Bezos writes (emphasis his). “This value will be a
direct result of our ability to extend and solidify our
current market leadership position. The stronger our
Amazon has a record of building out capacity for itself and then selling that market leadership position, the more powerful our
capacity to other companies. Photo Credit: Shutterstock.com economic model.”256

Figures suggest that in the kinds of work environments There’s no question that, nearly 20 years later, Bezos
that Amazon is creating, this gulf is widest for and his company have established a powerful
populations that have been historically marginalized. economic model, attained a market leadership
Among temp workers generally, for instance, position, and created shareholder value. The
African-Americans comprise more than 20 percent, question now, however, is at what cost, and whether
compared with 11 percent of the overall workforce.253 they’re creating value for anybody else.
At Amazon itself, there are significant racial disparities
between management and the rest of the company’s
workforce. As of July 2015, African-American and
Hispanic workers comprised 45 percent of Amazon’s
warehouse workforce, but only 8 percent of its
management.254

From its reliance on temp workers to its

investment in automation, Amazon’s vision
of labor is one that seeks to shift its profits
to an ever-smaller group at the top.

As Amazon continues to grow its market share,

this income inequality calcifies. A central driver of
inequality, recent research has found, is the increasing
size and market share of a handful of big companies.
One October 2015 study from the economists Jason
Furman and Peter Orszag, for instance, suggests that

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 Weakening
Communities
Amazon is Saddling Our Cities with
More Vacancies, Less Tax Revenue,
and Weaker Social Bonds
When people think about the place where they live, many picture their
friends and neighbors, or a favorite local park, or the school their kids
attend. Many also think about going for morning runs with the group
organized by the local running retailer, or getting project advice from the
corner hardware store, or browsing new releases at the bookshop. They
think of the restaurants where they bring out-of-town friends when they
come to visit, and the businesses that bring utility and enjoyment to their
daily routines.

Throughout history, merchants have located near their customers and played
a pivotal role in the liveliness and financial upkeep of their communities.
Amazon is upending this relationship. This section examines how Amazon,
as it severs the longstanding link between commerce and place, is directly
threatening cities with vacancies, job losses, and revenue shortfalls. It also
examines how at the same time, Amazon is corroding values that are more
abstract, but equally critical, including street life, civic engagement, and
Photo Credit: Stacy Mitchell social capital.

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 Brick-and-mortar retailers create about one out of 135 million square feet of retail vacancy. Over the
every eight jobs, and account for a large share of last year, headlines have frequently carried news
the commercial activity in most towns and cities. If of chain retailers shuttering dozens or hundreds of
they are locally owned, they also generate a second stores, and of sprawling shopping malls going dark.
tier of economic activity, as they spend some of The closure of independent retailers as Amazon
their revenue with nearby suppliers and service takes a larger share of the market is harder to track,
providers, sending money flowing into numerous but there too, the number may reach into the tens
local paychecks. of thousands. Amazon, meanwhile, doesn’t have
a physical presence in most of the places where it
does business.

Not all e-commerce follows

Amazon’s example, and many local
business owners are creating alternate
models for online shopping that allow
them to better serve their customers
while still operating on the
scale of the community.

Locally owned businesses are intimately linked with our own self-interest For cities and counties, the result is a decline in tax
and how we experience our communities. Photo Credit: AdobeStock revenues that has urgent fiscal implications. Yet, it’s
a threat with which governments haven’t begun to
States and cities have structured their revenue bases grapple. Instead, as we examine in the final section
around this age-old model of commerce, and most of this report, many continue to subsidize Amazon’s
depend on retail stores for a sizable portion of the expansion.
property and, in all but five states, the sales taxes
they use to fund schools, libraries, roads, and other Along with the fiscal impacts, some of the most
services. Property taxes are the largest single source damaging effects of Amazon’s growth are not
of state and local government revenue, comprising financial. Brick-and-mortar stores, particularly those
about one-third of the total.257 Although it varies from that are locally owned and in walkable business
state to state, on average, half of this revenue comes districts, are also intimately linked with our own self-
from commercial properties.258 interest and how we experience our communities.
Shopping and errands represent an important
share of the trips people take when they leave their
The decline in tax revenues as Amazon house,259 and testing train sets at the local toy shop,
grows has urgent fiscal implications, but it’s or trying on backpacks at the outdoor gear retailer,
a threat with which governments haven’t brings sensory and social enjoyment to the task of
yet begun to grapple. shopping that go beyond the exchange of money
for goods. At the same time, these stores create an
economy embedded in multifaceted relationships:
Today, a rising number of those properties are the bookstore owner lives in the same neighborhood
becoming vacant. We estimate that by the end as her employees and customers, and the hardware
of 2015, Amazon’s growth had displaced enough store owner sponsors the Little League team.
sales at brick-and-mortar stores to cause about

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 Looked at in the context of a single interaction, these one in the New York Times in August
connections can seem small, but taken together,
2016; “American malls are dying faster
260

they create tangible meaning and define much of

our sense of place and belonging. Research has
than you think—and it’s about to get
found strong links between a vibrant local business even worse,” read another in Business
community and positive outcomes that range from Insider two weeks later. Staples closed
261

social connectivity to civic engagement. 242 stores between 2014 and 2015, and
Office Depot closed 349 stores in the
With its vision of shopping as a solitary act,
Amazon makes it easy to forget that in our economic
same period. Sports Authority, and
262

interactions, we’re not just consumers. We’re also its remaining 463 stores, went out of
neighbors, workers, entrepreneurs, producers, business entirely.Of about 1,200 enclosed
taxpayers, residents, citizens, and so on, with needs shopping malls in the U.S., about one-
and wants from a shopping experience and an
third of them are dead or dying. 263

economy that go beyond the one-click checkout.

These retailers are closing for many reasons,
Though Amazon is now opening stores of its own,
including the massive overbuilding of big-box
these physical locations are designed primarily to
stores during the last two decades and stagnating
support its online sales, and in both quantity and
household income. Amazon’s expansion, however, is
quality, outposts like its device kiosks and its grocery
one of the leading causes. As a retail analyst put it in
pickup points offer poor substitutes for locally owned
2015, “Amazon has played a key role in the structural
businesses. Meanwhile, Amazon’s dominance
shift away from brick-and-mortar retail, and it may lay
and identification with online sales have masked
waste to many other retailers in the years to come.”264
alternate visions for how we can structure our digital
commerce. Many local business owners are savvy
Our analysis estimates that in 2015, Amazon’s growing
entrepreneurs who are creating different models of
market share caused more than 135 million square feet
e-commerce that enable customers to shop locally
of retail space to become vacant.265 For perspective,
from home, but that, unlike Amazon’s model, remain
that’s the equivalent of 1,267 vacant Home Depot
distributed and place-based.
stores, or about 700 empty big-box stores plus 22,000
shuttered Main Street businesses. As Amazon’s sales
expand, these vacancies will mount.

A Rising Tide of When big retail properties close, it’s the public that’s
left to pick up the pieces. Not only do closed properties
Vacant Stores no longer generate the same levels of property and
sales taxes, but cities are also forced to grapple with
Brick-and-mortar retailers — local the expenses of increased crime, ongoing services,
businesses and national chains alike— and often, how to make the site viable again, or at
least prevent it from dragging down properties
have been hit hard by the dramatic
around it. After decades of struggling with the many
growth of Amazon’s market share, and damaging impacts of big-box retailers, communities
one result has been a wave of vacancies. are now having to grapple with the sprawling empty
For national retailers, every week brings a boxes and hollowed-out local economies that these
new headline about the decline: “Macy’s stores are leaving behind.
to Close 100 Stores as E-Rivals and
When the mall next to Austin Community College
Discounting Hit Legacy Retailers,” read in Austin, Texas, started to decline, the college

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 and no one was on our street shopping,” wrote one
respondent, the owner of a home goods shop.

Declining Public Revenue

In 2015 the small city of Portland, Maine,
adopted a $323 million budget, with 268

provisions for everything from new

police officers to investments in parks,
street plowing to library operations.
“Amazon has played a key role in the structural shift away from brick-and- All of the revenue came from a pot of
mortar retail, and it may lay waste to many other retailers in the years to fees, taxes, and grants, and by far the
come,” noted a retail analyst in 2015.
largest share of it —55 percent —came
looked on worriedly as the crime rate increased and from property taxes. Nearly 40 percent
other commercial and residential vacancies started of this in turn came from commercial
climbing. Ultimately, the college felt it had no choice properties. 269

but to buy the property itself. “The whole community

surrounding it begins to deteriorate,” the CEO of the Portland is just one example, but most city revenue
school explained of what happens as a mall decays. sources follow similar outlines, and property taxes
City voters later approved bonding packages are the leading source of revenue for state and local
totaling $386 million for the college to transform the governments around the country. Businesses, in
space for its needs.266 particular, shoulder a disproportionate share of this
tax responsibility. In 39 states, property tax rates for
More commonly, cities saddled with dying malls and commercial and industrial property are higher than
empty big-box properties buy the spaces and simply they are for residential property. The gap is large
raze them. That’s what the city of Southfield, Mich., enough that the average commercial property in the
did when it bought the closed Northland Center mall U.S. pays a tax 1.724 times greater than that paid by
for $2.4 million, and prepared to spend upwards of a homeowner; in Denver the ratio gets as high as 3.5
$10 million to demolish it. “We bought it because times greater, and in New York City businesses pay
we did not want Northland Center to become a six times as much.270
vacant shopping center significantly blighting the
community,” the mayor said at the time.267 Businesses that are in walkable, mixed-use districts
are particularly valuable to municipal bottom
While America’s multiplying collection of dead malls lines, research has found. This is because they
and vacant superstores has been at least partially generate relatively high property tax payments
catalogued, the emptying out of retail space occupied with a comparatively small burden on public
by locally owned retailers is harder to put numbers to. services. One study, for instance, looked at costs
Yet the implications for communities are even greater. like road maintenance and public safety services,
Talk to local business owners, and it’s at the top of and found that for a Massachusetts town, big-box
their minds. In a 2016 survey of more than 3,000 retail and shopping centers ran a net deficit for
independent business owners around the country, taxpayers, costing more in services than they paid
70 percent ranked competition from large internet in taxes. Meanwhile, specialty retail like Main Street
retailers as their top challenge, by far the largest businesses generated more revenue than they
share of any response. “This year Amazon was Santa required in public services, providing a surplus of

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 $326 per 1,000-square-feet.271 Other research has in New Jersey, after Amazon opened up a new
found that though economic development policies fulfillment center, the mass of employees driving to
often favor sprawling projects like big-box retailers the site led to gridlocked roads and a 300 percent
and warehouses, the high-density, mixed use increase in the accident count. The town had to
buildings that locally owned retailers tend to occupy allocate five police officers to direct traffic near the
generate far greater property tax returns.272 facility during rush hour, and public officials had to
dedicate time to working with Amazon to discuss
In contrast, Amazon doesn’t pay property taxes on shift schedules and road expansions.275
prime commercial properties in central business
districts. In fact, in 20 states, Amazon doesn’t have
property at all.273 Even in states where the company
does have a physical presence, its fulfillment centers
An Existential Threat
occupy less space than the retail stores they empty out to the Vitality of Cities
and, built in places where land is cheap, are generally
valued at much lower rates than traditional retail.
Cities have long been praised for their
For cities and counties, this lack of a robust physical
vitality, and the power of their busy
presence—coupled with rising storefront vacancy streets to connect people, spark ideas,
as Amazon gains market share—has significant fiscal and foster creativity. Much of this
implications. In its 2016 report “Empty Storefronts,” vitality is linked to commerce that is
Civic Economics estimates that the land use changes
based on the city street—in visits to the
triggered by Amazon resulted in a drop of $528
million in property tax revenue in 2015, losses that are
pharmacy and conversations in line
expected to mount as Amazon’s market share continues at the grocery store, in the business
to grow. And even as Amazon is impacting property owner rearranging the window display
tax revenues, it continues to evade other forms of taxes. and the live-music event hosted by
The company does not collect sales taxes in 16 states,
the record store. The number of small
which, as we detail in the final section of this report,
costs local and state governments an additional $704
ways that people interact when they’re
million on top of the property tax losses. out and about on sidewalks and streets
may seem trivial, but, as the great urban
At the same time that Amazon undermines the
theorist Jane Jacobs has written, it
revenue sources of local and state governments, it
also imposes direct costs on the public. One example
creates a sum that’s not trivial at all. “The
is infrastructure. Trucks laden with Amazon delivery sum of such casual, public contact at a
boxes put wear-and-tear on roads, and Amazon not local level—most of it fortuitous, most
only skirts the taxes that pay for upkeep on those of it associated with errands,” Jacobs
roads, it’s also skilled at getting local governments—
writes, “[is] a web of public respect and
desperate for employment in an Amazon economy
that is shrinking opportunity—to pay for new ones. In
trust, and a resource in time of personal
Shakopee, Minn., for instance, when public outcry or neighborhood need.” 276

forced Amazon to drop its request for direct tax

incentives for a proposed fulfillment center, the Though Jacobs was writing in the 1960s, today,
company was still able to wrangle $5.8 million from the value of city streets is more recognized than
the city for road improvements for the new facility.274 ever. In recent years millennials and boomers
alike have flocked to cities in search of walkable
Amazon also imposes costs that are more mundane, neighborhoods and vibrant downtowns. Business
but still significant, like increased traffic. In one town schools teach theories of “serendipity,” or how to

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 mimic the ways that ideas can spark when people of greetings exchanged and people encountered,
run into each other, and cities from Minneapolis to ordering those same items at Amazon happens with
Cincinnati are investing in pedestrian infrastructure a few strokes on a keyboard, a scan of products, and
and public spaces. Even cities like Carmel, Ind., a a click. In Amazon’s world, people are fundamentally
suburb of Indianapolis, are designing city planning consumers and consumption happens alone. It’s
policies to favor multi-story buildings, underground a vision that holds profound implications for our
parking, and attention to street life. “The idea is communities and how we relate to each other.
people will be able to walk everywhere,” the city’s
five-term, Republican mayor explained.277 “When a city heart stagnates or disintegrates, a
city as a social neighborhood of the whole begins
to suffer,” Jacobs wrote. People who ought to get
As much as Amazon may admire cities and together, don’t. Ideas and money that ought to
meet fail to. Overall, Jacobs continued, without lively
their street life, its rise poses an existential
commerce and passing interaction, the city “falters at
threat to them. Aside from work and
producing something greater, socially, culturally and
school, by far the largest share of the trips economically, than the sum of its separated parts.”
we take when we leave the house involve
shopping and errands.

Even Amazon recognizes this value for itself. Though

Weakening Local
he eschews other tech company employee perks Ownership, a Powerful
like free lunches, Jeff Bezos has committed to the
amenity of keeping his company’s headquarters in Source of Social Capital
a city. Early on, he moved his young company from
suburban Bellevue to downtown Seattle, and today, The loss of local businesses as retail
Amazon’s corporate footprint spans more than 10 spending shifts to Amazon also means
square blocks, and the company encourages its the loss of a group of people that is
employees to walk to work.278 “It is a fact that we
critical for the health of place: Small
could have saved money by instead building in the
suburbs, but for us, it was important to stay in the city,” business owners. While Amazon, and
Bezos wrote in his 2013 letter to shareholders. “Our companies of similar scale, operate
employees are able to take advantage of existing many hundreds of miles and layers
communities… I also believe an urban headquarters of hierarchy away from most of the
will help keep Amazon vibrant, attract the right talent,
people they serve, small business
and be great for the health and well-being of our
employees.” As the New York Times has described, owners are deeply connected with
“Mr. Bezos has put his chips on the idea of Seattle and their employees, their customers, and
urban America itself.”279 their communities. Those connections
come with tangible benefits.
As much as Amazon may admire cities and their
street life, its rise poses an existential threat to Take political participation. Counties with economies
them. Aside from going to work and school, by far dominated by a few large businesses, sociology
the largest share of the trips that we take when we research has found, have lower levels of voter turnout,
leave our homes and head out into our communities interest and knowledge of politics and current
involve shopping and errands.280 While a trip to the events, local newspaper readership, participation in
store for pasta, or paint, or new running shoes is full associations, and engagement in protest activity. As a

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 commitment to the firm,283 and that counties with
greater shares of locally owned retail experience
a less-steep slope of out-migration, particularly
among college-educated residents.284 Still more
research has focused on the impacts of the economy
shifting away from local firms, such as a study that
found that the presence of a Walmart reduced the
number of social capital-generating associations,
such as churches, political organizations, and
business groups, per capita, and was associated
with lower voter turnout.285 The authors of that study
hypothesized that the drop in social capital is owed
to the disappearance of local businesses and the
decline of downtowns as Walmart claimed retail
market share. This is a process that happens to an
even greater degree as spending shifts to Amazon,
which has an even more limited local presence.
Much of the vitality of cities is linked to commerce that is based on the
city street, and research has found powerful links between local business
The research clearly describes something that
ownership and social capital.
many Americans also understand intuitively: Local
businesses and their owners play a critical role in
result of this economic concentration, the researchers community life. Along with their outsize contributions
wrote, “the independent middle class of local owners to economic indicators like business dynamism, job
is eroded,” and continued, “Our findings suggest creation, and innovation, these business owners
that the absence of an independent middle class also perform vital social and civic functions. Some
signals an equally absent civic spirit among local of these functions are expressed in concrete metrics
residents.”281 In their paper, the researchers link their like voter turnout and number of civic associations in
findings to contributions that local business owners a community. Others are expressed in experiences,
make to social trust, cross-cutting social networks, like the many business owners who go on to become
and the “problem-solving capacity” of a community. civic leaders themselves, as in the classic example
Local business owners are more engaged with of Harvey Milk, whose San Francisco camera shop
their community, they write, in part because to a launched him into local politics.
greater degree than is true for corporations with
headquarters elsewhere, “improvements to the Many of these functions, however, are also linked to
broader community generally benefit local business something more abstract, which is that an economy
owners as well.” made up of diverse, small, and independent
enterprises is also one aligned with values—personal
Other research has found similarly powerful links agency, self-determination, local control—that are
between local business ownership and social at the core of the American story. In conversations
capital, civic engagement, and well-being. Having about Amazon’s impacts, such broad values are
an economy made up of small-scale businesses is often left out in favor of questions about automation
correlated with lower rates of crime and better public or market capitalization, but it’s nothing less than
health, one study found, which the authors concluded these values that is at stake.
was a result of the greater “collective efficacy,” or
ability to work together for mutual benefit, in such
communities.282 Other researchers have focused on
measures of loyalty, and found that firm size and local
ownership are positively correlated with employee

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 Amazon’s placelessness, however, means that its
impacts are even more insidious. It leaves small signs
Stealth Invasion scattered around cities—a white delivery truck with
its logo on one side, or its boxes piled outside on
Amazon’s placelessness is not only a recycling day—but when the toy store closes down,
threat to cities,towns,and their residents, it’s hard to know the degree to which its customers
it’s also part of the challenge in how to had started shopping at Amazon.
take on the company. The company’s
At the same time that Amazon slowly infiltrates our
invisibility makes it harder to connect neighborhoods, it’s important to consider that not
its impacts back to it, and also to build all e-commerce follows its example. Indeed, across
the kind of grassroots response and the country, locally owned businesses are creating
resistance that citizens and towns have e-commerce models that allow them to better serve
their customers while still operating at the scale of the
been able to deploy against Walmart
community. In west Michigan, the athletic equipment
and other big-box stores, but haven’t retailer Gazelle Sports has grown its online sales
yet begun to establish against Amazon. from 2 percent to 6 percent of overall revenue
over the last two years, 288 and the Washington, D.C.,
In beginning to think about how to approach the bookstore Politics & Prose saw growth of more than
threats posed by Amazon, campaigns against Walmart 20 percent in its online business between 2014
offer instructive examples. Between 1998 and 2005, and 2015, and recently overhauled its website with
more than one-third of Walmart’s proposals for new a focus on highlighting its online browsing and
stores were met with local protests, and those protests shopping offerings.289
were successful in stopping the proposed store in 65
percent of cases, researchers at Columbia and Stanford These retailers are just two examples of the many
universities have found. “The principal obstacle to who are finding ways that technology can, instead
the expansion of Walmart has been protests by local of making commerce placeless and solitary, in
activists,” those researchers concluded.286 One example fact strengthen a local business’s ability to provide
of this type of action was in Damariscotta, Me., when communication, convenience, and connection. As
Walmart revealed plans to build a 187,000-square- local retailers are advancing these models, we can turn
foot supercenter there and the national conversation to them, as well as to a strong public policy response,
about the big-box retailer suddenly arrived in the to begin to address Amazon’s unchecked impacts
2,000-person village’s backyard. The proposal and to create an alternate vision for e-commerce in
galvanized town residents, who gathered enough our communities and lives.
signatures to bring before voters a measure to cap the
size of stores in town, next passed it with overwhelming
turnout and support, and then organized surrounding
towns to take similar action.287

Site fights like these give citizens a clear target for

protest, and also crystallize a sense of the impacts.
With big-box retailers, impacts are visible on the
landscape. When a Walmart opens up outside
of town and the longtime grocery store closes 6
months later, there’s a direct link of cause and effect.

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 The Policy Response
to Amazon
Policymakers should put an end to
the lavish subsidies and tax breaks
that have fueled Amazon’s growth,
and instead adopt policies that
would create a more competitive and
equitable digital economy
As Amazon has extended its tentacles into one sector of the economy
after another, as it has used its market power to eliminate competition
and exploit workers, and as it has weakened the financial and social
structures that underpin our communities, we might have expected
a robust response from elected leaders. We might have expected
policymakers to draw on existing antitrust and labor laws to hold Amazon
accountable and ensure fair and open markets for competing businesses
and workers, and to propose new policies to address the novel aspects
of the company’s power.

But quite the opposite has occurred. From Amazon’s founding in 1995,
Photo Credit: Robert Scoble
and continuing all the way through the company’s breakneck expansion

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 Amazon’s Lobbying Expenditures, 2000—2015
$10 Million

$8 Million

$6 Million

$4 Million

$2 Million

Source: Open Secrets, The Center for Responsive Politics, accessed May 23, 2016

of the last few years, Jeff Bezos has made evading total amount almost certainly exceeds the company’s
public obligations and securing government favors profits since its inception. In other words, had
a core part of his strategy, and many policymakers Amazon played by the same rules as its smaller and
have eagerly assisted the company. less politically influential competitors, it would have
had to charge higher prices or slow its expansion
In this section, we first document Amazon’s heavy or both. Bezos appears see these favors as critical
reliance on government handouts and favorable to the company’s continuing dominance. Between
treatment. We present new research finding that 2012 and 2015, Amazon increased its lobbying
Amazon has negotiated lucrative public subsidies expenditures almost fourfold, and it’s now spending
for more than half of the 77 fulfillment centers and more to buy political influence in Washington than
other large warehouses it built between 2005 and many other big companies, including Walmart and
2014. We look at Amazon’s long and continuing Apple.290 Amazon also recently hired several top-
history of sidestepping sales tax and how this flight D.C. lobbying firms,291 including one of the
competitive edge continues to swell its sales at nation’s foremost antitrust lobbyists,292 and in 2013,
the expense of brick-and-mortar retailers. And we Bezos purchased the Washington Post.
examine how Amazon uses an overseas tax haven
to skirt paying federal taxes—a scheme that has We then turn to the question of how citizens and
reduced its tax rate to less than one-third of what policymakers should respond to Amazon. We call
competing retailers pay. for restoring the broader range of goals that guided
antitrust enforcement for much of the 20th century,
Although we do not know the precise value of these and propose using these policies to divide Amazon
tax breaks and subsidies across Amazon’s 21-year into separate firms, prevent it from using its deep
history, based on the figures that are available, the

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 financial resources to capsize smaller competitors, Kenosha more than Kenosha needed
and require fair, nondiscriminatory terms for both
Amazon, the company managed to
sellers and buyers on its platform. We also call for
updating state and federal labor laws to protect
wring $27.3 million in public subsidies
workers’ rights in the digital economy, including from state and local officials in exchange
establishing stronger protections for temporary for locating there. “It’s a win-win for 294

workers and blocking companies from classifying everyone,” Gov. Scott Walker declared
workers as independent contractors as a way of
at the ribbon-cutting. 295

evading wage and hour standards. And finally, we

call on local and state governments to stop providing
The following year, in search of more capacity in
Amazon with subsidies and tax breaks, and to
the Chicago area, Amazon decided to open its first
revise their planning and economic development
policies to reflect the community benefits of local,
Share of Amazon Warehouses That Have
independent businesses.
Received Public Subsidies, 2005-2014

A Fulfillment Network 40 Fulfillment Facilities

Built with Subsidies
Built with Public Subsidies
In 2014, Amazon opened the first of two 77 Total Fulfillment
Facilities Built
massive warehouses along Interstate
94 in Kenosha, Wisconsin. Just 9 miles
from the Illinois border, and 50 miles 52% Share that Received
Public Subsidies
from Chicago, the location was crucial
to Amazon’s strategy. At the time, Sources: Institute for Local Self-Reliance analysis, drawing on news accounts, as well as:
“Amazon Global Fulfillment Center Network,” MWPVL International, accessed May
Amazon had no facilities in Illinois and 2016 and “Subsidy Tracker: Amazon.com,” Good Jobs First, accessed May 2016.

therefore did not have to collect sales

fulfillment center in Illinois, finally giving up its sales
tax on orders shipped to state residents, tax advantage after 21 years. The company chose
a competitive advantage that research a spot in the town of Joliet, a growing logistics
shows increases the company’s sales hub southwest of Chicago. Although Illinois was
by almost 10 percent, or roughly $200 struggling with a budget crisis that would ultimately
lead to cuts in services and layoffs, Amazon managed
million a year in a state the size of
to wrangle from the state a 10-year tax break, worth
Illinois. Figuring out how to preserve
293
about $10 million, for the new facility.296
this competitive advantage while also
opening warehouses within a short A few months after winning that deal, in early 2016,
delivery range of the Chicago area’s Amazon embarked on building two fulfillment centers
in the Illinois town of Edwardsville. Once again, the
10 million people presented Amazon
company and its developer secured a public handout.
with a dilemma. Locating in Kenosha City officials agreed not to levy property taxes on the
offered a perfect solution. And, better two facilities for a full decade, a subsidy whose value
still, although Amazon clearly needed will not be known until after the warehouses are
completed.297 Much like Kenosha, Edwardsville has

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 exemption in many states, and so Amazon honed its
ability to secure other kinds of tax breaks. It focused
on getting officials to subsidize its new warehouses,
a strategy that has paid off handsomely.

Matching a list of the 77 fulfillment, sortation, and

other large facilities Amazon built in the U.S. between
2005 and 2014 with data from Subsidy Tracker, a
project of Good Jobs First, and information in news
accounts, we found that the company received
public subsidies for at least 52 percent of these
facilities. These subsidies had a combined value of
$613 million. Amazon received another $147 million
in subsidies connected to its data centers during
these years. The combined value of these incentives,
$760 million, is equal to 17 percent of Amazon’s
global profits during this period. (Because of limits in
the availability of data, our analysis almost certainly
misses some of the deals Amazon negotiated in
these years, so these figures are conservative.)

We found that Amazon picked up subsidies in every

Amazon secured $27.3 million in public subsidies from state and local
corner of the country: $61 million in West Columbia,
officials to build this fulfillment center in Kenosha, Wisconsin.
South Carolina;299 $43 million in Baltimore;300 $12
million in Fall River, Mass.; 301 $18 million in Etna,
Ohio,302 to name a few. And, even as its revenue
strategic value to Amazon. It’s part of the St. Louis soared, Amazon’s demands for subsidies did not
metro, putting Amazon within close delivery range of slow. In 2014, the company reported $2 billion in
the metro’s residents and yet beyond the borders of free cash flow,303 and yet still squeezed incentives
Missouri where its lack of physical presence means worth an estimated $66 million from state and local
the company still does not have to collect sales tax. governments, our analysis found.

Meanwhile, back in Joliet, Amazon announced that it Among the reasons that public officials agree to
wanted to build a second facility, and the state again these deals, Amazon’s promise to create jobs is at
rolled out the tax breaks, offering about $20 million, the top. Yet, Amazon’s growth is eliminating more
or twice as much as it did for the first one.298 jobs than it’s creating, both nationally and in almost
every state, as we detailed in the second section
Extracting economic development incentives like of this report. Mark Meinster, executive director of
these has been a vital part of Amazon’s expansion Warehouse Workers for Justice, marvels at the feat
strategy for the last decade, our review of dozens of Amazon has pulled off: “The company has made the
these deals shows. Prior to 2005, Amazon operated decision to hedge everything on same-day delivery,
only a handful of warehouses, and it chose locations and try to put the brick-and-mortar retailers out of
mainly based on maximizing its sales tax advantage. business, and they’ve gotten [the strategy] to be
But as Amazon grew it increasingly staked itself largely publicly funded.”304
on rapid delivery, and beginning in 2010, Amazon
overhauled its logistics strategy in order to start
locating a fulfillment center within striking distance
of every U.S. city. This meant foregoing its sales tax

64 | Amazon’s Stranglehold www.ilsr.org

 households and found that, after Amazon starts
charging sales tax, people cut their spending on the
Allowing Amazon to Sidestep site by 9.4 percent, and by 29.1 percent for items
Sales Tax priced over $250.307 If sales tax matters this much
at this stage of Amazon’s development, given its
size and everything else it has going for it, one can
For most of its history, Amazon has
only imagine how much this government-granted
operated without having to collect competitive advantage propelled Amazon’s growth
sales taxes in most states. Today, there back when it was merely a book retailer, or after it
are still 16 states where virtually all of introduced Prime in 2005, when it was an $8 billion
Amazon’s competitors are required by company exempt from collecting sales tax in almost
every state.
law to collect sales tax from customers,
but Amazon is not. This gives Amazon
Although Bezos has downplayed the strategic value
a built-in price advantage. Its value
of this exemption, Amazon’s actions over the years
varies by location, but combined local tell a different story. In an interview with Fast Company
and state sales tax rates typically range in 1996, Bezos explained his decision to locate the
from about 6 to 10 percent. 305
company in Seattle: “It had to be in a small state. In
the mail-order business, you have to charge sales tax
The prospect of not having to pay sales tax306 adds to customers who live in any state where you have a
to Amazon’s appeal to shoppers and drives a business presence… We thought about the Bay Area,
portion of its sales. In a 2016 study, economists at which is the single best source for technical talent.
Ohio State University tracked spending by 275,000 But it didn’t pass the small-state test.”308

States Where Amazon Does Not Collect Sales Tax

Sources: Institute for Local Self-Reliance analysis;

“About Sales Tax,” Amazon.

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 As it grew, Amazon went to great lengths to not have a warehouse or other facility in the state.312
ensure that its activities could not be construed as As a result of these states changing their policies,
establishing “nexus” (a physical presence in a state) and Amazon expanding its warehouses into more
that would require the company to collect sales states, the company is now collecting sales tax from
taxes. According to a 2011 investigation by the Wall a majority of the U.S. population.
Street Journal, Amazon maintained a map showing
states where employees were barred from traveling But in 16 states, including ones with sizeable
unless they were outfitted with fake business cards populations, like Missouri, Amazon continues
indicating they worked for a subsidiary, rather than to operate sales tax free. The research firm Civic
Amazon, lest their activities trigger nexus.309 Economics estimates that Amazon’s uncollected state
and local sales taxes totaled more than $704 million
As Amazon grew, the company bullied states to allow in 2015.313 That year, Amazon reported profits of just
it to build facilities without having to collect sales $596 million.
taxes on in-state orders. In South Carolina, Amazon
cut a deal with the governor to remain sales tax free
even as it built warehouses in the state.310 When
the legislature balked, Amazon halted construction,
resuming only when lawmakers backed down. In
“An Extremely Advantageous
Texas, Amazon even went so far as to conceal its Tax Rate”
presence operating a warehouse that state tax
officials were unaware of until reporting by the Dallas
In 2003, Amazon decided to establish
Morning News uncovered it. When the state sued for
$269 million in back sales taxes, Amazon threatened
a European headquarters. With sales
to shut down the facility and fire hundreds of people. booming in the U.K. and a network
The state canceled the tax bill.311 of fulfillment centers planned for
Germany, one might have expected
Amazon to pick London or Berlin. But
Economists at Ohio State University instead it chose to site its headquarters
tracked spending by 275,000 households in the tiny nation of Luxembourg. What
and found that, after Amazon starts
Luxembourg has going for it is that it’s
charging sales tax, people cut their
a tax haven, a place where companies
spending on the site by 9.4 percent.
can funnel profits and shield them
from tax authorities in other countries.
Locating there was part of an
For more than a decade, legislation has been elaborate scheme—involving multiple
proposed in Congress that would allow states
shell companies and a lengthy chain
to extend sales tax to large internet retailers,
regardless of whether those firms have a physical
of transfer payments between them—
presence within their borders. In 2013, the U.S. that Amazon devised to dramatically
Senate overwhelmingly passed such a bill, but the cut its income taxes in both the U.S.
leadership in the House declined to bring the bill and Europe. 314

to a vote there. Meanwhile, about a dozen states,

tired of waiting on Congress and spurred by local Ever since, Amazon has benefitted from what
business owners and advocates, have devised a way Newsweek investigative reporter Simon Marks
to require Amazon to collect sales tax even if it does describes as “an extremely advantageous tax rate.”315

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 Whether Amazon’s tax-skirting scheme is legal has
become the subject of multiple investigations. The
IRS is pursuing Amazon for $1.5 billion in back taxes—
How Public Policy Should
and that figure is based on just two years, 2005 Address Amazon’s Power
and 2006, of the company’s operations. Additional
investigations have been launched by France, and Impacts
Italy, and the European Union. Pressure from U.K.
lawmakers led Amazon to stop using the tax-dodge As we begin to imagine what a different,
in that country last year. more competitive and equitable,
version of e-commerce might look like,
Whatever the outcome of these cases, Amazon’s
tax scheme has undoubtedly helped it grow into a
it can be easy to assume that Amazon’s
formidable market power by allowing it to pay a lower vision is the only way things could turn
tax rate than many of its competitors pay. Between out. After all, it’s been at the center
2008 and 2012, Amazon paid an effective federal tax of the online economy from the start.
rate of about 9 percent, which is less than one-third
Bezos would have us believe, as he’s
the average rate paid by other retailers, according to
the Institute on Taxation and Economic Policy.316And
argued with the book business, that
that edge continues: in the last quarter of 2015, the many consequences of Amazon’s
Newsweek’s Marks reports, “Amazon paid just $73 takeover that this report documents
million in taxes on $35.7 billion in revenues.”317 That are merely the inevitable aftershocks
works out to a federal tax rate of just 2 percent.
of technological change, and that to
In its 2015 Annual Report, in a section on risks,
challenge the company is to challenge
Amazon explains to shareholders the extent to which its the digital revolution itself. But if
profitability and free cash flow depend on aggressive, you look beyond Amazon’s modern
and potentially illegal, tax avoidance. “A successful veneer, the company looks remarkably
assertion by one or more states or foreign countries
like the Robber Barons of another age,
requiring us to collect taxes where we do not do so
could result in substantial tax liabilities, including for
who also took advantage of changing
past sales, as well as penalties and interest,” it declares. technologies to assert control, impede
competition, and exploit workers. That
era had an air of inevitability too, but
Americans rose up and over time
passed a series of laws that instituted
open markets and fair labor standards,
and in the decades that followed, we
reaped the benefits of a more dynamic,
competitive, and equitable economy.

It’s to this earlier era, with its trust-busters and its

wariness of unchecked corporate power, its fights
for the eight-hour workday and for a measure of self-
Establishing an office in Luxembourg was part of an elaborate scheme,
involving multiple shell companies, that Amazon devised to dramatically
determination on the job, to which we can turn for
cut its income taxes in both the U.S. and Europe. inspiration as we think about public interest-driven

67 | Amazon’s Stranglehold www.ilsr.org

 policies to shape the digital economy. What follows is This profound shift in the ideology guiding antitrust
a sketch of some of the most promising approaches. enforcement has impeded our ability to recognize
the dangers of Amazon’s tightening stranglehold
Restoring Competition in the Platform Age on American commerce. So long as the company
appears to offer consumers a good deal, at least
The antitrust laws that Americans enacted in in the short term, regulators have been inclined
response to that first Gilded Age are, by and large, to overlook the predatory and exclusionary ways
still the law of the land. But how we interpret and it exercises its power, and the harmful effects on
enforce those laws has radically changed.318 When competition and market diversity.319 In fact, as we
they were first adopted and for many decades noted earlier in this report, the Department of Justice
following, these laws embodied a broad set of acted to strengthen the company’s power in the
aims and values. They sought to protect our liberty book industry in 2012, when it accused publishers
as producers as well as our welfare as consumers, of colluding in the e-book market at a time when
and they recognized that concentrated power was Amazon controlled 90 percent of e-book sales.320
a threat not only to the economy but to democracy.
Then, beginning about 35 years ago, policymakers,
influenced by the theories of economists and legal Amazon is drawing new scrutiny from
scholars associated with the University of Chicago,
policymakers and calls for stepped up
began systematically refashioning the enforcement
antitrust enforcement.
of these laws. The changes they implemented
stripped antitrust of its commitment to protecting
competition and open markets, and limited
regulatory action to the narrow goal of maximizing Today, a growing number of scholars, policymakers,
economic efficiency. As this new way of thinking and public interest advocates are calling for a
swept in, we came to see antitrust policy as solely restoration of the broader range of concerns and
about keeping prices low for consumers. more vigorous approach to enforcement that guided
antitrust policy for much of the 20th century.321
Amazon in particular is drawing new scrutiny.
According to The Capitol Forum, several U.S. senators
are “circulating a letter that calls on DOJ to launch a
formal investigation into Amazon” and, in two recent
Senate Judiciary Committee hearings, “a bipartisan
group of senators has also requested stepped-up
enforcement of platform monopolies,” including
Amazon.322 In June Senator Elizabeth Warren gave
a widely covered speech on antitrust, in which she
singled out Amazon as a particular threat.323 Both the
European Union and Japan have opened antitrust
investigations into Amazon as well.324

Here are three ways policymakers could use anti-

monopoly policies to check Amazon’s power and
If you look beyond its modern veneer, Amazon looks remarkably bring more competition and dynamism to the
like the Robber Barons of another age, who also took advantage of economy:
changing technologies to assert control, impede competition, and
exploit workers.
• Enforce existing antitrust laws to bar Amazon
Illustration Credit: Udo J. Keppler from using its financial resources to crush

68 | Amazon’s Stranglehold www.ilsr.org

 competitors — In the wake of the federal operating as both a direct retailer and a platform
government’s case against Standard Oil—a firm for other sellers, an arrangement that is inherently
that maintained its dominance in part by slashing harmful to competition, and given the company’s
prices in certain markets to drive competitors dominance in the retailing of books, its publishing
out of business—Congress strengthened antitrust division should also be spun off.
statutes to prohibit companies from pricing goods
below cost “with the intent to destroy and make • Adopt common carrier rules for Amazon’s
unprofitable the business of their competitors” and platform — We should consider regulating Amazon’s
with the aim of “acquiring a monopoly.”325 Many platform as a common carrier, similar to how we
states subsequently adopted their own policies treat railroad companies and other firms that control
against predatory pricing, often known as fair trade essential transportation and communications
laws. With the ideological changes that upended infrastructure. “A platform,” writes Sabeel Rahman,
antitrust policy beginning in the 1970s and 1980s, “presents a uniquely troubling form of private
regulators and the courts stepped back from power… Unlike a traditional monopoly whose
investigating and prosecuting predatory pricing, power stems from its control over the production
on the theory that such tactics are rarely carried and pricing of a single good, a platform draws its
out and rarely successful, and that loss-leading can power from its position as a kind of middleman, a
benefit consumers. Amazon’s own track record of broker that controls the relationship with producers
selling below cost, both in the book business and and consumers alike. Once a platform reaches a
to block potential challengers like Zappos, strongly critical mass of consumers, producers, or both, these
suggests otherwise and illustrates the harms such groups become vulnerable to the platform’s control
tactics inflict, including on consumers who are left over standards and policies.”328 Applying common
with fewer choices and diminished product diversity, carrier obligations to a spun-off Amazon platform
and the potential of higher prices in the long-term. would be similar to the “net neutrality” policy that
In a related vein, regulators have also backed away has been adopted for internet service providers.
from blocking big retailers like Amazon from using Amazon would be required to treat all producers
their market power to extract discriminatory and and consumers equally, and would be barred from
unwarranted discounts from suppliers that result in discriminating among them by charging different
competing retailers being charged higher prices.326 prices or imposing different terms.
Each of these tactics—predatory pricing and price
discrimination—are ways that a powerful company
can use its deep pockets to undermine competition. Protecting Workers in the Digital Economy
The enforcement of laws against both should be
restored at the federal and state level. One of the best ways for Amazon’s workers to
improve the grueling conditions, below-average
pay, and precarious nature of employment in its
• Break up Amazon to prevent anti-competitive
warehouses would be for them to form a union. That’s
conflicts of interest — Prior to the 1980s, antitrust
a challenging organizing project, but public policy
policy took a dim view of vertical integration, which
occurs when a company operates in two different can improve workers’ odds by giving them more
parts of the supply chain. As Lina Khan documents in protection on the job and more opportunities to
a forthcoming Yale Law Journal article,327 regulators bargain collectively. Here are some of the important
generally prohibited such combinations, because steps policymakers could take:
of the way an integrated company could use its
power in one part of the supply chain to impede
competition in another—as Amazon can do by
• Proactively enforce wage-and-hour laws — For
starters, more states should proactively enforce their
privileging its own products in search rankings, or
existing wage-and-hour laws, and also take prompt
by using the data it gathers from third-party sellers
action when claims are filed, as some states, notably
to pick off the most profitable retail segments for
California, already do.
itself. Regulators should once again adopt a tougher
stance on vertical integration and should initiate
action to separate Amazon into distinct companies.
• Adopt policies that protect temporary workers
and expand joint employment liability — Also
At the very least, Amazon should be prohibited from
promising are policies that make companies

69 | Amazon’s Stranglehold www.ilsr.org

 and their subcontractors and staffing agencies Federal action can also support states’
jointly responsible for workers, known as “joint misclassification statutes, particularly through
employment.” At the federal level, the Department funding for enforcement. In 2014, for instance, the
of Labor issued new guidance on joint employment Department of Labor awarded 19 states $10.2
this year,329 and recent National Labor Relations million to assist their efforts to fight employee
Board rulings have made it more straightforward misclassification. Meanwhile, the Department of
for unions to bring companies, instead of just their Labor also recently issued important guidance on
subcontractors, to the bargaining table.330 One of proper classification.336
the changes, for example, allows direct hires and
temps to organize and bargain together, rather than The laws are working. It was drivers in Massachusetts
having to form separate unions.331 These rules can and California that brought a class-action
change with new presidential administrations, but misclassification suit against Uber; the ride-hailing
Congress could give such standards the weight and company was prepared to settle for as much as $100
permanence of law. States can also enact legislation million in April 2016, but a federal judge denied the
that establishes joint liability for wage theft, settlement as not adequate enough, and the case is
compensation claims, and other labor violations, as still pending.337 It was drivers in Massachusetts that
California did in 2014 by adding Section 2810.3 to brought a class-action suit against Amazon courier
its Labor Code, and Illinois did earlier with its Day LaserShip, which LaserShip settled for $800,000.338
and Temporary Labor Services Act. And it was drivers for Prime Now in California who
brought a suit against the courier service Scoobeez
• Enact stronger state laws and enforcement and Amazon which, though the suit is ongoing, has
mechanisms to block employers from resulted in Amazon directing Scoobeez to classify
misclassifying workers — As Amazon increasingly the drivers as employees.339
tests the boundaries of the employer-employee
relationship, hiring couriers and “flex” drivers to
deliver packages, policy also needs to keep up, Recognizing the Value
particularly with regard to the classification of workers of Independent Businesses
as independent contractors or employees. States
without laws against misclassification should pass
Finally, policymakers need to rethink the merits of
them, and states with them should strengthen them
giving huge subsidies and tax advantages to Amazon.
and dedicate resources to vigilant enforcement.332
State and local governments, in particular, have much
Massachusetts and California offer two examples of to lose by financing Amazon’s growth, only to end up
best practices, and of how these laws can be effective. with fewer jobs, more commercial vacancies, and less
In Massachusetts, for instance, the independent revenue to provide services. Economic development
contractor law creates a strong presumption for incentives, which overwhelmingly bypass small
employee status, outlines a strict three-part test businesses and flow to the biggest firms,340 have
companies must pass to overcome the presumption, come under new scrutiny in the last few years, as
and carries high penalties.333 In both states, legislation
it’s become increasingly clear that these giveaways
also makes companies liable for misclassification
found at any of their subcontractors.334
often fail to deliver the promised jobs, even as they
distort competition by favoring some firms over
These states have also followed through with others. Amazon offers a particularly striking case of
enforcement. Massachusetts, for instance, has the Joint a company that neither needs a handout nor creates
Employment Task Force on the Underground Economy the economic benefits that might warrant one.
and Employee Misclassification; in 2014, the task force
helped state agencies recover more than $20 million in
Meanwhile, though locally owned businesses
wage restitution, state taxes, unemployment taxes, and
generate significant value for their communities,
other fines.335 As the state’s results make clear, strong
enforcement not only protects workers, it also benefits policymakers have often ignored their needs and
the state’s bottom line. challenges. In order to enable these businesses to
thrive, state and local officials could look to loan funds

70 | Amazon’s Stranglehold www.ilsr.org

 Laws in Massachusetts and California are giving new rights and protections to workers misclassified as independent contractors.
Photo Credit: SounderBruce

that help small businesses access credit;341 zoning Without a strong and thoughtful public policy
policies that create a built environment hospitable to response to Amazon’s growing monopoly power,
locally owned businesses;342 formula business policies and the high costs it’s imposing on competition,
that allow city planners to account for factors like the small businesses, workers, and consumers, many
balance of neighborhood-serving businesses and of the benefits of the digital revolution will not be
the proliferation of chain stores;343 and purchasing realized. The opportunities this new technology
policies that use public dollars to strengthen the affords—for new businesses and innovations, for
local economy,344 among other strategies. As we’ve more variety and competition, and for a rising tide
documented elsewhere, the most vibrant cities are of productivity that lifts all boats—will be lost as more
the ones finding ways to address the challenges power and wealth centralizes in the hands of a single
that their local businesses face, and prioritizing their company. Taken together, the policy approaches
development.345 As independent retailers continue outlined here represent an initial sketch of how to
to grow online, city and county officials can also loosen the company’s grip. We hope this report will
think about tools to help promote a place-based, spark discussion and more ideas for how to ensure
community-rooted approach to digital commerce. that markets are open to all entrepreneurs, that the
future of work is one of opportunity and equity, and
that our communities are vital and prosperous.

71 | Amazon’s Stranglehold www.ilsr.org

 Notes
1. Amazon took the top spot in the Harris Poll’s annual study of corporate 7. “Is it time to break up the big tech companies?” Steven Strauss, Los
reputations in 2013, 2014 and 2016, and came in second in 2015. See: Angeles Times, June 30, 2016.
“2016 Reputation Quotient Rankings,” The Harris Poll, Feb. 18, 2016.
8. Figures for retail e-commerce sales are from the U.S. Census Bureau’s
2. “Cheap Words,” George Packer, The New Yorker, Feb. 17, 2014. Quarterly Retail E-Commerce Sales reports. Amazon’s market share
was calculated by the authors, drawing on information from Amazon
3. “It looks like all the money Amazon is spending on streaming video is
and Channel Advisor.
starting to pay off,” Peter Kafka, Recode, Jun. 22, 2016.
9. Ibid.
4. “To Gain the Upper Hand, Amazon Disrupts Itself,” David Streitfeld, New
York Times, Dec. 1, 2014. 10. Projected by the authors, based on Amazon’s 1st and 2nd quarter
results, drawing on information from Amazon, Channel Advisor, and
5. As Franklin Foer put it in his New Republic cover story on the company,
the U.S. Census Bureau’s Quarterly Retail E-Commerce Sales reports.
“We’re all enjoying the benefits of these corporations far too much to
think hard about distant dangers.” See: “Amazon Must Be Stopped, 11. Codex Group survey, via: “Amazon Has Basically No Competition
Franklin Foer, New Republic, Oct. 9, 2014. Among Online Booksellers,” Polly Mosendz, The Wire, May 30, 2014.

6. “Who’s Writing the Book on Web Business?,” William C. Taylor, Fast 12. Letter from Authors United to William Baer, Assistant Attorney General
Company, Oct. 31, 1996; “What Amazon Wants for Christmas: 100,000 for the Antitrust Division, U.S. Department of Justice, July 14, 2015.
Temps,” Adam Satariano and Spencer Soper, Bloomberg, Dec. 10,
13. Ibid.
2015; The Everything Store, Brad Stone, New York, N.Y.: Little Brown,
p. 115; “AWS Remains Dominant Despite Microsoft and Google 14. “Paul Ryan is of two minds about Amazon—or is he?” Carolyn Kellogg,
Growth Surges,” Synergy Research Group, Feb. 3, 2016; “Special Los Angeles Times, Aug. 21, 2014.
Report: Amazon’s billion-dollar tax shield,” Tom Bergin, Reuters, Dec.
6, 2012; “Amazon Seeks to Ease Ties With UPS,” Laura Stevens and 15. “Cheap Words: Amazon is good for customers. But is it good for
Greg Bensinger, Wall Street Journal, Dec. 22, 2015; “52% of U.S. books?” George Packer, The New Yorker, Feb. 17, 2014.
Amazon customers belong to Prime,” Elizabeth Weise, USA Today,
16. “Cowen: It Looks Even More Like Amazon Will Become America’s Top
July 11, 2016; “Cheap Words: Amazon is good for customers. But is it
Clothing Retailer in 2017,” Julie Verhage, Bloomberg, May 11, 2016.
good for books?” George Packer, The New Yorker, Feb. 17, 2014; The
Everything Store, Brad Stone, New York, N.Y.: Little Brown, p. 268-273; 17. “Deutsche Bank: Amazon set to eclipse Best Buy as top consumer
Amazon’s annual reports; “States, counties will have to reveal more electronics retailer,” Daphne Howland, Retail Dive, June 22, 2016
about incentives given to create jobs,” Tim Flach, The State, Aug. 14,
18. “The Western Toy Market,” Lutz Muller, Toy Directory Online, Feb. 1,
2015; “How Amazon Triggered a Robot Arms Race,” Kim Bhasin and
2015.
Patrick Clark, Bloomberg, June 29, 2016; “The Details About the CIA’s
Deal With Amazon,” Frank Konkel, The Atlantic, July 17, 2014; “US 19. “AmazonFresh Expands to New Cities, including Chicago and Dallas,
Department of Labor’s OSHA cites 5 companies following December with Monthly Membership Plan,” Amazon, Oct. 26, 2016.
2013 fatality of temporary worker at Amazon fulfillment center in
Avenel, NJ,” OSHA Regional News Release, June 12, 2014; “Amazon. 20. “Internal Amazon documents reveal a vision of up to 2,000 grocery
com’s Workers Are Low-Paid, Overworked And Unhappy; Is This stores across the US,” Eugene Kim, Business Insider, Oct. 26, 2016
The New Employee Model For The Internet Age?,” Angelo Young,
21. ”Amazon is poised to chew up the food chain,” Bloomberg News,
International Business Times, Dec. 19, 2013; “Google Thinks Amazon
March 17, 2016.
Is Its Biggest Competitor,” Alison Griswold, Slate, Oct. 14, 2014;
“Amazon robots speed customer orders but may lead to fewer workers,” 22. “Amazon expands logistics reach with move into ocean shipping,” Mari
Andrea Chang, Los Angeles Times, Dec. 2, 2014; “Amazon and Empty Saito, Reuters, Jan. 15, 2016.
Storefronts,” Civic Economics, Jan. 2016; “These new stats about
23. “Why One Amazon Bull Thinks Jeff Bezos Is Building A $3 Trillion
Amazon should make Google very nervous,” Jillian D’Onfrio, Business
Company,” Antoine Gara, Forbes, May 4, 2016.
Insider, April 20, 2015; “Exclusive: Amazon expanding deliveries by
its ‘on-demand’ drivers,” Mari Saito, Reuters, Feb. 18, 2016; “Amazon 24. Walmart’s Annual Reports; Amazon’s Annual Reports.
Passes Wal-Mart as Biggest Retailer by Market Value,” Shannon
Pettypiece, Bloomberg, July 23, 2015.“Amazon Plans Hundreds of 25. U.S. Economic Census, 1997–2012.
Brick-and-Mortar Bookstores, Mall CEO Says,” Greg Bensinger, Wall
26. Letter to Shareholders, 2007 Annual Report, Jeff Bezos, Amazon, 2007.
Street Journal, Feb. 2, 2016; “Internal Amazon documents reveal
a vision of up to 2,000 grocery stores across the US,” Eugene Kim, 27. “Amazon Must Be Stopped,” Franklin Foer, The New Republic, Oct. 9,
Business Insider, Oct. 26, 2016; “Amazon Prime Air,” Amazon, accessed 2014.
August 8, 2016; “Amazon’s Jeff Bezos looks to the future,” Charlie Rose,
28. “Jeff Bezos explains why the Echo is harder to hack than smartphones,”
60 Minutes, Dec. 1, 2013; Institute for Local Self-Reliance analysis
Anita Balakrishnan, CNBC, Oct. 20, 2016.
and, “Amazon and Empty Storefronts,” Civic Economics, Jan. 2016;
“Retail layoffs in 2016 could be highest since 2010,” Tonya Garcia, 29. “Amazon’s Music-Streaming Service Competes on Price and Robotic
Marketwatch, Apr. 25, 2016; “If you think Amazon is huge now, wait Assistance,” Hannah Karp, Wall Street Journal, Oct. 12, 2016.
until it becomes America’s biggest fashion retailer,” Marc Bain, Quartz,
July 27, 2015; “Bezos passes Buffett, becomes third-richest person: 30. “The Real Story of How Amazon Built the Echo,” Joshua Brustein,
Forbes,” Jonathan Stempel, Reuters, July 28, 2016; “The ‘Amazon Bloomberg, April 19, 2016; “Amazon: The Real King of Smart Home
Tax’: Empirical Evidence from Amazon and Main Street Retailers,” Ben Appliances,” Seeking Alpha, Jun. 16, 2016; “Amazon Is Now a
Baugh, Itzhak Ven-David, Hoonsuk Park, Fisher College of Business Gadget Company.” Will Oremus, Slate, Sept. 17, 2014; “Kindle Fire
Working Paper, Sept. 1, 2016. “Amazon Says It Puts Customers Touchscreen Eats Up 46 Percent of its Manufacturing Costs,” David
First. But Its Pricing Algorithm Doesn’t,” Julia Angwin and Surya Murphy, PC Magazine, Nov. 19, 2011.
Mattu,ProPublica, Sep. 20, 2016; “As Competition Wanes, Amazon
31. “Amazon Alexa will now talk to GE’s connected appliances in smart
Cuts Back Discounts,” David Streitfeld, New York Times, July 4, 2013.
home push,” Teena Maddox, Tech Republic, Sept. 13, 2016.

72 | Amazon’s Stranglehold www.ilsr.org

 32. “These Ford Cars Will Soon Be Able to Talk to Amazon’s Alexa,” Reuters, 59. 2015 Annual Report,” Amazon; “Letter to Shareholders,” Jeff Bezos,
Oct. 3, 2016. Amazon, 2006.

33. “Amazon’s Music-Streaming Service Competes on Price and Robotic 60. “AWS Remains Dominant Despite Microsoft and Google Growth
Assistance,” Hannah Karp, Wall Street Journal, Oct. 12, 2016. Surges,” Synergy Research Group, Feb. 3, 2016.

34. “Amazon’s Plan to Infiltrate Homes This Holiday: Music Via Echo,” 61. “Why One Amazon Bull Thinks Jeff Bezos Is Building A $3 Trillion
Spencer Soper, Bloomberg, Sept. 27, 2016. Company,” Antoine Gara, Forbes, May 4, 2016.

35. Letter to Shareholders, 2007 Annual Report, Jeff Bezos, Amazon, 1997. 62. “The Secession of the Successful: The Rise of Amazon as Private Global
Consumer Protection Regulator,” Jane K. Winn, Arizona Law Review,
36. Figures calculated from Amazon’s Annual Reports.
2016, p. 193-212.
37. “Amazon.com enjoys a rare competitive advantage: It doesn’t seem to
63. “Third-party sellers giving Amazon a huge boost,” Ángel González,
need to make a profit,” observes reporter Miriam Gottfried in “Profits
Seattle Times, May 31, 2016. In his most recent letter to shareholders,
Don’t Swim Through the Amazon,” Wall Street Journal, Jul. 25, 2013.
Bezos wrote that Marketplace provided “selling tools that empowered
38. Letter from Authors United to William Baer, Assistant Attorney General entrepreneurs.” See: “Letter to Shareholders,” Jeff Bezos, Amazon, 2015.
for the Antitrust Division, U.S. Department of Justice, July 14, 2015.
64. Author interview, June 28, 2016.
39. “Cheap Words,” The New Yorker, Feb. 17, 2014.
65. Author interview, June 29, 2016.
40. Letter from Authors United to William Baer, Assistant Attorney General
66. Author interview, July 19, 2016.
for the Antitrust Division, U.S. Department of Justice, July 14, 2015.
67. Author interview, June 28, 2016.
41. “Amazon Vs. Book Publishers, By the Numbers,” Jeff Bercovici, Forbes,
Feb. 10, 2014. 68. “‘Free’ Shipping Crowds Out Small Retailers,” Laura Stevens, Wall Street
Journal, April 27, 2016.
42. “Amazon Loves Government,” Wall Street Journal, Sept. 11, 2014.
69. “Upstream Commerce Retail Intelligence Research Finds Amazon
43. “Sony exits the North American ebook business and gives its
Muscles In On Its Own Vendors’ Best Sellers,” News Release, Oct. 28,
customers to Kobo,” Laura Owen, Gigaom, Feb. 6, 2014.
2014.
44. “Is This the End for the Barnes & Noble NOOK?,” Daniel B. Kline, The
70. “Competing with Complementors: An Empirical Look at Amazon.com,”
Motley Fool, Mar 11, 2016
Feng Zhu and Qihong Liu, Harvard Business School, Working Paper
45. The Everything Store: Jeff Bezos and the Age of Amazon, Brad Stone, 15-044, April 28, 2015.
New York, N.Y.: Little Brown, 2013, p. 268-273.
71. “Amazon Says It Puts Customers First. But Its Pricing Algorithm Doesn’t,”
46. The Everything Store, Brad Stone, p. 294-300. Julia Angwin and Surya Mattu, ProPublica, Sep. 20, 2016.

47. “Amazon Beating Google as First Stop for Shoppers,” Lauren Inuvik, 72. ”Sellers Need Amazon, but at What Cost?” Angus Loten and Adam
Mashable, July 26, 2012 (citing Forrester Research). Panofsky, Wall Street Journal, Jan. 14, 2015.

48. “How Amazon Loses on Prime and Still Wins,” Nanette Byrnes, MIT 73. “Amazon Angers Mom-and-Pop Sellers With ‘Arbitrary’ Suspensions,”
Technology Review, Jul. 12, 2016 (citing Forrester Research). Spencer Soper, Bloomberg, Aug. 26, 2016.

49. The Everything Store, Brad Stone, p. 287 74. “Sellers who use Fulfillment by Amazon consider their options after a
fee hike notice,” Sandra Guy, Internet Retailer, May 19, 2016.
50. “These new stats about Amazon should make Google very nervous,”
Jillian D’Onfrio, Business Insider, April 20, 2015. 75. “Amazon sellers have to work harder to grow,” Fareeha Ali, Internet
Retailer, Sept. 20, 2016; “Amazon Building Global Delivery Business to
51. Consumer Intelligence Research Partners, cited in: “52% of U.S. Take On Alibaba,” Spencer Soper, Bloomberg, Feb. 9, 2016.
Amazon customers belong to Prime,” Elizabeth Weise, USA Today,
July 11, 2016. 76. “Amazon helps Chinese merchants double their sales on Amazon sites
in 2015,” Frank Tong, Internet Retailer, Dec. 9, 2015.
52. “Amazon Shipping Has Gotten Slower For Non-Prime Members,” Kate
Ashford, Forbes, Jan. 30, 2016 77. “Amazon Angers Mom-and-Pop Sellers With ‘Arbitrary’ Suspensions,”
Spencer Soper, Bloomberg, Aug. 26, 2016.
53. “Amazon Has Begun Labeling Some Items Prime-Exclusive,” Andrew
Liptak, Gizmodo, Apr. 24, 2016. 78. Birkenstock’s letter is included in full in: “Birkenstock quits Amazon in
US after counterfeit surge,” Ari Levy, CNBC, Jul. 20 2016.
54. “Amazon Grabs 55 Percent of Consumers’ First Product Search, Set to
Dominate 2016 Holiday Shopping,” BloomReach press release, Sept. 79. “How Amazon counterfeits put this man’s business on brink of collapse,”
27, 2016. Ari Levy, CNBC, Oct. 24, 2016.

55. “Amazon Wants to Ship Your Package Before You Buy It,” Greg 80. Author interview, July 21, 2016.
Bensinger, Wall Street Journal, Jan. 17, 2014.
81. “Amazon and J&J Clash Over Third-Party Sales,” Serena Ng and
56. Quotations are from authors’ correspondence with Keller on August Jonathan D. Rockoff, Wall Street Journal, Nov. 10, 2013.
16, 2013, and a phone interview on June 11, 2015. Additional details
82. Author interview, July 22, 2016.
of the Kellers’ story can be found in: “Amazon.com and Retail:
Predatory Pricing, Bully Tactics Squeezing Competition, Retailers 83. The Everything Store, p. 243.
and Small-Business Advocates Say,” Christopher Zara, International
84. “Cheap Words,” The New Yorker, Feb. 17, 2014.
Business Times, Dec. 20, 2013.
85. The Everything Store, Brad Stone, p. 52.
57. “Amazon Acts as Guide in Online Retail Jungle,” Chris Gaither, Los
Angeles Times, Nov. 29, 2004. 86. Letter from Authors United to William Baer, Assistant Attorney General
for the Antitrust Division, U.S. Department of Justice, July 14, 2015.
58. The Everything Store, Brad Stone, p. 182.

73 | Amazon’s Stranglehold www.ilsr.org

 87. “Cheap Words,” The New Yorker, Feb. 17, 2014. 116. “Amazon’s Jeff Bezos looks to the future,” transcript of a 60 Minutes
interview with Jeff Bezos, which was conducted by Charlie Rose and
88. Letter from Authors United to William Baer, Assistant Attorney General aired Dec. 1, 2013.
for the Antitrust Division, U.S. Department of Justice, July 14, 2015.
117. “Amazon Plans Hundreds of Brick-and-Mortar Bookstores, Mall CEO
89. “The Wages of Writing: Key Findings from The Authors Guild 2015 Says,” Greg Bensinger, Wall Street Journal, Feb. 2, 2016.
Member Survey,” Authors Guild, 2015.
118. Capitalism and Freedom: Fortieth Anniversary Edition, Milton
90. Author interview, Jun. 27, 2016. Friedman and Rose D. Friedman, University of Chicago Press, 2002,
91. “Got a Hot Seller on Amazon? Prepare for E-Tailer to Make One Too.” p. 120.
Spencer Soper, Bloomberg, April 20, 2016. 119. Market Dominance, David Ira Rosenbaum, Greenwood Publishing
92. Site searched Sept. 9, 2016. Group, 1998, p. 33.

93. “Got a Hot Seller on Amazon? Prepare for E-Tailer to Make One Too.” 120. “By collecting an extensive and rich dataset on user activity and
Spencer Soper, Bloomberg, April 20, 2016. habits, dominant platform operators have created a high barrier to
entry,” law scholars Sabeel Rahman and Lina Khan noted in a recent
94. “The Best Kept Secrets of Amazon’s Private Label Initiative: paper, referring to both Amazon and other digital platforms, such as
AmazonBasics,” Tristan Clausell, Skubana blog, Apr. 20, 2016. Google and Facebook. “Restoring Competition in the U.S. Economy,”
in Untamed: How to Check Corporate, Financial, and Monopoly Power,
95. Site searched Sept. 9, 2016.
Nell Abernathy, Mike Konczal, and Kathryn Milani (editors), Roosevelt
96. “The Best Kept Secrets of Amazon’s Private Label Initiative: Institute, June 6, 2016.
AmazonBasics,” Tristan Clausell, Skubana blog, Apr. 20, 2016.
121. Author interview, Aug. 1, 2016.
97. “Amazon Begins Selling Perishable Private-Label Foods,” Greg
122. “As Competition Wanes, Amazon Cuts Back Discounts,” David Streitfeld,
Bensinger, Wall Street Journal, Jun. 29, 2016.
New York Times, July 4, 2013.
98. “Amazon has quietly launched its own clothing lines, as it tries to take
123. “How Amazon Tricks You Into Thinking It Always Has the Lowest Prices.”
over fashion retail,” Marc Bain, Quartz, Feb. 23, 2016.
Jason Del Rey, Recode, Jan. 13, 2015.
99. Author interview, July 21, 2016.
124. “Amazon changes its prices more than 2.5 million times a day,” Robert
100. “Amazon Begins Selling Perishable Private-Label Foods,” Greg A. Ferdman, Quartz, Dec. 14, 2013.
Bensinger, Wall Street Journal, Jun. 29, 2016.
125. “Amazon’s Antitrust Paradox,” Lina Khan, Yale Law Journal, 2017
101. “Amazon Is Considering Making Its Own Private Label Clothing Lines,” (forthcoming).
Sapna Maheshwari, BuzzFeed, Oct. 27, 2015.
126. ”Subscribe and Save on Amazon? Don’t Count on It,” Brian X. Chen,
102. “Amazon Fashion, Playing the Long Game,” Lauren Sherman, Business New York Times, Aug. 24, 2016.
of Fashion, Jun. 30, 2015.
127. The Everything Store, Brad Stone, p. 316.
103. This was the case when we checked on Sept. 12, 2016.
128. “Reigniting Competition in the American Economy,” Senator Elizabeth
104. “Jeff Bezos: Amazon Fire Phone Flop Was ‘Bold Bet’ That Will Take Warren, Keynote Remarks at New America’s Open Markets Program
Many Iterations to Get Right,” Todd Spangler, Variety, Dec. 2, 2014. Event, June 29, 2016.

105. U.S. Economic Census, 1997–2012. 129. “Amazon’s Profits Grow More Than 800 Percent, Lifted by Cloud
Services,” Nick Wingfield, New York Times, July 28, 2016.
106. “2016 Independent Business Survey,” Institute for Local Self-Reliance, 2015.
130. Author interview, July 1, 2016.
107. For most of its history Amazon has been exempt from collecting sales
tax in most states, a significant competitive advantage that we discuss 131. “Amazon fulfillment center exceeds job expectations,” Zac Anderson,
in more detail in the final section of this report. Today, Amazon still Sarasota Herald-Tribune, April 3, 2016.
does not collect sales tax in 16 states.
132. “Amazon opening two fulfillment facilities in Edwardsville, creating
108. Author Interview, July 19, 2016. 1,000 jobs,” Jacob Barker, St. Louis Post-Dispatch, June 2, 2016.

109. Author Interview, July 29, 2016. 133. “Amazon’s Baltimore site to receive more than $43M in tax credits,” Luke
Broadwater, Baltimore Sun, Oct. 23, 2013. The GM plant employed as
110. Codex Group research, as cited in: “Why Online Book Discovery is many as 7,000 workers. Over the years those numbers had dwindled,
Broken (and How to Fix It),” Laura Owen,Gigaom, Jan. 17, 2013. but in 2005, the remaining 1,100 workers earned an average of $27 an
111. Letter from Authors United to William Baer, Assistant Attorney General hour, and up to $80,000 a year with overtime. See: “Broening GM plant
for the Antitrust Division, U.S. Department of Justice, July 14, 2015. to close May 13,” Stacey Hirsch, Baltimore Sun, Feb. 9, 2005; “GM plant
a sign of decline.” Stacey Hirsh, Baltimore Sun, May 9, 2005.
112. “Industry Innovativeness, Firm Size, and Entrepreneurship: Schumpeter
Mark III?,” Wilfred Dolfsma and Gerben van der Velde, Journal of 134. “Amazon showcases robots at massive new warehouse,” Natalie
Evolutionary Economics, 2014. Sherman, Baltimore Sun, Sept. 28, 2015.

113. “The decline of American entrepreneurship — in five charts,” J.D. 135. “Bezos passes Buffett, becomes third-richest person: Forbes,” Jonathan
Harrison, Washington Post, Feb. 12, 2015 (citing analysis from the Stempel, Reuters, July 28, 2016.
Kauffman Foundation); “Declining Business Dynamism in the United 136. “Cheap Words: Amazon is good for customers. But is it good for
States: A Look at States and Metros,” Ian Hathaway and Robert E. Litan, books?,” George Packer, The New Yorker, Feb. 17, 2014.
Brookings Institution, 2014.
137. Institute for Local Self-Reliance analysis, drawing on an analysis from
114. “The Importance of Young Firms for Economic Growth,” Jason Wiens the Seattle Times. See: “Full-time jobs at Amazon grow at rapid pace
and Chris Jackson, Kauffman Foundation, Sept. 14, 2015. in first quarter,” Ángel González, Seattle Times, May 9, 2016.
115. “Wage Inequality and Firm Growth,” Holger M. Mueller, Paige P.
Ouimet & Elena Simintzi, LIS Working Paper 632, 2015.

74 | Amazon’s Stranglehold www.ilsr.org

 138. Amazon’s AI work includes its Echo speaker. See: “AI, Trump, and 164. “Amazon warehouse jobs push workers to physical limit,” Hal Bernton
Gawker: Six Highlights From Amazon’s Jeff Bezos Interview,” Brad and Susan Kelleher, Seattle Times, April 3, 2012.
Stone, Bloomberg, May 31, 2016.
165. “Amazon fulfillment center receives $7K fine, hazard alert letters after
139. The Everything Store, Brad Stone. OSHA investigates workplace safety complaint,” OSHA Regional News
Release, Jan. 12, 2016.
140. “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace,” Jodi
Kantor and David Streitfeld, New York Times, Aug. 15, 2015. 166. “Feds expose numerous injuries at Amazon’s Robbinsville warehouse,”
Sulaiman Abdur-Rahman, The Trentonian, Jan. 12, 2016.
141. “Amazon and Empty Storefronts,” American Booksellers Association
and Civic Economics, Jan. 2016. 167. We looked at Glassdoor.com wage data for hourly Amazon
warehouse positions with the following titles: Warehouse Associate
142. Institute for Local Self-Reliance analysis, drawing on, “Amazon and
- Hourly, Fulfillment Associate - Hourly, Amazon Warehouse Worker -
Empty Storefronts,” American Booksellers Association and Civic
Hourly, Stower - Hourly, Packer - Hourly, FC Associate - Hourly,
Economics, Jan. 2016
Outbound Order Picker - Hourly, Picker - Hourly, Warehouse Picker
143. Institute for Local Self-Reliance calculation from U.S. Census data. - Hourly, Warehouse Worker - Hourly, Order Picker - Hourly. All data
accessed June 2016.
144. Sources: Institute for Local Self-Reliance analysis, drawing on
Amazon’s annual reports, U.S. Census data, and data disclosed 168. “Living Wage Calculator,” MIT, accessed August 2016.
by Amazon on its website, available at “Economic Impact — About
169. In these eleven metro areas, for instance, the prevailing local wage for
Amazon,” Amazon, accessed May 2016.
warehouse work is still an average of 5 percent lower than the living
145. The irony of this timing was first pointed out by a writer for the wage for those areas.
Philadelphia Inquirer. “How Amazon’s growth causes retailers to close
170. “2015 Employer Information Report, Consolidated,” Amazon, Equal
stores,” Suzette Parmley, Philadelphia Inquirer, May 9, 2016.
Employment Opportunity, July 1, 2015.
146. These are Alabama, Alaska, Arkansas, Hawaii, Idaho, Iowa, Louisiana,
171. “Our Innovations: Amazon Fulfillment Network,” Amazon, accessed
Maine, Mississippi, Missouri, Montana, Nebraska, New Mexico, North
October 2016.
Dakota, Oklahoma, Rhode Island, South Dakota, Utah, Vermont,
Wyoming. 172. For instance, a July 2016 press release announcing a new fulfillment
center in California crowed, “Full-time employees at Amazon
147. See, for instance: “The company has been criticized for destroying
receive competitive hourly wages and a comprehensive benefits
more jobs than it creates as it drives less-efficient brick-and-mortar
package, including healthcare, 401(k) and company stock awards
competitors into the ground,” in, “Full-time jobs at Amazon grow at
starting on day one.” An Amazon spokesperson talking about jobs
rapid pace in first quarter,” Ángel González, Seattle Times, May 9, 2016.
at a warehouse in Kenosha, Wisc., which received millions in public
148. “Letter to Shareholders,” Jeff Bezos, Amazon, 2015. subsidies, told the local paper of 1,000 new hires, “These are all
full-time positions. They all start out with benefits on day one. So
149. “Direct Hire Warehouse Associate—Joliet, Ill.,” Amazon posting by the minute they walk into the door, they’ll have full health insurance
Integrity Staffing Solutions, accessed June 9, 2016. including medical, dental and vision. They’ll have a 401(k) with 50
percent match, bonuses, stock awards and of course a great network
150. “Amazon.com’s Workers Are Low-Paid, Overworked And Unhappy; Is
to ensure our employees succeed. I think it really differentiates
This The New Employee Model For The Internet Age?,” Angelo Young,
Amazon from other employers. It’s something that we’re really proud
International Business Times, Dec. 19, 2013.
of.” See: “Amazon to begin accepting job applications for fulfillment
151. “What Is Life Like For an Amazon Worker?” Hamilton Nolan, Gawker, center,” James Lawson, Kenosha News, March 22, 2015.
July 29, 2013.
173. Amazon offers a choice of four medical plans for its full-time
152. “Inside Amazon’s Warehouse,” Spencer Soper, The Morning Call, Sept. employees, as of August 2016. One example of the options is
18, 2011. described in an employee review in a post on Glassdoor.com in
September 2014: “Several options ranging from the low monthly
153. Ibid.
premium, but a high $1500 deductible (including your prescriptions)
154. Ibid. HSA plan to a more traditional PPO with a $300 annual deductible
(but you pay nearly four times more a month in premiums).”
155. Author interview, June 20, 2016.
174. “Benefits at Amazon Operations and Customer Service,” Amazon,
156. “Amazon.com’s Workers Are Low-Paid, Overworked And Unhappy; Is accessed August 2016.
This The New Employee Model For The Internet Age?,” Angelo Young,
International Business Times, Dec. 19, 2013. 175. Based on a sample of nine salaries on the self-reported salary website
Indeed.com, accessed June 2016.
157. “Amazon warehouse jobs push workers to physical limit,” Hal Bernton
and Susan Kelleher, Seattle Times, April 3, 2012. 176. “Agreement between Stater Bros. Markets and United Food and
Commercial Workers Union Local 1167, March 3, 2015 to March 6,
158. Ibid. 2016,” United Food and Commercial Workers Union.
159. Mindless: Why Smarter Machines Are Making Dumber Humans, Simon 177. “Inside Amazon’s Warehouse,” Spencer Soper, The Morning Call, Sept.
Head, New York, N.Y.: Basic Books, 2014. 18, 2011.
160. “Amazon warehouse jobs push workers to physical limit,” Hal Bernton 178. “Amazon Proves Infertile Soil for Unions, So Far,” Nick Wingfield, New
and Susan Kelleher, Seattle Times, April 3, 2012. York Times, May 16, 2016.
161. “Inside Amazon’s Warehouse,” Spencer Soper, The Morning Call, Sept. 179. “Amazon warehouse jobs push workers to physical limit,” Hal Bernton
18, 2011. and Susan Kelleher, Seattle Times, April 3, 2012
162. “Full List of Most and Least Loyal Employees,” PayScale, July 2013. 180. “In Germany, Amazon Keeps Unions at Bay: German Union Verdi
Conducts Strikes, but Online Retailer Refuses to Bargain,” Sarah Sloat,
163. Author interview, June 16, 2016.
Wall Street Journal, Sept. 23, 2014.

75 | Amazon’s Stranglehold www.ilsr.org

 181. “Inside an Amazon Warehouse, the Relentless Need to “Make Rate”,” 196. “What Amazon Wants for Christmas: 100,000 Temps,” Adam Satariano
Hamilton Nolan, Gawker, June 6, 2016. and Spencer Soper, Bloomberg Businessweek, Dec. 10, 2015.

182. “Amazon Warehouse Workers Are “Treated Like a Child, a Dumb 197. “Integrity Staffing Solutions, Inc. v. Busk,” U.S. Supreme Court case No.
Child”,” Hamilton Nolan, Gawker, Oct. 27, 2014. 13-433, decided Dec. 9, 2014.

183. “As Amazon Struggles, More Insiders Speak,” Hamilton Nolan, Gawker, 198. “US Department of Labor’s OSHA cites 5 companies following
July 25, 2014. December 2013 fatality of temporary worker at Amazon fulfillment
center in Avenel, NJ,” OSHA Regional News Release, June 12, 2014.
184. See, for example: “Amazon says it exceeded hiring goal early,” Tim
Flach, The State, Dec. 6, 2013;“Amazon Center In Lebanon Hiring 199. Institute for Local Self-Reliance analysis using Bureau of Labor
More Than 2,000 For Holidays,” Associated Press, Oct. 22, 2015. Statistics data. Other reviews find that the gap between direct hire
employees and temp employees is even larger. In their survey of
185. “Exclusive: Amazon makes even temporary warehouse workers sign
warehouse workers in Will County, Ill., Warehouse Workers for Justice
18-month non-competes,” Spencer Woodman, The Verge, March 26,
and the Center for Urban Development at the University of Illinois
2015.
at Chicago found that the median hourly wage for temps was $9.00,
186. In its full-time temp job postings, Integrity Staffing Solutions uses this while it was $12.48 for direct hire employees. See: “Bad Jobs in
open-ended description for “job duration”: “Integrity Staffing places Goods Movement: Warehouse Work in Will County, IL,” Warehouse
qualified candidates to work assignments at Amazon Warehouses Workers for Justice and Center for Urban Economic Development at
on a temporary basis. Assignments vary in length. There is no the University of Illinois at Chicago, 2010.
guarantee to the length of the assignment. Length of employment is
200. Amazon job postings at Integrity Staffing Solutions and Staff
based on client’s business needs which can change.” On the issue of
Management, accessed between June and August 2016.
permatemps in the warehouse industry in general, see, for instance,
research such as the survey of warehouse workers in Illinois that found 201. “Amazon warehouse workers fight for unemployment benefits,”
that most temps had been on the job for over three months. “The Spencer Soper, The Morning Call, Dec. 17, 2012.
long tenure of temps in warehouse jobs suggests that warehouse
202. “Bad Jobs in Goods Movement: Warehouse Work in Will County,
owners and managers are using temporary staffing services to
IL,” Warehouse Workers for Justice andCenter for Urban Economic
outsource human relations departments,” the researchers concluded.
Development at the University of Illinois at Chicago, 2010.
See: “Bad Jobs in Goods Movement: Warehouse Work in Will County,
IL,” Warehouse Workers for Justice and Center for Urban Economic 203. “Exclusive: Amazon expanding deliveries by its ‘on-demand’ drivers,”
Development at the University of Illinois at Chicago, 2010. Mari Saito, Reuters, Feb. 18, 2016.
187. Author interview, June 6, 2016. 204. “At a loose end? Amazon will pay you to deliver its packages as it
pushes to get all its goods to customers within just HALF AN HOUR of
188. “The NLRB’s Evolving Joint-Employer Standard: Browning-Ferris
ordering,” Paddy Dinham, Daily Mail, July 21, 2016.
Industries of California, Inc.,” Daniel B. Pasternak & Naomi Y. Perera,
ABA Journal of Labor & Employment Law 295, 2016. 205. A 2016 poll found that of people who have participated in the gig
economy, about one-third make more than 40 percent of their income
189. The next-largest occupation within the temp industry has just a 6.1
in it, describe it as their primary source of income, or say that they
percent share of employment. We’re referring to the occupation
can’t get work in a more traditional job. See: “See How Big the Gig
category, “Laborers and Freight, Stock, and Material Movers, Hand,”
Economy Really Is,” Katy Steinmetz, Time, Jan. 6, 2016.
SOC 53-7062, and to the “Warehousing and Storage” and “Temporary
Help Services” industries, NAICS 493000 and 561320. Institute 206. “The Rise and Nature of Alternative Work Arrangements in the United
for Local Self-Reliance analysis of Bureau of Labor Statistics data, States, 1995-2015,” Lawrence F. Katz, Harvard University, and Alan B.
accessed June 2016. Krueger, Princeton University, March 29, 2016. See also: “With ‘Gigs’
Instead of Jobs, Workers Bear New Burdens,” Neil Irwin, New York
190. “Our Innovations: Amazon Fulfillment Network,” Amazon, accessed
Times, Mar. 31, 2016.
August 2016.
207. “The global opportunity in online outsourcing,” Siou Chew Kuek, et. al.,
191. “What Amazon Wants for Christmas: 100,000 Temps,” Adam Satariano
World Bank, June 2015.
and Spencer Soper, Bloomberg Businessweek, Dec. 10, 2015.
208. “Amazon’s Mechanical Turkers want to be recognized as ‘actual human
192. See, for example: “Project Rex center could be 2.4 million square feet,”
beings,’” James Vincent, The Verge, Dec. 4, 2014.
Karen Brune Mathis, Financial News and Daily Record, May 17, 2016;
“Amazon Center In Lebanon Hiring More Than 2,000 For Holidays,” 209. “Amazon’s Mechanical Turk Fee Hike Irks Researchers,” Greg Bensinger,
Associated Press, Oct. 22, 2015; “Amazon says it exceeded hiring goal Wall Street Journal, June 23, 2015.
early,” Tim Flach, The State, Dec. 6, 2013; “3,000 temps among 4,500
Amazon is hiring,” Mike Pare, Times Free Press, Oct. 19, 2011. 210. “Amazon Mechanical Turk and the commodification of labour,” Birgitta
Bergvall-Kareborn and Debrea Howcroft, New Technology, Work, and
193. A 2010 survey of 319 warehouse workers in 150 warehouses in Employment, 29:3, 2014.
the logistics hub of Will County, Ill., found that 63 percent of the
warehouse workers surveyed were employed by temp agencies, and 211. “The Future of Amazon Logistics and U.S. Transportation,” Deutsche
81 percent of workers had been initially hired by a temp agency. Bank Markets Research, June 14, 2016.
See: “Bad Jobs in Goods Movement: Warehouse Work in Will County,
212. “How Amazon Triggered a Robot Arms Race,” Kim Bhasin and Patrick
IL,” Warehouse Workers for Justice and Center for Urban Economic
Clark, Bloomberg, June 29, 2016.
Development at the University of Illinois at Chicago, 2010. Other
estimates run as high as 80 percent.See: “The New Blue Collar: 213. “Amazon on pace to boast Fortune 500’s second-largest workforce,”
Temporary Work, Lasting Poverty And The American Warehouse,” Ángel González, Seattle Times, Feb. 20, 2016.
Dave Jamieson, The Huffington Post, Dec. 20, 2011.
214. “Amazon robots speed customer orders but may lead to fewer
194. “Temporary Workers In California are Twice as Likely as Non-Temps to workers,” Andrea Chang, Los Angeles Times, Dec. 2, 2014.
Live in Poverty,” Miranda Dietz, UC Berkeley Labor Center, Aug. 2012.
215. “Shareholder Letter,” Jeff Bezos, Amazon, 2014.
195. Information through an online conversation with an Integrity Staffing
216. “The Future of Amazon Logistics and U.S. Transportation,” Deutsche
Solutions “Guest Representative” in June 2016.
Bank Markets Research, June 14, 2016.

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 217. “How Amazon Triggered a Robot Arms Race,” Kim Bhasin and Patrick 244. Ibid.
Clark, Bloomberg, June 29, 2016.
245. “Amazon Veers Into Labor Law Fight Zone for Hurried Deliveries,”
218. “Inside Amazon’s Warehouse, Human-Robot Symbiosis,” Will Knight, Edvard Pettersson and Spencer Soper, Bloomberg, Jan. 19, 2016.
MIT Technology Review, July 7, 2015.
246. Ibid.
219. “Amazon moves one step closer toward army of warehouse robots,”
247. “Amazon Takes Flight: Company’s First Air Cargo Plane to Fly in
Sam Thielman, The Guardian, July 5, 2016.
Seattle’s Annual Seafair Air Show Parade,” Amazon, Aug. 5, 2016.
220. “Amazon’s latest robot champion uses deep learning to stock shelves,”
248. Ibid.
James Vincent, The Verge, July 5, 2016.
249. “Amazon expands logistics reach with move into ocean shipping,” Mari
221. “Amazon Acquires Image Analysis Startup Orbeus,” Jack Clark,
Saito, Reuters, Jan. 15, 2016. As Deutsche analysts note, “Amazon is
Bloomberg, April 5, 2016.
also likely to bring significant automation capabilities to ships.”
222. “Amazon’s Bezos sees AI at early stages of decades-long trend,” Ari
250. “Bezos passes Buffett, becomes third-richest person: Forbes,” Jonathan
Levy, CNBC, May 31, 2016.
Stempel, Reuters, July 28, 2016.
223. “Amazon robots speed customer orders but may lead to fewer
251. “Amazon’s artsy, amenity-packed tower marks a reshaped
workers,” Andrea Chang, Los Angeles Times, Dec. 2, 2014.
neighborhood,” Ángel González, Seattle Times, May 9, 2016.
224. “Amazon’s Jeff Bezos looks to the future,” 60 Minutes, Dec. 1, 2013.
252. 2016 Proxy Statement.
225. Ibid.
253. “The Expendables: How the Temps Who Power Corporate Giants Are
226. “Open Secrets,” The Center for Responsive Politics, accessed May 23, Getting Crushed,” Michael Grabell, ProPublica, June 27, 2013.
2016.
254. “Diversity at Amazon,” Amazon, July 2015.
227. “Amazon Partners With U.K. to Test Deliveries by Aerial Drone,” Gwen
255. “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality,”
Ackerman, Bloomberg, July 26, 2016.
Jason Furman and Peter Orszag, Oct. 2015. See also: “Wage
228. “The Future of Amazon Logistics and U.S. Transportation,” Deutsche Inequality and Firm Growth,” Holger M. Mueller, Paige P. Ouimet, and
Bank Markets Research, June 14, 2016. Elena Simintzi, LIS Working Paper 632, March 2015.

229. “UPS Fact Sheet,” UPS, accessed August 8, 2016. 256. “Letter to Shareholders,” Jeff Bezos, Amazon, 1997.

230. “Number of Postal Employees Since 1926,”United States Postal Service, 257. “What are the sources of revenue for local governments?,” Tax Policy
Feb. 2016. Center, accessed October 2016.

231. “National Master United Parcel Service Agreement, 2013-2018,” 258. “State and Local Property Taxes Target Commercial and Industrial
Teamsters. Property,” Joseph Henchman, Tax Foundation, Nov. 20, 2012.

232. Letter Carrier Pay Schedule: City Carrier Wage Schedule, Effective Feb. 259. National Household Travel Survey,” U.S. Department of Transportation,
19, 2016,” National Association of Letter Carriers AFL-CIO. 2009.

233. “Postal workers overwhelmed by flood of Amazon Sunday deliveries,” 260. “Macy’s to Close 100 Stores as E-Rivals and Discounting Hit Legacy
Tricia Duryee, GeekWire, Dec. 16, 2014. Retailers,” Rachel Abrams and Sapna Maheshwari, New York Times,
Aug. 11, 2016.
234. “The Future of Amazon Logistics and U.S. Transportation,” Deutsche
Bank Markets Research, June 14, 2016. 261. “American malls are dying faster than you think — and it’s about to get
even worse,” Ashley Lutz, Business Insider, Aug. 31, 2016.
235. The Future of Amazon Logistics and U.S. Transportation,” Deutsche
Bank Markets Research, June 14, 2016. 262. Amazon’s annual reports.

236. “Taree Truong, Khaled Alkojak, Olga Georgieva, Cynthia Miller v. 263. “A New Life for Dead Malls,” Alana Semuels, The Atlantic, March 9,
Amazon.com, Scoobeez, ABT Holdings,” Class Action Complaint, 2015
Superior Court for the State of California County of Los Angeles, Oct.
264. “How Amazon’s growth causes retailers to close stores,” Suzette
27, 2015.
Parmley, The Philadelphia Inquirer, May 8, 2016.
237. “Meet The Real Amazon Drones,” Dave Jamieson, Huffington Post, April
265. Institute for Local Self-Reliance calculation based on Amazon’s direct
24, 2014.
retail sales in the U.S., and an estimated average of sales per square
238. “Amazon ‘Prime Now’ Drivers In Arizona Sue Company For foot for brick-and-mortar retailers.
Misclassification, Wage Theft,” Laura Northrup, Consumerist, January
266. “A New Life for Dead Malls,” Alana Semuels, The Atlantic, March 9,
8, 2016.
2015
239. “Mass. AG fines Amazon delivery contractor for unpaid wages,” Ángel
267. “City of Southfield to buy empty Northland Center mall,” JC Reindl,
González, Seattle Times, March 29, 2016
Detroit Free Press, Oct. 7, 2015.
240. “Meet The Real Amazon Drones,” Dave Jamieson, Huffington Post, April
268. This figure combines the city’s general budget and its education
24, 2014.
budget. “Portland passes $221 million budget that raises taxes 3
241. “LaserShip looks to expand to the midwest,” Abha Bhattarai, percent,” David Harry, The Forecaster, May 20, 2014.
Washington Post, April 13, 2014.
269. “Comprehensive Annual Financial Report: For the Fiscal Year Ended
242. “Delivery Driver Jobs,” OnTrac, Accessed August 8, 2016. June 30, 2015,” City of Portland, Maine.

243. “Meet The Real Amazon Drones,” Dave Jamieson, Huffington Post, April 270. “State and Local Property Taxes Target Commercial and Industrial
24, 2014. Property,” Joseph Henchman, Tax Foundation, Nov. 20, 2012.

77 | Amazon’s Stranglehold www.ilsr.org

 271. “Fiscal Impact Analysis of Residential and Nonresidential Land 291. Amazon has also recruited Jay Carney, President Obama’s former
Use Prototypes,” Tischler & Associates, July 2002. See also: White House press secretary, as its senior vice president for Worldwide
“Understanding the Fiscal Impacts of Land Use in Ohio,” Randall Gross, Corporate Affairs. See: “Amazon Hires Jay Carney, Former Obama Press
Development Economics, August 2004. Secretary,” David Streitfeld, New York Times, Feb. 26, 2015.

272. “Thinking Differently About Development,” Joe Minicozzi, Government 292. “Amazon hires antitrust lobbyist,” Ali Breland, The Hill, Aug. 24, 2016.
Finance Review, Aug. 2013.
293. “Can Taxes Shape an Industry? Evidence from the Implementation of
273. Institute for Local Self-Reliance analysis, drawing on, “Amazon Global the ‘Amazon Tax,’” Brian Baugh, Itzhak Ben-David, and Hoonsuk Park,
Fulfillment Center Network,” MWPVL International, accessed May Fisher College of Business Working Paper, July 2016.
2016.
294. “Wisconsin to provide Amazon with $7 million in tax credits,” Tom
274. “Amazon withdraws request for $1.2 million in tax incentives in Daykin, Milwaukee Journal Sentinel, Nov. 6, 2013.
Shakopee,” Emma Nelson and Kavita Kumar, Star Tribune, May 19,
295. “Working for Wisconsin: Governor Scott Walker Delivers Remarks at
2015.
Amazon Fulfillment Center Grand Opening,” Office of the Governor,
275. “Amazon’s mega warehouse gridlocks traffic in N.J. towns,” Christina Oct. 7, 2015.
Rojas, Times of Trenton, Dec. 1, 2015.
296. “Amazon gets Illinois tax credits despite calls for review,” Chicago
276. The Death and Life of Great American Cities, Jane Jacobs, New York, Tribune, Sept. 6, 2015.
N.Y.: Random House, 1961.
297. “Amazon opening two fulfillment facilities in Edwardsville, creating
277. “Q&A: In Indiana, fighting climate change by rethinking the suburb,” 1,000 jobs,” Jacob Barker, St. Louis Post-Disptach, Jun. 2, 2016.
Kari Lydersen, Midwest Energy News, Aug. 31, 2016.
298. “Amazon bringing 2,000 jobs to second Joliet warehouse,” Kim
278. “Prime Real Estate: Amazon Has Swallowed Downtown Seattle,” Janssen, Chicago Tribune, May 25, 2016.
Spencer Soper and Peter Robison, Bloomberg, June 29, 2016.
299. “Subsidy Tracker,” Good Jobs First, Accessed June 2016.
279. “As Amazon Stretches, Seattle’s Downtown Is Reshaped,” Kirk Johnson
300. “Amazon’s Baltimore site to receive more than $43M in tax credits,”
and Nick Wingfield, New York Times, Aug. 25, 2013.
Luke Broadwater, The Baltimore Sun, Oct. 23, 2013.
280. “National Household Travel Survey,” U.S. Department of Transportation,
301. “Amazon seeks tax breaks for Fall River-Freetown site,” Dan Adams,
2009.
Boston Globe, March 23, 2015.
281. “The Configuration of Local Economic Power and Civic Participation in
302. “Subsidy Tracker,” Good Jobs First, Accessed June 2016.
the Global Economy,” Troy Blanchard and Todd L. Matthews, Social
Forces, University of North Carolina Press, Vol. 84:4, June 2006. 303. 2014 Amazon Annual Report.

282. “The Health and Wealth of US Counties: How the Small Business 304. Author interview, July 1, 2016.
Environment Impacts Alternative Measures of Development,” Troy C.
Blanchard, Charles Tolbert, and Carson Mencken, Cambridge Journal 305. “State and Local Sales Tax Rates Midyear 2013,” Tax Foundation, Aug.
of Regions, Economy, and Society, 2011. 28, 2013.

283. “Small, Local, and Loyal: How Firm Attributes Affect Workers’ 306. Technically, online shoppers still owe the tax and are supposed to
Organizational Commitment,” Katie L. Halbesleben and Charles M. remit it with their income tax returns. However, fewer than 2 percent
Tolbert, Local Economy, Oct. 2014. do, and tax authorities say there is no feasible way to enforce it. See:
“Most People Are Supposed To Pay This Tax. Almost Nobody Actually
284. “College Graduates, Local Retailers, and Community Belonging in the Pays It,” Chana Joffe-Walt, NPR, April 16, 2013.
United States,” Samuel Stroope, Aaron B. Franzen, Charles M. Tolbert,
and F. Carson Mencken, Sociological Spectrum, Feb. 2014. 307. “Can Taxes Shape an Industry? Evidence from the Implementation of
the ‘Amazon Tax,’”Brian Baugh, Itzhak Ben-David, and Hoonsuk Park,
285. “Walmart and Social Capital,” Stephan J. Goetz and Anil Rupasingha, Fisher College of Business Working Paper, July 2016.
American Journal of Agricultural Economics, Dec. 2006.
308. “Who’s Writing the Book on Web Business?” William C. Taylor, Fast
286. “Trouble in Store: Probes, Protests and Store Openings by Walmart, Company, Oct. 31, 1996.
1998-2005,” Paul Ingram, Lori Qingyuan Yue, and Hayagreeva Rao,
American Journal of Sociology, Oct. 1, 2009. 309. “Amazon Battles States Over Sales Tax,” Stu Woo, Wall Street Journal,
Aug. 3, 2011.
287. “Store Size Cap – Damariscotta, ME,” Institute for Local Self-Reliance,
Dec. 2, 2008. 310. “Controversial Amazon SC tax break set to expire in 2016,” Cassie
Cope, The State, Dec. 28, 2014.
288. Author interview, July 19, 2016.
311. “Did deal with Amazon violate state law?,” Laylan Copelin, Austin
289. Author interview, Oct. 18, 2016. American-Statesman, May 12, 2012.
290. Open Secrets,” The Center for Responsive Politics, accessed May 23, 312. These laws establish “nexus” based on Amazon’s use of in-state
2016. Lobbying records show Amazon has lobbied on issues such affiliate marketers that drive business to its site. Amazon has
as corporate tax reform, which could close the loopholes that allow vigorously fought these state laws, filing (unsuccessful) lawsuits in
it to shelter profits earned in the U.S. overseas, drone regulation, some states and firing its in-state sales affiliates to avoid compliance
and defense spending. Amazon is a major defense contractor. In in others. See: “Amazon’s Big Assist from Government,” Stacy Mitchell,
2013, Amazon Web Services was granted a $600 million contract to Institute for Local Self-Reliance, May 1, 2014.
build and manage cloud computing infrastructure for the Central
Intelligence Agency. The award was controversial, so much so that 313. “Amazon and Empty Storefronts: 2015 Update,” Civic Economics,
it prompted a review by the U.S. Government Accountability Office, September 2016.
which found that IBM had been skipped over in favor of Amazon
314. “What Is Amazon’s Core Tech Worth? Depends on Which Taxman
despite offering a lower bid. See: “Decision: Matter of IBM-U.S.
Asks,” Gaspard Sebag and David Kocieniewski, Bloomberg, August 22,
Federal,” U.S. Government Accountability Office, June 6, 2013.
2016; “Special Report: Amazon’s billion-dollar tax shield,” Tom Bergin,
Reuters, Dec. 6, 2012

78 | Amazon’s Stranglehold www.ilsr.org

 315. “Amazon: How the World’s Largest Retailer Keeps Tax Collectors at Bay,” 332. In 2016, 35 states had laws against misclassification of employees,
Simon Marks, Newsweek, July 13, 2016. but the strength and enforcement of these laws is variable. See:
“Independent Contractor vs. Employee: Why independent contractor
316. “The Sorry State of Corporate Taxes,” Robert S. McIntyre, Matthew misclassification matters and what we can do to stop it,” Catherine K.
Gardner, and Richard Phillips, Citizens for Tax Justice and Institute on Ruckelshaus and Sarah Leberstein, National Employment Law Project,
Taxation and Economic Policy, February 2014. May 2016.
317. “Amazon: How the World’s Largest Retailer Keeps Tax Collectors at Bay,” 333. For instance, the law makes misclassification of workers as
Simon Marks, Newsweek, July 13, 2016. independent contractors a violation of Massachusetts’s Wage Act,
318. “Monopoly Power and the Decline of Small Business: The Case for which opens the employer up to extensive civil and criminal liabilities.
Restoring America’s Once-Robust Antitrust Policies,” Stacy Mitchell, See: Chapter 149, Section 148B, Massachusetts General Laws.
Institute for Local Self-Reliance, August 2016; “Antitrust: A Missing Key 334. Section 2810.3, California Labor Code.
to Prosperity, Opportunity, and Democracy,” Barry C. Lynn, Demos,
October 2013. 335. “2014 Annual Report,” Commonwealth of Massachusetts Joint
Enforcement Task Force on the Underground Economy and Employee
319. “Amazon’s Antitrust Paradox,” Lina Khan, Yale Law Journal, 2017 Misclassification.
(forthcoming).
336. “Administrator’s Interpretation No. 2015-1: The Application of the Fair
320. For a fuller discussion of this case, see: “Amazon’s Antitrust Paradox,” Labor Standards Act’s ‘Suffer or Permit’ Standard in the Identification
Lina Khan, Yale Law Journal, 2017 (forthcoming); “Justice Department of Employees Who Are Misclassified as Independent Contractors,”
Abets Amazon’s E-Book Monopoly,” Stacy Mitchell, Institute for Local David Weil, U.S. Department of Labor, July 15, 2015.
Self-Reliance, June 20, 2012; “Cheap Words,” George Packer, The
New Yorker, Feb. 17, 2014. 337. A federal judge struck down the settlement in August. See: “Judge
Overturns Uber’s Settlement with Drivers,” Mike Isaac, New York Times,
321. “Bring Back Antitrust,” David Dayen, American Prospect, Nov. 9, 2015; Aug. 18, 2016.
“Too much of a good thing: Profits are too high. America needs a giant
dose of competition,” The Economist, Mar. 26, 2016; “After Three 338. “Meet The Real Amazon Drones,” Dave Jamieson, Huffington Post, April
Decades of Neglect, Antitrust Is Back on the Democratic Platform,” 24, 2014.
Stacy Mitchell, Truthout, Aug. 3, 2016.
339. “Some Amazon Prime Now Delivery Drivers Are Now Employees,”
322. “Amazon: As EU Continues Scrutiny of US Tech Giants, Amazon Caroline O’Donovan, BuzzFeed, Feb. 29, 2016.
is Increasingly Vulnerable in US to Antitrust Enforcement for
340. “Shortchanging Small Business: How Big Businesses Dominate State
Exclusionary Conduct in Books,” The Capitol Forum, June 8, 2016.
Economic Development Incentives,” Good Jobs First, 2015.
323. “Reigniting Competition in the American Economy,” Senator Elizabeth
341. “Access to Capital for Local Businesses,” Institute for Local Self-Reliance,
Warren, Keynote Remarks at New America’s Open Markets Program
April 2014.
Event, June 29, 2016.
342. “Affordable Space: How Rising Commercial Rents Are Threatening
324. “How Europe Is Going After Apple, Google and Other U.S. Tech Giants,”
Independent Businesses, and What Cities Are Doing About It,” Olivia
Kelly Coutrier, New York Times, Aug. 30, 2016; “Amazon Japan raided
LaVecchia and Stacy Mitchell, Institute for Local Self-Reliance, April
on suspicion of antitrust practices: Nikkei,” Thomas Wilson, Reuters,
2016.
Aug. 8, 2016; “EU Competition Watchdog Investigates Amazon Over
Electronic-Books Business,” Tom Fairless, Wall Street Journal, June 11, 343. “Formula Business Restrictions,” Institute for Local Self-Reliance.
2015.
344. “Local Purchasing Preferences,” Institute for Local Self-Reliance.
325. “Amazon’s Antitrust Paradox,” Lina Khan, Yale Law Journal, 2017
(forthcoming), quoting the House Report that accompanied the 345. See, for instance: “New Studies Reveal 5 Reasons Policymakers Should
legislation. Prioritize Local Business in 2016,” Olivia LaVecchia, Institute for Local
Self-Reliance, Jan. 12, 2016.
326. “Monopoly Power and the Decline of Small Business: The Case for
Restoring America’s Once-Robust Antitrust Policies,” Stacy Mitchell,
Institute for Local Self-Reliance, August 2016.

327. “Amazon’s Antitrust Paradox,” Lina Khan, Yale Law Journal, 2017
(forthcoming).

328. “Curbing the New Corporate Power,” K. Sabeel Rahman, Boston Review,
May 4, 2015.

329. It issued important guidance on joint employment in January 2016.

See: “Joint Employment Under the FLSA and MSPA,” U.S. Department
of Labor, Jan. 20, 2016.

330. “Browning-Ferris Industries of California, Inc.,” National Labor Relations

Board, Aug. 27, 2015. See also: “The NLRB’s Evolving Joint-Employer
Standard: Browning-Ferris Industries of California, Inc.,” Daniel B.
Pasternak and Naomi Y. Perera, ABA Journal of Labor and Employment
Law, 2016.

331. “Miller & Anderson, Inc.,” National Labor Relations Board, July 11, 2016.

79 | Amazon’s Stranglehold www.ilsr.org