Amazon (NASDAQ:AMZN) exercising market power or not?
It has been revealed that Amazon (NASDAQ:AMZN) has great market power which is no surprise but how its exercising it might be different. The public policy is that company can’t exercise market power for taking out competition. However if a company is exercising its power for the better then why the trouble of public policy. If consumers are happy with it, then isn’t that the major goal that every company should be looking for?
Krugman is right in his words when he says that Amazon (NASDAQ:AMZN) is a market power with its books; dominating sales of online books with a comparable market share to that of Standard Oil’s. Even after totaling the book sales, Amazon (NASDAQ:AMZN) still takes the lead. The company is highly dominant with e-books giving it a high amount of market share throughout the markets it has entered.
The company is exercising this right to such an extent that it has brought on disputes, most famous Amazon vs Hachette which is explicitly about e-book pricing. The point is that Amazon (NASDAQ:AMZN) has not exploited its customers as yet. The company has in turn kept its prices relatively low to not show the overbearing dominance that has been the talk of the market for a while now which it can potentially show.
Amazon (NASDAQ:AMZN) has instead used the market power that it generated to decrease its prices on the books that it pays for. This is exactly the reason why it has had the dispute with Hachette. Considering the economics of the matter, the company isn’t a monopolist. It doesn’t raise its prices by being the dominant seller in the market. Instead it helps push down the prices.
We should be happy about the activities the company is carrying out rather than going against it. The bottom line is that what it’s doing is overall helping its consumers. How can that be wrong? Standard Oil on the other hand lowered the prices of its refined products so that it could help keep market power intact. This is almost the same situation that is happening with Amazon (NASDAQ:AMZN); extensive market power is being used to provide incentives for customers to purchase its products.
If the company gains a significant level of market power through which it creates a monopolistic environment then that will be the perfect time to go against the company and apply rules and regulations that will help bring it down. There is no evidence that the company is doing this now so there’s really no point to look into the matter at the company who isn’t exploiting its power and hence other stakeholder weaknesses.
The problem that the company is facing right now is market jealousy which is increasing the amount of conflicts Amazon (NASDAQ:AMZN) is having with its suppliers. It is time for the company to show the market that it does not have negative intentions therefore calming the situation before it could get any worse. This won’t happen though as long as Amazon (NASDAQ:AMZN) stays within rules and regulations.