Here are the critical paragraphs detailing Amazons predatory practices from a review in the latest Harpers of a new book on Amazon called The Everything Store. Message: try to avoid buying from Amazon. Initially, publishers considered Amazon a godsend: it appeared to be generating enormous sales without siphoning off revenue from the old brick-and-mortar stores. This didn’t last, nor did the era of good feeling between Bezos and the New York book world. As soon as Amazon secured a sizable share of the market, it began pressing publishers for deeper discounts — technically illegal under the Robinson–Patman Act of 1936, but attainable by such workarounds as promotional fees and shipping discounts. These practices have long been common among retailers. But Amazon has shown a peculiar genius when it comes to squeezing more dollars out of publishers, including university presses and indies that can ill afford to shave their margins any further. The company’s initial foray into shaking down these vulnerable parties was called the Gazelle Project, because Bezos had suggested that “Amazon should approach these small publishers the way a cheetah would pursue a sickly gazelle.” The legal team quickly rechristened it the Small Publisher Negotiation Program. (A similar program in Europe went from Pay to Play to the more sanitized Vendor Realignment.) Stone, who maintains his reportorial neutrality throughout most of The Everything Store, drops the ball here. After dutifully cataloguing Amazon’s venal behavior, he falls back on what is literally the company line — that these extorted dollars “create the foundation on which everyday low prices become possible.” This should be a real comfort to publishers now contending with Amazon’s newest shakedown. A former employee, who asked not to be identified, recently told me that some publishers are now being pressured to pay the equivalent of 1 percent of their annual net sales to Amazon — levied on top of any existing fees — simply for the privilege of presenting their lists to the marketing team and buyers. In the case of the larger houses, this sum could run between $500,000 and $1 million — and failure to pay will make it awfully hard to get an Amazon buyer on the phone.2 2 An Amazon spokesperson denies this latest practice, and several publishers were understandably leery of revealing the specifics of their own agreements with the company. What came through clearly, however, was a general repugnance toward Bezos’s tactics. Describing Amazon’s appetite for “creative destruction” as “somewhere between scary and disgusting,” one New York publishing executive added: “When you go to work each morning with a battle-ax, everything looks like a head to be chopped off.” 3In February 2013, after an embarrassing outcry in the press, Amazon fired Hensel European Security Services (HESS), whose staff were reportedly harassing foreign workers and sporting Thor Steinar clothing — a brand the German government had briefly banned in 2004 because its corporate logo resembled the insignia of the SS. Of course it’s legal. So is Amazon’s control of an estimated 65 percent of the e-book market, a near monopoly that’s apparently of no concern to the supine Department of Justice. So is its bare-bones price of $9.99 for popular e-books, a loss-leading tactic that might be classified as predatory pricing if there weren’t so many legal hurdles to making such a charge stick. So is the funneling of its British revenues through a subsidiary in Luxembourg, a tax-avoidance loophole the G20 nations now intend to close, and its use of black-uniformed neo-Nazi skinheads to patrol one of its German warehouses.3 So were the ghastly tactics used against such competitors as Zappos (Bezos spent an estimated $150 million to price-cut the online shoe merchant into submission, then acquired it) and Diapers (whose executives calculated that Amazon’s kamikaze discounting blew through “$100 million over three months in the diapers category alone”). But if this isn’t mercenary behavior, what is?
Posted on: Sun, 24 Nov 2013 18:45:55 +0000