A few days ago, the New York Times revealed that Amazon had been playing hardball with Hachette, a major New York book publisher with big sellers like Stephen Colbert and Malcolm Gladwell. The e-commerce site wasn't happy with the outcome of contract negotiations, the Times reported, and so has started to suggest other books when customers try to order something from Hachette — and if they proceed to checkout, the book might take weeks to arrive.
Authors, understandably, are irate over the unequal treatment. Even if they have other options, like Barnes & Noble or even their local bookstore, a certain number of people will end up not buying the book at all — which especially hurts some of the writers who aren't as famous as Gladwell or Colbert.
Amazon, which didn't respond to a request for clarification from The Washington Post, is by no means unique in employing this tactic. All big multi-brand retailers choose what to sell in their stores, and when they have enough market power, can extract substantial concessions from the companies whose products they allow in. That's Walmart's whole business model: Require vendors to squeeze as much cost out of their supply chains as possible so they can end up at the lowest price. Even Whole Foods does it, expelling the Greek yogurt brand Chobani when it declined to create "unique" options for Whole Foods stores.
The problem comes in, however, when the consumer doesn't have other options. That's why people are so upset about the Federal Communications Commission's plan to allow cable companies to charge Internet businesses more for faster access: With only a couple cable providers out there, the Netflixes and YouTubes of the world will have no choice but to pay up, while smaller players could be consigned to slow loading times forever.
In some ways, Amazon's decision to choke off Hachette is similar. Wanting to give consumers access to its products through the biggest single pipeline available, Hachette may relent on the price at which it sells books to Amazon, squeezing its slim profit margins even further. As Amazon gains more and more market share, its power to do so will only increase. And as Slate's Jordan Weissman points out, our antitrust law is all geared toward lower prices for consumers, so there's likely nothing Hachette can do about it (unless Amazon, in its now-pressing quest for profit, starts to charge more on top).
So, what to make of this? It depends on how you want to think about Amazon as a middleman. If it's just one storefront among many to purchase products, it can cut whatever deals it wants, and you can take your business elsewhere. Increasingly, though, we're starting to see it as an open-access marketplace, on which vendors sell their products directly to consumers — if there's no real choice of where to buy things, maybe there should be some other way to retain pricing power for those who produce goods in the first place.
Disclosure: Amazon.com founder and CEO Jeff Bezos owns The Washington Post.