Amazon’s ongoing dispute with the Hachette Book group over e-book sales terms seems to have turned into a litmus test on publishing in the digital era. It has also shone a brighter-than-usual light on Amazon itself, prompting a number of stories questioning the company's size, and approach to doing business. Now New York Times columnist and Nobel prize-winning economist Paul Krugman has waded into the battle, declaring without reservation that Amazon “has too much power" and that the company "uses that power in ways that hurt America.”
While Krurgman acknowledges that Amazon is not a monopoly, “a dominant seller with the power to raise prices,” he says that it is actually a “monopsony,” or a dominant buyer in a marketplace with enough power to push prices downward. Krugman dismisses Amazon supporters who contend that the e-tailer is just doing the business of capitalism and giving consumers what they want. To Krugman the issue revolves around the question of marketplace power and how that power is wielded.
Krugman is more concerned with the market share and economic power Amazon has accumulated, even if it did so by being smarter than its competitors. He compares Amazon to a textbook example of the monopolistic abuse of power, J.D Rockefeller’s Standard Oil, noting Amazon has “immense” market power, even beyond its market share, and says that, like Standard OIl, some of Amazon's business practices are out of line.
He declares, “So can we trust Amazon not to abuse that power? The Hachette dispute has settled that question: no, we can’t.”