After last week’s high street blood bath, is it time to split up Amazon?
Jeff Bezos, chief executive of Amazon, is by most accounts a mild mannered sort of guy with classic West Coast liberal views. There is one thing, however, that makes him as ballistic as one of his Blue Origin space rockets – and that’s any mention of subjecting Amazon to a break-up.
He may, on the other hand, have to get used to it. On both sides of the Atlantic, the invasive market power of his business creation is the object of ever closer political and regulatory scrutiny.
No one doubts the phenomenal business achievement that Amazon is, or that it is qualitatively very different from the “robber baron” monopolies of the gilded age. Amazon is an entirely self-made business success story, won not through merger and acquisition, unfair practice, or like the AT&T and BT telephone monopolies of old, via government mandate. It has simply been much better than others at exploiting the market opportunities offered by the internet.
From a standing start less than 20 years ago, Amazon is today Britain’s fifth largest retailer, and few doubt that within five years it will be the largest, eclipsing even the once mighty Tesco. Its tentacles have spread into almost everything. Even BSKYB is now directly threatened, with Amazon’s acquisition of Premier League rights.
Last week’s further bout of carnage on the UK high street cannot be wholly attributed to Amazon. Punishingly high business rates and rents are the major part of that story. But the question none the less arises of whether it is politically acceptable – as traditional bricks-and-mortar retail dies on its feet, eroding a significant part of the UK tax base – to have such a large chunk of consumer spending dominated by a single, foreign-controlled retailer.
The question is doubly galling to Europeans because, unlike China, Europe has not managed to spawn significant alternatives to the power of the American internet giants. China has Tencent, Alibaba and Baidu. Europe has … er, Amazon, Google and Facebook. Add to the mix US president Donald Trump’s threatened trade war with Europe, and it shouldn’t surprise that already European policymakers are wondering whether one way of getting their own back is to kick the Americans where it hurts most – not with tariffs on blue jeans, peanut butter and Harley-davidsons, but by attacking the soft underbelly of its digital titans.
Another front in this war is set to open up shortly, when Margrethe Vestager, Europe’s competition commissioner, imposes another blockbuster fine on Google – this time for supposedly using Android to block rivals. She’s threatened before to break up Google, and behind the scenes is working on her options.
It would be much harder to make such a case against Amazon. Despite the company’s arguably greater impact on conventional business models and sources of taxation, Bezos has been clever; he doesn’t actually have a monopoly position in anything. Even in cloud computing, his market share is “only” 35pc. Even so, it’s easy to see where this is going; the political environment for America’s digital disrupters is becoming increasingly hostile, in the UK, in Europe and beyond, and at some stage, enforced asset separation, or even sequestration, looks all too possible.
BT: pleasing no one
It started so well, with his film star looks and easy charm. But from the Italian accounting scandal onwards, it’s been a torrid couple of years for Gavin Patterson, chief executive of BT, and investors have finally lost patience with him.
So off he goes, and in comes … well, we know not who yet. But apparently it’s not with the purpose of tearing up Patterson’s strategy and starting anew, but just to carry on as before trying to reconcile the impossible trinity of dealing with the pensions deficit, maintaining the dividend, and answering the political pressures for major investment in ultra-fast fibre optic broadband. Change the man, but not the strategy? That makes no sense. No new chief executive worth his salt would agree to such a plan. Patterson’s problem was that in attempting to meet all three demands, he also skimped on all three and thereby satisfied no one. The final indignity was to freeze the dividend, though this was a board decision, not his.
To succeed, the new man must grasp the nettle, properly separate the company into its wholesale and retail components, as demanded by rivals, and slash the dividend to release money for appropriate long-term investment. For income investors, such an approach would go down even less well than Patterson, but equally it is as plain as a pikestaff that the status quo is not sustainable. The world is changing fast; BT is becoming a barrier to such change, rather than, as it should be, a facilitator.
Brexit in name only
There is not much that Brexiteers and Remainers agree on, but one thing almost everyone thinks is that the Government is making a terrible hash of it all. The alleged “treachery” of Remainers, and in particular Philip Hammond and the Treasury, get a lot of the blame, but maybe the Brexiteers should take a look at themselves.
I hesitate to say this, but it is the truth; the three Cabinet Brexiteers most directly involved – David Davis, Boris Johnson and Liam Fox – carry virtually no respect either in the civil service or in the business community, or with their interlocutors around the world. It’s worse than that; they are actually regarded as a joke.
You might argue that this is just the establishment rounding on the revolutionaries. But the art of good government is to take your opponents with you, even on matters as divisive as Brexit, and on this they have failed hopelessly. If it is a clean Brexit they are after, they have already lost the battle. Pitifully, we head for Brexit in name only; they’ve been outmanoeuvred and the blame is entirely theirs.
‘Amazon’s tentacles have spread into almost everything. Even BSKYB is now directly threatened’
Jeff Bezos with one of his Blue Origin Rockets. The Amazon boss faces ever closer regulatory scrutiny of his company