Af­ter last week’s high street blood bath, is it time to split up Ama­zon?

The Sunday Telegraph - Money & Business - - Business - JEREMY WARNER

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

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