Deep Dive: The Amazon ‘Para-State’

In a laughable attempt at creative writing, some six years ago I co-wrote the beginnings of a science-fiction narrative in which Amazon becomes a nation that supersedes the United States of America and its laws. In that story, every citizen had its own identifying Prime account. Your economic class was determined by how much or little you spent through the Prime program – it served as a proxy for taxes contributed to a central government. Humor me for a moment:

I imagine a dystopian 2024. Robert “Bob” Zhose, Founder and CEO of North America’s largest eCommerce company, lords over a coveted subscription product with over 150 million members. It’s a subscription that determines your economic class and access to basic supplies, medication, security, and national citizenship.

Zhose runs for President and wins the popular vote by leveraging a vast majority of his 150 million members against the two parties’ popular candidates. In 2024, he becomes America’s 46th president after eight years of shifting internet regulation, the consolidation of the federal government, the shuttering of most media, and the establishment of a commerce monopoly.

Of course, “Zhose” went on to change the rules governing a corporation’s power, one of the first American examples of a digital overlay overwhelming a physical landscape.

And then I gave up on the story. Part of it was a lack of time and ability. The other part was that it didn’t seem so science fictional after a while. Amazon’s dominance of the landscape led me to write about its monopolistic practices and its defenses against antitrust litigation. In 2018’s The Age of Conglomeration, I began:

Monopoly is not a suitable term for what Amazon is in the process of accomplishing. A monopoly is defined as the exclusive possession or control of the supply or trade in a commodity or service. There is no term for a corporation becoming the supply or the trade.

The report frequently cited then-professor and academic writer, Lina Khan. She wrote a number of legal scholarship on matters of antitrust – especially in the context of Amazon, Facebook, and Google. Of my favorite are Amazon’s Antitrust Paradox and, specifically, The Chicago School Approach to the Department of Justice’s analysis of antitrust matters. I explained:

After Reagan’s Antitrust Explosion of 1982, elements of the law began to shift from structuralism and toward consumer welfare. […] Amazon built its business around the belief that as long as consumer prices were low, antitrust laws wouldn’t apply. Lina Khan went on to say: “Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.”

Today, Lina Khan is no longer an academic, she’s the feared chairwoman of the Federal Trade Commission (FTC). Shortly after she was appointed to the FTC in 2021, Amazon filed a petition that claimed “she should be recused in investigations of the company, in light of her extensive past criticisms of Amazon.” She wasn’t removed, but despite her wide-ranging influence on such matters, she’s had less of an impact on Amazon’s standing than one might expect.

Amazon, today, is closer than ever to lording over that fictional nation that I envisioned when I journeyed on that creative writing project in 2017.

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The title of the fictional work (2018, Rights of

Vice Media’s recent report on Amazon’s economic power is entitled: “Amazon Is Now a ‘Para-State’ Governing Global Commerce, Researcher Says.” With the changes caused by ATT and the iOS 14.5 upgrade, it’s only emboldened Amazon, which currently ranks in the top five advertising companies:

This is not just the result of Amazon’s shifting rules, according to the report, but its total dominance of seller ad data, which it charges sellers access to.

We have covered retail media in depth. Amazon’s use of third-party sellers to fuel this first-party data trove is quite the oversight on our part; I’d never thought of it that way. Amazon is harvesting data by collecting vendors into a system, handling logistics for them (reducing cost of entry), and serving as the outwardly-appearing vertical operation to the customers of Amazon Prime.

Here’s what you may not understand about Amazon’s third-party marketplace system: there may not be a more powerful economic engine on the planet. It spans the globe, including China (40% of marketplace sellers). It has become so powerful that it’s reduced legitimate entrepreneurs to operating like gig workers. In a 51-page report by Data & Society called “Trickle Down Monopoly,” it explained the engine behind Amazon’s shift from traditional marketplace to effective retail dictatorship. On page 15:
Amazon tried to acquire and imitate eBay several times (Stone 2013). And, between 1998 and 2000, it experimented with several live auction features. But the form that marketplace finally took was to merge third-party merchants with Amazon’s first-party retail business. First- and thirdparty goods now appeared in a single catalog. And, crucially, goods had “single listings.” On eBay, a search for, say, a teddy bear could turn up a dozen pages of the same teddy bear, offered by different merchants. On Amazon, a search for that teddy bear would turn up a single page, even if multiple sellers were supplying it behind the scenes. In order to make that possible, Amazon had to develop a single set of standards for tracking goods within the Amazon catalog, its warehouses, and logistics network.
This system was devised by Rebecca Allen, an Amazon engineer that developed the ASIN system or Amazon Standard Identification Numbers. The Amazon Standard Identification Number (ASIN) is a unique identifier assigned to products listed on Amazon’s Marketplace platform. The incorporation of the ASIN numerical system changed Amazon’s marketplace in several ways.
  • Improved product search and discovery: The ASIN system allowed Amazon to create a more organized and efficient product catalog, making it easier for customers to find the products they are looking for. This improved the customer experience and made Amazon a more attractive marketplace for shoppers.
  • Increased visibility for third-party sellers: With the ASIN system, third-party sellers were able to list their products in the Amazon catalog, making them easier to find for potential customers. This increased visibility for third-party sellers and made it easier for them to reach new customers and grow their businesses on Amazon.
  • Improved product data accuracy: The ASIN system ensured that product data, such as product titles and descriptions, was accurate and consistent. This improved the quality of product data in Amazon’s catalog, making it easier for customers to find the information they needed and make informed purchasing decisions.
  • Enhanced product and seller performance tracking: The ASIN system allowed Amazon to track the sales and performance of individual products and sellers, allowing the company to make data-driven decisions about which products and sellers to promote and which to de-prioritize.
  • Streamlined product management: With the ASIN system, Amazon was able to manage its product catalog more efficiently, making it easier for the company to maintain accurate product data and ensure that products were listed correctly.

The incorporation of the ASIN numerical system was a significant change for Amazon’s marketplace. It improved product search and discovery, increased visibility for third-party sellers, improved product data accuracy, enhanced product and seller performance tracking, and streamlined product management. It was a system that made it easier to be a third-party retailer and even easier to enjoy consuming the products sourced by those independent entrepreneurs. According to the report’s citation of Brad Stevens’ 2013 book The Everything Store: Jeff Bezos and the Age of Amazon, the original vision for the Amazon marketplace was more traditional:

When they started, Amazon marketplace functioned mostly like a catalog—an online version of the Sears Roebuck catalog from the 1890s, or of Stewart Brand’s Whole Earth Catalog, where Amazon’s first engineer, Shel Kaphan, had worked as a high school dropout in the late 1960s.

Kaphan, Amazon’s first employee, has become a light advocate of breaking up Amazon’s monopoly. Notably, Amazon discarded his original vision. In the early days of Amazon, the company focused primarily on selling its own products and fulfilling orders through its own warehouse. However, as Amazon grew, it became increasingly difficult for the company to manage its inventory and keep up with the demand for products. This is when Amazon started to explore new business models that would allow the company to sell a wider range of products without having to manage the inventory itself.

In 2000, Amazon launched its Marketplace platform, which allowed third-party sellers to offer their products for sale on the Amazon website. This was a significant moment in Amazon’s history as it marked the beginning of the company’s transformation into a third-party marketplace. The Marketplace platform was a game-changer because it allowed Amazon to offer a much wider range of products to its customers without having to manage the inventory itself.

Over the years, Amazon has continued to refine and improve its Marketplace. In 2005, the company introduced the Fulfillment by Amazon (FBA) program, which allowed third-party sellers to store their products in Amazon’s warehouses and have Amazon handle the shipping and customer service for their products.

Today, Amazon’s Marketplace is a massive operation, with hundreds of thousands of third-party sellers offering millions of products to customers around the world. The Marketplace is a critical part of Amazon’s business, accounting for a significant portion of the company’s total sales.

Amazon has often been compared to its own country due to the size, scale, and influence it has over various aspects of modern life. The company’s Marketplace and the first-party data that is fueling its advertising business have made Amazon’s multi-national power seem more realistic. Its reach knows no bounds, and despite its many frustrations by sellers, it is nearly impossible to thwart. While Amazon has reported diminished growth in its retail business, the advertising business is crashing the duopoly of Meta and Google. It’s also undermining critics’ position that it has become a retail monopoly. Meanwhile, Amazon’s size, scale, and influence continues to grow.

Cambridge Sociologist Dr Montserrat Guibernat once defined a nation as: “a human group conscious of forming a community, sharing a common culture, attached to a clearly demarcated territory, having a common past and a common project for the future and claiming the right to rule itself.” (1996) Well:

Economy: Amazon has a massive economic impact, generating billions of dollars in revenue each year and employing hundreds of thousands of people. It also has a significant impact on the broader economy, with its business dealings affecting the economies of many countries around the world.

Infrastructure: Amazon has built a vast and sophisticated logistics network, with warehouses, delivery centers, and transportation hubs spread out across the globe. This infrastructure is key to the company’s success and makes it possible for Amazon to offer fast and reliable delivery to its customers.

Culture: Amazon has a unique culture and way of doing business, which is centered around innovation, efficiency, and customer obsession. This culture has been instrumental in the company’s success and has helped to shape the company into the behemoth it is today.

Impact: Amazon has a significant social impact, both in the way it operates its business and the impact its business has on society. For example, Amazon’s delivery network has made it possible for people to receive packages within hours of ordering them, which has changed the way people shop and receive goods.

Rules and regulations: Amazon has its own set of rules and regulations for its marketplace, which govern how sellers can list and sell products on the site. These rules and regulations are enforced by Amazon and are designed to ensure a fair and trustworthy marketplace for buyers and sellers.

Vice called it a “para state.” FTC Chairwoman Lina Khan views it as a threat. And media organizations cite its power to impact personal, regional, and national economies. John Herrman, a writer of New York Magazine wrote this in the last week of January 2023:

The company’s decades of aggressive investment and execution have resulted in the creation of a service without credible direct competitors: a commerce platform with more than 150 million subscribers, backed by a singular logistics empire that employs hundreds of thousands of people, with more market share than its next 14 competitors combined.

In fact, the only clear indication that Amazon does not have power above and beyond the typical corporation is ChatGPT’s response to the question at hand: “Amazon is a multinational technology company headquartered in Seattle, United States. It is not a country. The idea of a company becoming a country is not a concept that is recognized or supported by any existing political or legal systems.”

It is not a serious notion to believe that Amazon is seeking nationhood but it begs the question? Does it need to be? So far, Amazon has resisted the offensive by the U.S. Government and its most fervent antitrust agent: Lina Khan. But there was a flaw in ChatGPT’s answer, specifically the part about existing systems.

When a former group of British colonies became its own nation – a united group of states – it relied on existing political and legal systems but also subsequent treaties and diplomatic agreements to establish what hadn’t been done in history. But who needs traditional political power when a multinational monopoly can be had instead.

By Web Smith | Edited by Hilary Milnes with art by Alex Remy and Christina Williams  

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