Breaking Up Amazon: The Great Tech Debate: ‘Assertions of predatory pricing are like Bigfoot sightings.’

Letters to The WSJ. Excerpts:

"Joe Lonsdale makes “The Case for Splitting Amazon in Two” (op-ed, Feb. 8) on the theory that the high-gross-margin Amazon Web Services is supporting a retail operation that sells below cost. But is the retail business really running at a loss? All those warehouses and distribution centers are built with favorable depreciation rules, a legitimate part of the tax code that encourages job-producing business expansion. On a cash basis, Amazon’s retail business is probably nicely profitable.

David Robinson

University of California, Berkeley" 

"Mr. Lonsdale commits a subtle but telling error by claiming that the consumer-welfare standard “holds that certain anticompetitive behaviors may be permissible if they provide value to consumers.” In fact, the standard holds that all practices that provide value to consumers are competitive, regardless of the impact on rival firms.

So how are consumers faring? Quite well! That the low prices enjoyed today by Amazon’s customers perhaps result from Amazon’s shareholders spending some of their wealth to make these low prices possible is no antitrust offense.

Mr. Lonsdale will reply that these low prices become an offense if they are “predatory.” But assertions of predatory pricing are like Bigfoot sightings: Proof is never found. The profit motive is too powerful, entrepreneurs too creative and markets too dynamic to make predatory pricing a viable monopolizing strategy in reality. History knows of no unambiguous instance of a private firm, operating in the market, that sold at predatory prices only to later gain monopoly power used to harm consumers for any length of time.

History does know of many instances of government officials and courts—especially before the consumer-welfare standard became dominant—mistakenly identifying competitive prices as “predatory” and then using antitrust to deny consumers the benefits of competition.

Prof. Donald J. Boudreaux

George Mason University

Fairfax, Va."