Why Reining in Big Tech Will Help Save Local Businesses

By Katy Milani

This past holiday season, thousands of Arizonans spent time enjoying the state’s local Main Street areas and browsing for unique gifts in local shops, which was made even easier with the Local First Arizona directory.

Local businesses contribute to the vitality, character, and unique sense of community. In addition, small businesses create economic stability and offer quality jobs to residents, while keeping dollars in the community.

But for all the good that they do, this is a precarious time for many small businesses in Arizona. For far too long, small businesses have been competing on an uneven playing field against monopolistic corporations. Lax enforcement and antiquated state and federal antitrust laws have allowed monopolies to amass unprecedented economic and political power, dwarfing the ability of independent businesses to compete fairly and leading to waves of closures. Amazon’s rise coincides with a sharp decline in the number of independent businesses across the country; between 2007 and 2017, the number of small retailers fell by 65,000.

In a 2019 survey, three-quarters of independent retailers ranked Amazon’s dominance as a major threat to their survival, and only 11 percent of those selling on Amazon described their experience as successful. And it isn’t just small business owners who feel that way. In a recent poll, nearly 80 percent of voters agreed that Amazon should be subject to greater regulation — and more than half support breaking it up.

It’s no wonder so many small businesses support stronger oversight of Amazon, because the tech giant has used a host of unfair tactics to exert its dominance over small businesses and thwart competition. Amazon undermines third party sellers on its platform by using proprietary data to compete against them, stealing their best ideas, and continually raising fees.

A new report issued just last month by my organization, Institute for Local Self-Reliance, showed that Amazon has been imposing increasingly steep fees on third-party sellers. The report shows that Amazon now pockets a stunning 34 percent cut of the revenue earned by independent sellers on its site, up from 19 percent in 2014. In the past two years alone, Amazon’s take from sellers has more than doubled, soaring from $60 billion in 2019 to a staggering $121 billion in 2021. It also shows that Amazon penalizes sellers that offer lower prices on other, less expensive shopping sites, thwarting competition and ensuring that Amazon’s steep fees inflate consumer prices across the web and not just on its own site.

Despite its growing fees, Amazon’s monopolization of the online market means that businesses that want to reach consumers online have little choice but to sell on Amazon’s site. That’s because two-thirds of Americans looking to buy something online start their product search on Amazon, rather than a search engine.

We’ve been conditioned to believe that small businesses are disappearing because they’re not as capable or efficient as their big competitors. But a closer look suggests otherwise. In many sectors — from pharmacies to craft breweries to banking — small businesses deliver distinct market benefits and outperform their bigger rivals in key ways. Their decline has much more to do with monopoly power and an array of policies that put them at a disadvantage.

Fortunately, it’s not too late to turn things around, and small businesses are stepping up to the challenge. More than 150,000 independent businesses across the country have formed Small Business Rising, a coalition advocating for new antitrust laws and better enforcement of existing regulations.

And progress is being made. Federal lawmakers are considering new Big Tech anti-monopoly legislation aimed at breaking the stronghold Amazon and other tech monopolies now have, including a bill to break Amazon apart. For small businesses to thrive, even survive, this legislation is vital, and we need Congress to act.

Small businesses do so much for our communities. They create jobs, keep wealth and opportunity in the local economy, and help shape the dynamic business districts that we all enjoy. Every day, we lose more small businesses because of the abusive and anti-competitive tactics of Amazon and other monopolies. The new federal legislation will help rebalance the playing field and give Arizona’s entrepreneurs a chance to compete.

Katy Milani is a senior policy advocate with ILSR and helped co-found Small Business Rising.
She can be reached at [email protected].