Amazon’s founder Jeff Bezos kicked off the year making headlines for selling 24 million shares of his company for $4 billion. The move came right after he relocated to Florida, a state that doesn’t levy capital gains tax, allowing him to dodge a $595 million tax bill from the state of Washington.
But as much as Americans may be used to seeing billionaires avoid taxes, the schemes of Bezos and Amazon leave a trail of destruction that goes beyond protecting personal wealth. We learn that, and much more, when we go back to the origins of Amazon and watch it morph into the giant that it is today. In The Everything War, the journalist Dana Mattioli shows us at length that Bezos’s legacy is far more insidious than we ever suspected.
In 1995, Amazon emerged as a scrappy online bookseller promising cheap book deliveries across the country. Yet despite its friendly, up-and-coming image, from its very founding exploiting tax loopholes was central to Amazon’s growth. By designating the company’s warehouses as subsidiaries, Bezos exploited a tax loophole from a 1992 Supreme Court decision that couldn’t have possibly anticipated Amazon’s ubiquity. When Amazon could no longer keep this advantage, beginning around 2012, the tech giant’s strategy changed to secure tax breaks and subsidies from towns and cities where it landed.
At the same time, the permissive antitrust environment, which tolerated monopolies as long as prices were low, enabled Amazon to corner market after market. As Amazon grew to become one of the most powerful companies in the world, it revealed itself as a predatory monopolist that undercuts other companies with anticompetitive (and likely illegal) tactics, steals ideas, abuses its own workers, and is hollowing out the American retail economy.
Even in Amazon’s early years, when it was celebrated by both consumers and Wall Street investors, Bezos’s Machiavellian tactics showed through. A good example came after the launch in 2000 of the Amazon Marketplace, which allowed third-party businesses to sell goods sourced from their own inventory. (Until then, Amazon had been buying inventory from major brands to drive sales.) That same year, Toys “R” Us partnered with Amazon to grow its e-commerce business, as many others were doing at the time, since building a proprietary e-commerce platform was very costly.
Mattioli unpacks the well-documented demise of Toys “R” Us to unveil Amazon’s prime pattern of behavior: to grow on the backs of its competitors. Under the partnership deal, Toys “R” Us agreed to pay Amazon a variable fee to be its exclusive toy vendor. But Amazon used its access to business data from Toys “R” Us to squeeze the company for hefty fees. Not only that, because the Marketplace was expanding to various retail categories, Amazon also harnessed Toys “R” Us’s data to boost sales of other vendors’ toys—resulting in a breach of contract that took years to settle. In the end, the toy company went bankrupt without ever having made a profit from that partnership.
To illustrate how Amazon embraced predatory pricing to conquer more markets, Mattioli dusts off the decade-old case of Quidsi, the parent company of Diapers.com—also documented in a seminal paper on Amazon by Lina Khan, now the chair of the Federal Trade Commission. Founded in 2005, Diapers.com was revolutionizing the market with its 24-hour deliveries. The Amazon mergers team was fascinated by the delivery system, but above all, they wanted its hard-earned customer base: mothers with purchasing power.
With the direct involvement of Bezos, in 2010 Amazon kicked off a detailed plan to destroy the startup. The first tactic was to slash the price of all diapers on Amazon’s Marketplace by 30 percent (amounting to a loss of $200 million per month). On that same day, the mergers team contacted a Quidsi board member saying the company should sell itself to Amazon.
When a monopolist lowers prices below the costs of production to kill competitors, only to lock in new customers and raise prices back up, pricing becomes “predatory.” This is an illegal monopolistic practice in the United States, per the precedent set by Standard Oil. But beginning in the 1980s, the interpretation of antitrust enforcement started changing, influenced by the former federal judge Robert Bork, who persuaded regulators to care less about how companies competed and more about “consumer welfare”—the capacity of big corporations to deliver low prices.
Under this school of antitrust, Amazon’s legal team anticipated that regulators would not pay attention to this particular case, given Amazon’s small presence in the diaper market at the time. And they were right. Quidsi had little recourse left, since a lawsuit for anticompetitive practices would have been costly and difficult to win.
Amazon’s assault ended up forcing Quidsi into a buyout. Amazon offered $545 million; Walmart offered $650 million. Quidsi, logically, wanted to take the highest offer. But when Amazon found out, it bared its claws again, threatening to slash its diaper prices to zero if Quidsi went with Walmart. Cornered, the diaper company sold itself to Amazon in November 2010. In 2017, Amazon shut down Quidsi, arguing that it was unprofitable—but not before absorbing Quidsi’s customers into its own platform and becoming the leading online retailer in the baby goods category.
Amazon also spread its toxicity through investment operations such as the Alexa Fund. Launched in 2015 as Amazon’s internal venture capital arm, the Alexa Fund was used to steal intellectual property and kill promising new companies in the voice technology space. For anyone wondering how monopolies stifle innovation, this chapter gives the answers.
As its name suggests, the Alexa Fund was designed to help Amazon build its now-ubiquitous voice assistant, as well as other voice-related products. Had it been a traditional venture capital fund, the Alexa Fund would have taken a stake in the best startups working in voice technology, helped them grow, and sold its stake for a profit. At best, it would have paid them to use their technology. Instead, the Alexa Fund operated as an espionage unit that expanded Amazon’s practice of growing on the backs of competitors.
One startup stands out in this chapter: Doppler Labs. Doppler’s rise and fall has been previously reported, but Mattioli reveals that Amazon played a central role. Doppler was an electronics startup that manufactured earphones years before Apple released its AirPods. In 2016, Doppler was valued at $250 million and was preparing to launch wireless earbuds that let users adjust the volume of real-life sounds around them. That year, Doppler cofounder Noah Kraft started talks with Amazon’s devices head, Dave Limp, who told Kraft that Amazon wanted to either buy or make a big investment in Doppler.
A deal in the range of $500 million to $1 billion was discussed. In June 2017, Amazon began its due diligence of Doppler. Two days later, Amazon’s device team held a celebratory dinner with Kraft—popping champagne—and an “impending partnership” was announced. But Amazon had a request: Kraft had to write a business plan for how Doppler would fit into Amazon’s suite of devices. Kraft proposed a product he dubbed “Amazon Ears.” He expected a quick reply, but instead, he was ghosted. By October, the wait had prevented Kraft from raising more capital, and the startup began to run out of cash.
It was only then that Amazon reappeared again, with an offer of $10 million to buy Doppler—far below the $500 million floor Kraft expected from a year ago. Amazon executives pressured him to take the deal so he could at least say he’d been “acquired by Amazon.” But Kraft turned down the offer, sold Doppler’s intellectual property to Dolby, and shut down the startup by the end of 2017. Two years later, Kraft sat in disbelief while witnessing the launch of the Amazon Echo Buds, a product nearly identical to the “Amazon Ears” that he had proposed, after popping champagne for a deal that never happened. In response to this story, an Amazon spokesperson denied that it had copied Doppler’s product or used its technology.
All this growth and win-at-all-costs mentality was also taking a toll on Amazon workers. The first stories of labor malpractices surfaced around 2011 and focused on the warehouses, showing scenes of people being constantly surveilled and working in suffocating heat. By 2014, the company was facing a reckoning in public relations. Amazon’s messaging to politicians and the public, which so far had been focused on a few strategic areas—job creation, support to small businesses, and local investments when it opened warehouses—started to unravel.
Corporate employees lived their own version of hell in the name of growth. In a heartbreaking episode from November 2016, we learn about an engineer who jumped off the 12th floor of Amazon’s Apollo building in Seattle. After months of working around the clock, he had asked to be transferred to a different team, only to be met with retaliatory action to terminate his position. The suicide note was sent to the whole staff. Bezos and other senior managers did nothing to address the event. Well, almost nothing: The suicide email was deleted from employee inboxes.
By 2020, Amazon had expanded to the media market. Mattioli highlights digital advertising as another key component of Amazon’s growth, and shows how it, too, was used to discriminate against competitors on the Marketplace.
For example, as Amazon grew its hardware line, the top device sellers started noticing that they could no longer buy ads to promote their goods on the Marketplace. Because Amazon controlled the playing field, the tech giant was able to suppress certain competitors’ ad bids to preference its own products. In 2020, such was the case for Roku, which competes against Amazon’s Fire TV, and Arlo smart doorbells, a competitor of Amazon’s Ring doorbells.
In practice, users looking to buy a Roku TV would be bombarded with sponsored ads for Fire TV at the top of search results. But if they looked for “Fire TV” instead, they would not be presented with ads for Roku; in fact, a search for “Fire TV” would often not allow a single other sponsored product in the results. Similarly, Arlo could not buy ads pegged to Amazon devices, and was simply told by the company that there was nothing they could do.
Manipulating ads on the Amazon Marketplace might not seem like a big deal. But the truth is that for Amazon competitors who have to sell on its Marketplace, not being able to buy sponsored ads on search results that list Amazon devices costs them new customers. The whole episode is a reminder of the many illusions Amazon has crafted: Is it that people really prefer Amazon products because they are the best, or do people prefer them because Amazon decides who sees what and when?
Mattioli does an excellent job at framing the FTC lawsuit filed last year against Amazon for monopolizing online retail. As she rightly points out, the lawsuit is narrow in scope and is supported by a Borkian argument that even the fiercest opponents of Lina Khan can’t easily discredit: that Amazon’s monopoly, after crushing competitors, has actually caused prices to go up across retail. With this chapter, her book becomes the most up-to-date story on Amazon, as well as a go-to source for any journalist who will cover the future trial.
Overall, Mattioli’s book delivers a blunt picture of Amazon’s real impact in American society. Born as a scrappy online shop, Amazon created the perception that it was a David facing the Goliaths of its time. But Bezos, trained on Wall Street, had foreseen that its business model could exploit the laissez-faire environment that had left corporate America to its own devices since the 1980s. In this brave new world, it became easy to avoid collecting sales taxes while encouraging states to offer ever larger tax breaks. It was also easier to become a monopolist as long as you could lower prices here and there, for some time.
For Amazon, this meant the freedom of amassing multiple lines of businesses to make up what Bezos would later call a “flywheel”: a self-reinforcing loop that speeds up as it’s fed. Today, Amazon is a major e-commerce utility, a fulfillment and logistics company, a cloud services provider, an advertising company, a primary care provider, a grocery store, a streaming TV service, and a film production company—all created to leverage one another. As a result, Bezos has openly challenged the future of fair competition with one idea: that it no longer matters what “core sector” businesses can operate in.
At this point, continuing to defend Amazon’s business practices with the argument of low prices, even when such toxicity extends to a soul-crushing work culture, has turned into a feel-good illusion that corporate America keeps telling itself about the monster it has created. But as with all illusions, at some point, reality hits. This book is exactly the dose of reality Americans need to imagine a world without Amazon, which already costs us so much to feed.
