Influential Krugman says Amazon 'hurts America'

Prominent New York Times columnist Paul Krugman has criticized Amazon for using its power in ways that “hurt America”.

The Nobel Prize-winning economist, who has been described as The Times’ “most heralded” columnist, used a piece in the newspaper yesterday (19th October) to argue that Amazon has too much power and is “abusing” that power by using it to push prices down.

He said: “So far Amazon has not tried to exploit consumers. In fact, it has systematically kept prices low, to reinforce its dominance. What it has done, instead, is use its market power to put a squeeze on publishers, in effect driving down the prices it pays for books — hence the fight with Hachette. In economics jargon, Amazon is not, at least so far, acting like a monopolist, a dominant seller with the power to raise prices. Instead, it is acting as a monopsonist, a dominant buyer with the power to push prices down.”

He asked if consumers could trust Amazon not to abuse that power. "The Hachette dispute has settled that question: no, we can’t. It’s not just about the money, although that’s important: By putting the squeeze on publishers, Amazon is ultimately hurting authors and readers. But there’s also the question of undue influence, Krugman wrote.

The journalist argued that because book sales rely on “word of mouth buzz”, Amazon has the power to “kill the buzz” if it refuses to stock a book.

“Which brings us back to the key question. Don’t tell me that Amazon is giving consumers what they want, or that it has earned its position. What matters is whether it has too much power, and is abusing that power. Well, it does, and it is,” he said.

Krugman’s column has been seen as a response to the newspaper’s ombudsman “public reader” Margaret Sullivan’s previous article criticizing the newspaper’s journalist David Streitfeld for unbalanced coverage of the Amazon-Hachette dispute. Sullivan's article has been seen as unfair because she cited two Amazon KDP authors - Barry Einsler and Hugh Howey – as the sole evidence to back up her argument.

In other news, American publishers have been reacting to the idea that the e-commerce company will soon open bricks and mortar style retail stores in the States.

According to Publishers Weekly, Dominique Raccah, publisher and c.e.o of Sourcebooks, said she views Amazon’s move as “as a test of the Apple store concept" which will mainly sell hardware.

Whereas Steven Zacharius, president and c.eo of  publisher Kensington, thinks the move is to counteract the hardware sales decline Amazon has seen recently. “People don’t have to replace their tablets or e-readers every year," he said. "So I assume Amazon feels the need to let people see and touch [their devices], to show them what they’re all about."

Amazon is set to open two Californian pop-up stores for the Christmas season, according to recent reports.

In the UK, the company revealed this morning (20th October) it would hire 13,000 temporary staff in its eight fulfillment centres across the UK for the Christmas season, on top of the extra 1,000 permanent staff it would hire in its fulfillment centres in the next few months.

John Tagawa, Director of UK Operations at Amazon, said: “Last year, on the busiest day in the run up to Christmas, our customers ordered 4.1 million items - that’s about 47 items ordered per second.  The thousands of seasonal associates who join us at this time of year play an integral role in helping us deliver an exceptional experience for our customers during this incredibly busy time.”