Paul Rafelson: Lawmakers should not be swayed by Amazon’s investment In Utah

Greater antitrust enforcement is desperately needed to control Big Tech.

(Photo courtesy of Amazon) The first Amazon fulfillment center in Salt Lake City is busy handling customer orders on a recent day.

Amazon recently brought a fulfillment center to Salt Lake City, marking yet another warehouse opened by the e-commerce platform in the Beehive State. Although Amazon might repeatedly try to entice state and local officials with the number of jobs it promises to create, lawmakers should be wary. It almost appears Amazon may be dangling investments to ensure that state leaders remain far away from antitrust enforcement.

In Utah alone, Amazon has five warehouses from West Jordan to Salt Lake City. Utah has also provided Amazon with over $7 million in subsidies since 2018, rewarding one of our nation’s most profitable companies with lucrative tax breaks. While lawmakers may view this exchange as beneficial for Utah’s economic growth, research shows that’s not the case. A report by the Economic Policy Institute found the opposite — states have more to lose by offering Amazon tax incentives to bolster job creation.

One may wonder why Amazon continues to expand aggressively across Utah, even though it already has a throng of fulfillment centers and distribution centers all over the state. Perhaps these facilities are nothing more than an effort to win over lawmakers given that antitrust enforcement is right on the horizon — particularly at the state level and particularly with respect to Big Tech companies like Amazon.

Nowadays, states are beginning to take notice of the dominant status obtained by leading technology firms and are looking for ways to level the playing field for small businesses. In New York, the state Senate recently passed a landmark antitrust bill that would prohibit the “abuse of dominance” by companies, and mandate greater transparency in transactions and mergers. Although it has yet to become law, the strong support for the bill demonstrates how states can begin to act on their own volitions to protect their constituents from the far-reaching power of tech companies.

With respect to Amazon, attorneys general across the country have begun to investigate the company for antitrust violations. Pennsylvania and Massachusetts are now reported to be collaborating with New York and California on probes into the tech giant. And in the District of Columbia, Attorney General Karl Racine has broadened his antitrust lawsuit against Amazon to address its agreements with wholesalers as well as third-party sellers.

While federal lawmakers have continued to look for ways to rein in Big Tech, Build Back Better and other competing priorities have instead remained top of mind for lawmakers. Therefore, it is more crucial for Utah to step in and protect local businesses from dominant tech firms — and why Utah lawmakers should not be won over by bold job promises and new warehouses.

State antitrust efforts are for good reason given the status reached by Amazon and other technology companies, and the sizable impact these firms have on small businesses. For instance, a Wall Street Journal investigation found that the company mines data from individual sellers to create similar products under its own private label. Amazon has also done little to stop counterfeit products from appearing on its marketplace — which hinders sellers on its platform selling legitimate, safe merchandise. And not a single state attorney general has investigated Amazon directly for rampant price gouging during the COVID-19 pandemic.

There are many ways in which Salt Lake City can take necessary action and restore balance to Utah’s economy. For instance, lawmakers can provide the Utah attorney general’s office with additional resources to go after the largest monopolistic offenders. Lawmakers can also follow the lead of New York and begin to enact a similar “abuse of dominance” standard for Utah’s antitrust laws — allowing state leaders to more easily challenge Big Tech’s domineering practices.

Regarding Amazon, one area worthy of scrutiny is its longstanding efforts to skirt paying state sales taxes, which has allowed it to dominate the market. Such actions undercut competitors, keeping prices low on its third-party marketplace — all while Amazon can dangle the jobs it has created in Utah as leverage.

Amazon’s strategy to avoid scrutiny in Utah is simple — pumping warehouses and hiring thousands of workers to curry favor with those in Salt Lake City. But this unspoken exchange between states and Amazon comes at a price to small businesses. Utah lawmakers cannot fall prey to this misrepresented opportunity. Greater antitrust enforcement is desperately needed here in Utah — even if Amazon keeps trying to tell lawmakers otherwise.

Paul Rafelson

Paul Rafelson is the executive director of the Online Merchants Guild, the largest network of small and micro e-commerce businesses nationwide.