Amazon is squeezing Arizona small businesses. Will Congress level the playing field?

Entrepreneurship and innovation in Arizona will be hindered if lawmakers do not rein in Big Tech.

Over the last two decades, the tech giants have grown and used their power to control markets and thwart competition. But there is bipartisan legislation in Congress that would make significant steps toward leveling the playing field for Arizona’s small businesses.

As the founder and CEO of Local First Arizona, a nonprofit committed to supporting Arizona’s local enterprises and communities to build a vibrant and inclusive economy, I have spent two decades working to ensure that Arizona-grown businesses can compete and thrive.

I hear regularly from businesses in my community about the challenges they face, including Amazon, Apple, Facebook and Google, and their monopoly hold over the digital marketplace. If Arizona’s most dynamic local economies and entrepreneurs are able to seize this moment, Arizona’s policymakers must fight for legislation that will diminish Big Tech’s monopolistic control of the online marketplace.

Amazon charges, then often competes with sellers

Amazon penalizes businesses who try to sell for a lower price on other platforms and imposes ever-growing fees on its sellers. That is bad for competition and bad for business. And, if a seller’s product becomes popular, Amazon is likely to clone it and sell the competing product under its own AmazonBasics brand – sometimes using the data it collects on seller’s products to design and market a competing product.

Small sellers now report paying 34 cents out of every dollar they earn to Amazon. Small app designers must sell through Apple, and Apple takes a 30% cut of their revenue. 

I’ve heard directly from an Amazon seller in Tempe. He asked not to be identified for fear that Amazon would retaliate against his company. He described the crushing weight of Amazon’s fees, which is capsizing his and many businesses that sell on Amazon’s marketplace.

When his startup began selling its unique sports apparel on Amazon in 2016, it was a viable business. But then Amazon increased its fee for clothing, from 15% to 17%. To sell $10,000 worth of clothing, this seller pays Amazon $1,700 in referral fees on top of another $1,500 to $2,000 on ads, not to mention a host of smaller fees. 

“Amazon is now taking more of the pie than I am,” he said. “And you cannot run a sustainable business like that.”

Why sell there? They have no other choice

A recent survey from the Institute of Local Self-Reliance validates the experiences of the Arizona businesses. They asked more than 900 independent businesses across the country about the challenges they face, and found that more than 60% of businesses said Amazon’s control over the online market was a very or extremely significant challenge.

The institute also surveyed 100 Amazon sellers and found 74% of respondents believe that Amazon’s algorithms are unfair and favor Amazon’s own products over those of sellers. When asked why they sell on Amazon, 63% of respondents said there was no viable alternative, and 55% of Marketplace sellers said they would not feel comfortable speaking out about Amazon's treatment of sellers.

“Amazon can be extremely punitive in its dealings with its independent sellers,” one seller told the institute.

Congress’s efforts to rein in Big Tech will help restore competitive balance to the American tech sector, which is great for consumers and small businesses. The American Innovation and Choice Online Act, which targets the tech giants’ immense power as gatekeepers, is an important and critical first step.

Legislation would offer a level playing field

It would prohibit dominant platforms from abusing their gatekeeper power by favoring their own products or services at the expense of competitors and prohibit specific conduct that harms small businesses and entrepreneurs. 

The bill also would give enforcers strong, flexible tools to deter violations and hold dominant platforms accountable when they cross the line into illegal, anticompetitive behavior.

This is a must-pass bill, but we need more. Congress must pass legislation that gets at the heart of Big Tech power. This means passing the full package of legislation that passed by the House Judiciary Committee last summer, which would restrict Big Tech platforms from owning businesses that create a conflict of interest and prevent these platforms from unfairly disadvantaging their competitors.

The communities and businesses that Local First Arizona is fighting for are tough, creative and resilient. They’re not asking for guarantees, just the level playing field that this legislation will give them.

At this critical juncture in the legislative process, Arizona needs Congress to step up and vote on these bills for broader economic opportunity in the internet age.

Kimber Lanning is founder and CEO of Local First Arizona. Reach her at kimber@localfirstaz.com. On Twitter: @LocalFirstAZ