Monopoly critics decry ‘Amazon amendment’

Lawmakers put the finishing touches this week on military funding legislation that contains a provision that stands to significantly benefit Amazon.

The amendment, Section 801 of the National Defense Authorization Act (NDAA), would help Amazon establish a tight grip on the lucrative, $53 billion government acquisitions market, experts say.  

The provision, dubbed the “Amazon amendment” by experts, according to an article in The Intercept, would allow for the creation of an online portal that government employees could use to purchase everyday items such as office supplies or furniture.

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This government-only version of Amazon, which could potentially include a few other websites, would give participating companies direct access to the $53 billion market for government acquisitions of commercial products.

 

“It hands an enormous amount of power over to Amazon,” said Stacy Mitchell of the Institute for Local Self-Reliance, a research group that advocates for local businesses.

Mitchell said that the provision could allow Amazon to gain a monopoly or duopoly on the profitable world of commercial government purchases, leaving smaller businesses behind and further consolidating the behemoth tech firm’s power.  

Amazon declined to comment to The Hill on Section 801.

The Seattle-based tech giant spent the second and third quarters of 2017 lobbying on the NDAA and “government procurement,” according to disclosures that the company filed this year.

Amazon has also recruited outside firms to help it influence policymakers on the matter. Disclosure filings made by lobbying firm TwinLogic Strategies, made on behalf of Amazon as its client, do not specify the exact legislation that they tried to influence, but note that they focused on the “modernization of the procurement process.”

The Internet Association, a trade group representing the political interests of major tech firms like Amazon, Google and Facebook, also pushed lawmakers on the matter.

“Dozens of acquisition reform proposals over the years have highlighted the need to inject greater innovation and disruption into federal procurement,” the group's President Michael Beckerman wrote in an Oct. 12 letter addressed to Senate Armed Services Committee Chairman John McCainJohn Sidney McCainGOP strategist donates to Alabama Democrat Meghan McCain knocks Bannon: 'Who the hell are you' to criticize Romney? Dems demand Tillerson end State hiring freeze, consult with Congress MORE (R-Ariz.) and ranking member Jack ReedJohn (Jack) Raymond ReedSenate panel moves forward with bill to roll back Dodd-Frank Army leader on waiver report: 'There's been no change in standards' 15 Dems urge FEC to adopt new rules for online political ads MORE (D-R.I.).

In his letter, Beckerman wrote that a government purchasing portal offers “just that opportunity.”

Despite the size of the potential windfall for Amazon, Section 801 has gone unnoticed by some lawmakers on the House and Senate Armed Services committees, which are responsible for drafting and finalizing the NDAA.

Many legislators in the House and Senate whom The Hill asked about the bill were not immediately familiar with the provision, though some expressed interest and commented later after reviewing Section 801.

Those who were familiar with the provision had mixed opinions, but many lawmakers leaned toward supporting it.

“I’m going to seriously scrutinize it and see if we’ll want to revise it in some way,” said Sen. Richard Blumenthal (D-Conn.).

The Connecticut senator said he was skeptical of criticisms that the provision would allow Amazon to dominate the government procurement market.

“My concern is that every company have a chance to participate in the procurement process — both online and traditional,” Rep. Ro KhannaRohit (Ro) KhannaOvernight Tech: Net neutrality repeal sparks backlash | Dems push FCC to delay repeal vote | Apple, Ireland reach deal over B tax bill | Facebook launches Messenger for kids GOP bets that tax bill will unlock corporate cash overseas Congress must end American support for Saudi war in Yemen MORE (D-Calif.), who represents Silicon Valley, told The Hill when questioned about the amendment.

Khanna said it was essential that the final version of the bill ensured “transparency in input pricing and also to make sure they have multiple bids from competitors.”

Another member of the House Armed Services Committee, Rep. Rick LarsenRichard (Rick) Ray LarsenMonopoly critics decry ‘Amazon amendment’ Trump’s air traffic control overhaul would trigger spending cuts For Hill staffers, Cruz’s ‘liked’ porn tweet a nightmare scenario MORE (D-Wash.), offered a more pointed defense of Section 801.

“This isn’t about Amazon, although Amazon lobbied for it. It’s about trying to create online space for purchasing so that [the Department of Defense] can get something for value,” Larsen argued.

He explained that the provision was born out of trying to create a specific provision for Defense Department procurement only. But the committee realized that, to do that, “we’d have to set up a mini-[General Services Administration] inside the Defense Department.”

“So then it became more broad,” Larsen said.

In a briefing on Wednesday before the bill’s release, senior House and Senate Armed Services committee staffers explained that, in addition to Amazon and Walmart, Staples and industrial supply company Grainger would be eligible to also provide commercial items.

But Mitchell is skeptical, pointing to language in the current version of the bill that would appear to exclude Staples and Grainger.

“The way the language reads to me, it’s hard to imagine that there are any other companies who would fit the bill besides Amazon and perhaps Walmart,” she said. “Those are the only retailers who are operating online marketplaces who seem to be in a situation to create a government marketplace portal that this provision envisions.”

The House Armed Services Committee contests the idea that Section 801 will only benefit one or two companies, saying that multiple companies will have access to the government procurement market in the final version of the NDAA.

“[Amazon’s dominance of government procurement] is a myth that opponents of the provision have been shopping for a while, that we wrote the language in such a way as to exclude more specialized marketplaces,” a representative from the House Armed Services Committee told The Hill over email, adding that some of Section 801’s language had been changed in the latest version of the provision.

House Armed Services Committee Chairman Mac Thornberry (R-Texas) has made a strong push for online marketplace reform. In addition to advocating for the amendment, he also introduced a standalone bill in May that shares similar goals with Section 801.

Mitchell and other experts believe that Section 801 could have harmful impacts.

“It’s incredibly dangerous,” said Matt Stoller, an economist at the Open Markets Institute, a think tank critical of Amazon’s growing power. “What it’s doing is concentrating the buying power of the country into the hands of Jeff Bezos.”

Rebecca Kheel contributed.