Santa Clara University

 
 

Business Ethics in the News

Back to Blog

AMAZON: How Far Does "For the Sake of the Customer" Go?

Wednesday, Jun. 4, 2014

Source: Natalia Romay

The highly publicized battle between Amazon and major book publisher, Hachette, has reached a boiling point this week. Unable to come to an agreement on terms on e-book pricing, Amazon, the largest retailer of books, has resorted to strong-arm tactics to break the stalemate. Hachette titles are currently not available for advance order, often take over 2 weeks to be shipped, and in some instances have been removed from Amazon entirely. Hachette has dug in its heels, accusing Amazon of “preventing its customers from connecting with their authors’ books,” and in effect, undermining the marketplace of ideas. Many also see this as an antitrust issue, due to the immense power that Amazon has in the publishing industry. Amazon, in a rare press release, argued: “When we negotiate with suppliers, we are doing so on behalf of customers,” and even suggested customers purchase Hachette titles from one of their competitors — Walmart is offering Hachette titles at a 40% discount. Is Amazon hurting or helping customers with these tactics? Is there an ethical significance to the product in question being books?

  Patrick: This is what happens when major industry players don’t adapt to changing conditions. The major publishers failed to respond to the move to online book sales — Amazon did — now they have to play ball with Amazon. The anti-trust red flags are premature: the ready availability of Hachette books at Walmart, at a discount, is evidence of this. Hachette has leverage here too: they can pull their books from Amazon entirely. But given Amazon’s importance to their business, they won’t, and that’s yet another reason for them to reach across the aisle here.

  Kirk: While I buy all my books from Amazon, this is not yet an anti-trust issue. For now, it does not appear that access to these books has been limited outright, but it is still a potential problem for the future. Presumably, customers stand to gain from Amazon’s tactics as they will most certainly lead to lower prices, but there are also concerns. We must always be careful when we subject things we value, in this case books and their production, to market pressure. “For the good of the customer” justifies bargaining, but not shameless opportunism. The book publishing industry will continue to evolve, which is a good thing, provided it doesn’t collapse upon itself.

Amazon Absorbing Price Fight Punches (NY Times)

Hachette/Amazon Business Interruption (Amazon)

Hachette Press Release (Hachette)

A Framework for Ethical Thinking (Markkula Center)

 

NEXT STORY: Another Hoop for Applicants to Jump Through

Comments Comments

Jim in MD said on Jun 23, 2014
Decry this as we might, tactics to improve market share is the logical outcome of capitalism, where the acquisition of wealth and ROI is the sine qua non of success. Isn't this what free markets demand? Economic Darwinism? As for antitrust, I don't see any combination in restraint of trade. That doesn't make any of this right or ethical, merely legal. Would Amazon treat Hachette like this if they were people living next door to each other? The depersonalization of commerce, coupled with using the law (here antitrust) as a proxy for good, makes this unsavory, even if lawful and with good utilitarian results. - Like - 1 person likes this.
Patrick said on Jun 23, 2014
Jim, I like your point on the depersonalization of commerce. This doesn't come across as the way you treat a "valued stakeholder." Then again, Hachette and Amazon are presumably communicating behind closed doors. It'd be interesting to see if these tactics are being replicated in the negotiation room, or if there are attempts to reach across the aisle. - Like
Jim in MD said on Jun 23, 2014
I fear that took many of us treat stakeholders well only to the extent of wiifm. And with Amazon's market power, it can proceed unfettered, with no market feedback or loss of profit to guide is activities. But even back door communication won't compensate for community, the idea that we are in it together, or the Confucian idea of promoting harmony over profit. - Like - 1 person likes this.
Patrick said on Jun 23, 2014
Jim, Interesting thoughts, particularly the Confucian concept. Do you think Amazon would have the market share it has now if it adopted a cooperative approach? Not saying it's not a possibility, or that if it wasn't the case it would justify any means from Amazon to keep it that way, but I doubt it. Amazon lives and dies on price competition. Perhaps Amazon extending Prime benefits and inventory storage within their fulfillment centers to certain suppliers constitutes goodwill. Then again, I see it as more of an attempt to subsume the competition. - Like - 1 person likes this.
Post a Comment