New Washington Post owner Bezos has close relationship with feds

William Green Contributor
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Jeff Bezos began honing his political skills long before his purchase of the Washington Post.

In the course of a long, losing struggle against federal and state politicians’ lust for power and taxes, the Amazon founder and CEO has still found ways to turn the power of public choice to his own advantage.

Bezos’ recent wins include a prominent visit by President Obama to an Amazon facility, Department of Justice moves against e-book rival Apple, and a lucrative CIA contract.

During Amazon’s nationwide expansion, it fought efforts from several states, lobbied by large brick and mortar retailers as well as small businesses, to force the company to collect sales tax on customers’ purchases. But it has recently withdrawn from the opposition to the “Marketplace Fairness Act,” which seeks to impose a nationwide regime for collection of state sales taxes and is opposed by e-commerce companies and low-tax states.

Relying on state governments’ desire for job creation, Amazon has also negotiated tax exemptions and even subsidies as a precondition to establishing distribution facilities.

As the company moved into same-day distribution, making taxation unavoidable, it also dropped its objection to collecting state sales taxes.

Amazon has enjoyed a particularly close relationship with the Obama administration. According to industry magazine Federal Computer Week, Amazon beat out longstanding government partners like IBM in January to secure a $600 million contract for cloud computing from the Central Intelligence Agency.

Cloud computing is a profitable and growing bright spot for the often unprofitable online shipping behemoth, which announced its purchase of The Washington Post from the Graham family Monday.

Morgan Stanley report released in May predicted that Amazon’s cloud division could grow from roughly $2 billion in revenue 2012 to $24 billion within a decade, thanks in large part to government contracts. The company as a whole reported roughly $17 billion in earnings last year.

In addition, just six days before Bezos’ Post announcement, President Obama Tuesday toured a Chattanooga, Tenn., Amazon warehouse and touted the site as a shining example of quality middle-class employment. The visit was timed to highlight Amazon’s announcement that it will hire 5,000 new warehouse workers.

The visit was criticized by the American Booksellers Association in an letter to the president for promoting what it described as Amazon’s anti-competitive and anti-small business tactics.

The ABA cited research by the Institute for Local Self-Reliance, which found that brick-and-mortar retailers employ 47 people for every $10 million in sales, while Amazon employs only 14.

Amazon has come under even more criticism from publishers and booksellers since engaging in a bitter price war with online shopping rival, culminating in some popular and relatively new books being discounted more than 65 percent. In a post, industry newsletter Shelf Awareness described the discounts as “levels we’ve never seen in the history of Amazon or in the bricks-and-mortar price wars of the past.”

The ABA blasted the discounts in its letter, calling them “further evidence that [Amazon] will stop at nothing to garner market share at the expense of small businesses that cannot afford to sell inventory below their cost of acquisition.”

Three days before Bezos’ Post announcement, the Department of Justice officially proposed a set of significant market restrictions on Amazon’s e-book rival Apple after the company lost a major antitrust lawsuit.

Justice Department officials alleged the company had improperly colluded with publishers to raise e-book prices artificially high. Apple asserted it had done nothing wrong, and that its actions were a reasonable response to Amazon’s “monopolistic grip on the publishing industry.”

Amazon controls about 65 percent of the U.S. e-book market, while Apple is estimated to control less than 10 percent.


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