Amazon Has A Bidding Problem And It’s Worse Than The Casinos In Vegas

Amazon sign Shutterstock/Jonathan Weiss

Keith Naughton Public Affairs Consultant
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Amazon has had a pretty good ride with its HQ2 sweepstakes. Over 200 cities submitted lucrative bids, some with over-the-top promotional gimmicks. Amazon itself has benefited from a massive amount of free publicity – almost all of which celebrates the company’s success and compliments its shrewd efforts to promote lucrative bidding war.

But nothing lasts forever, and Amazon may well find that the current fawning coverage will take a dark turn. Contained within the HQ2 sweepstakes is a math problem: There can be only one winner, so there will be plenty of losers.

The problem for Amazon is not just that it is guaranteed to disappoint a lot of people, it’s that the company and the other ubiquitous tech giants (Apple, Google and Facebook) are facing increased scrutiny and potential political problems. Concerns over privacy, security and market dominance are growing amongst both the political class and the general public. Amazon has been hit with accusations that it exploits its online dominance to reduce competition, that it’s Marketplace for third party sellers puts Amazon’s interests first and that it underpays the workers in its distribution network.

The possibility that Amazon could break up, either voluntarily or via government mandate, is a very real threat, although certainly not in the near-term. Just because the federal government is passive in anti-trust and corporate growth today, hardly means it won’t be active in the future.  The potential for an Amazon in multiple pieces could well be one of the reasons the company is developing a second headquarters.

In order for Amazon to protect itself from government action, whether increased regulation or anti-trust, the company needs to make and keep friends in the world of politics.  Winning politics and public relations is about popularity – providing favors, services, psychological affirmation.  “Yes” is good and “No” is bad.  In the HQ2 sweepstakes Amazon gets to say “Yes” only once, but has to say “No” 237 times.  No matter how Amazon explains the “No,” the recipient is not going to be happy. Des Moines may have known intellectually that its entry had no chance, but being left out still stings.

Alternately, Kansas City, a much stronger candidate, was bluntly told that it did not have sufficient talent to satisfy Amazon’s needs.  Whether or not that analysis is true – or important for any aspiring tech city to understand – do you really think Kansas City wants to hear that?  In politics, nobody wants to hear an unpleasant truth.

The hurt feelings of Des Moines and Kansas City are just the tip of the bad politics iceberg. The 238 applicants all spent time and resources to apply. Each applicant trumpeted their bid locally.  And now all but the 20 finalists have been rejected, leaving taxpayers wondering why their money was wasted on a fool’s errand.  Make no mistake, the local politicos are not going to blame themselves for the embarrassment, they will look for the best target – the unfair decision of the multibillion dollar corporate behemoth.

Now that Amazon is down to its final 20 (although the company has likely only had a few cities on its list from the start), the political problems get even more fraught. In the initial round, every applicant rationally considered itself an underdog. Now, every finalist thinks it has a very good shot at winning. Each finalist now will be put through a more intense evaluation process by Amazon – and one that each city has to pay for, not Amazon itself. The company’s inclusion of Washington, D.C., Montgomery County Maryland and northern Virginia instead of just the Washington metro area was a blatant ploy to hype up the bidding war in that area (same for including New York City and Newark). As the bids and competition mount, so will expectations.

Losing now is a much more bitter pill.

Perhaps sensing the increasingly difficult politics, Amazon has demanded that the finalists all keep deliberations confidential. Good luck with that. Combine twenty different groups, their consultants and local demands for accountability and you have the recipe for a leaky process no matter what.

Leaving over 200 regions with an empty bag certainly isn’t a good strategy when you are increasingly under the public microscope.  The additional publicity is not worth the political cost.  Given the extreme competition for corporate investment, Amazon would be likely to receive just as good a deal if it had conducted a more private, limited competition as with the public sweepstakes.

Keith Naughton is a prominent political consultant.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.

Keith Naughton