Monopoly critics decry ‘Amazon amendment’ for Federal Purchasing
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.
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 McCain (R-Ariz.)
and ranking member Jack Reed (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 Khanna (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 Larsen (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.
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