November 8, 2017

Amazon is making moves to corner the US federal procurement market, through the National Defense Authorization Act

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Over at The Intercept, David Dayen reports that, buried deep in this year’s National Defense Authorization Act—which was passed by the House earlier in the year, and is currently working its way through committee in the Senate—lies some language from lawmakers that would radically transform the way that the Department of Defense procures paperclips, printer paper, sticky notes, and ballpoint pens.

While this might seem like small potatoes for an organization that routinely spends tens of billions of dollars on killing people, the change could have dramatic effects on the US’s domestic online retail market.

As Dayen reports, the goal of the clause—which sits in section 801 of the bill—is to open up the federal procurement process for the DoD, allowing military branches to order run-of-the-mill consumer and office goods through online marketplaces, like any business would. At present, federal procurement offices must work their way through an arcane mess of long-term contracts and purchase “schedules,” which often ends up inflating prices.

Unfortunately, because online retail is involved, the whole thing has the stink of Amazon on it. In the legislation (which is informally being referred to as the “Amazon Amendment,” hooray) an “online marketplace” is defined, in part, as something that:

(1) is used widely in the private sector, including in business-to-business e-commerce;

(2) provides dynamic selection, in which suppliers and products may be frequently updated, and dynamic pricing, in which product prices may be frequently updated;

(3) enables offers from multiple suppliers on the same or similar products to be sorted or filtered based on product and shipping price, delivery date, and reviews of suppliers or products;

(4) does not feature or prioritize a product of a supplier based on any compensation or fee paid to the online marketplace by the supplier that is exclusively for such featuring or prioritization on the on- line marketplace;

(5) provides the capability for procurement oversight controls, including spending limits, order approval, and order tracking;

(6) provides consolidated invoicing, payment, and customer service functions for all transactions;

(7) satisfies requirements for supplier and product screening in subsection (d); and

(8) collects information necessary to fulfill the information requirements in subsection (h).

The key clauses here are apparently (2) and (3). Taken together, they essentially elimate all but two major players from the online retail market: Jet.com (owned by Walmart) and, of course, Amazon. As Stacy Mitchell of the Institute for Local Self-Reliance told Dayen, “Every reference implies we’re talking about a platform where third parties are selling. If that’s the case, we’re talking about Amazon, Walmart, and not really anybody else.”

What does this mean? It means that this already terrible bill, which was supported by Democrats and Republicans alike, would more or less enshrine Walmart and Amazon as a government-backed duopoly in the $53 billion dollar market for federal defense procurement. In fact—assuming the language in question doesn’t get stripped from the Senate bill—that would be the best case scenario. It’s not entirely unlikely that Amazon would end up monopolistically dominating that market, and become a single source for the DoD’s consumer goods.

This is almost certainly Jeff Bezos’s plan. Dayen notes that Amazon’s recent hiring of Anne Rung (onetime US Chief Acquisition Officer) as the head of Amazon Business’s public sector division is a sure sign that they’ll be aggressively pursuing this kind of business going forward.

We’ve said it before, and we’ll say it again: nationalize Amazon, before they nationalize us.

 

 

Simon Reichley is the rights and operations manager at Melville House.

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