For millions of small businesses across the country, Amazon is both an indispensable partner and an impossible competitor. Independent businesses depend on the platform to reach millions of customers, yet they must operate under strict rules that ensure Amazon always comes out ahead. Central to this power imbalance is Amazon’s ability to use the immense profits from its cloud business, Amazon Web Services (AWS), to promote its own marketplace operations and undermine retail competition and to the detriment of its own third-party sellers.
Despite appearing to be a level playing field, the Amazon platform is tilted to always keep itself on the winning side. Take Amazon’s “Buy Box” – the company’s default add-to-cart option that drives most purchases. While the option certainly increases sales and visibility for merchants, access to the feature comes with conditions. For example, Amazon allegedly uses this power to manipulate consumers and punishing sellers who offer their goods elsewhere at lower prices.
While the Federal Trade Commission’s 2023 lawsuit against Amazon describes these “anti-discounting” tactics as a form of self-reinforcing monopoly behavior, business owners are still caught in the middle. Industry data show that most now operate on after-fee margins of 10 to 20 percent – down from 15 to 25 percent a few years ago. Some reports estimate that Amazon retains as much as half of the revenue from every third-party sale. That squeeze leaves many small businesses struggling to stay profitable even as they depend on the platform for survival.
Amazon, however, can afford to play a different game – thanks to its cloud business AWS.
AWS accounts for two-thirds of Amazon’s total operating income, despite representing only about 15 to 20 percent of its total revenue, with the service producing $10.6 billion in operating profit out of Amazon’s $21.2 billion total in the fourth quarter of 2024 alone. This means Amazon’s retail platform can keep consumer prices unreasonably low, absorb any marketplace losses, and invest aggressively in fulfillment and logistics to promise things like overnight delivery
This kind of cross-subsidization distorts competition in ways that does not fit neatly into traditional antitrust law. Traditional monopoly analysis tends to look at single markets in isolation – think John D. Rockefeller’s Standard Oil or J.P. Morgan’s U.S. Steel. But Amazon’s operations span retail, logistics, entertainment, and cloud computing, meaning that profits from one of its dominant markets can sustain anti-competitive practices in another.
The FTC’s ongoing case details how Amazon uses its algorithms to manipulate prices and visibility and punish third-party sellers who don’t play by its rules, with reports finding that losing the Buy Box can tank a small business’s sales. It’s a clear win-win for Amazon and lose-lose for small retailers.
AWS keeps generating enormous profits and gives Amazon the resources to reinforce its market dominance, while sellers face shrinking margins, rising fees, and punitive rules. Competing marketplaces and retailers can’t keep up, while consumers have fewer real alternatives without being forced to pay more.
Despite the digital veneer, this is the same story of economic concentration that played out in the Gilded Age with oil, rail, and steel monopolies. The question now, however, is whether the tools of competition enforcement designed to prevent those past monopolies can address a company that can lose money indefinitely in one business because another is so profitable.
It’s not that Congress and regulators aren’t paying attention, as the FTC’s lawsuit marks an important step. But legal experts have noted how these internal cross-subsidies fall into a gray area of current antitrust doctrine, and it is an area policymakers can no longer afford to ignore.
When one company’s cloud profits can prop up its retail dominance, small businesses lose their bargaining power, and bargaining will only be the first domino to fall. Once you’re trapped in a David vs. Goliath battle with a monopoly, innovation will come to a halt, options will become limited for consumers, and the marketplace – and our nation’s economy – will quickly lose its dynamism.
If antitrust law wants to move from the Gilded Age to the age of platform monopolies, it must recognize that market power today isn’t just about size – it’s about structure. And few companies embody that reality more than Amazon.