In my neighborhood, I frequently walk past “shop local” signs in the windows of struggling stores. Yet I don’t feel guilty ordering most of my family’s household goods on Amazon. In a world of fair competition, there will be winners and losers.
But when a mail truck pulls up filled to the top with Amazon boxes for my neighbors and me, I do feel some guilt. Like many close observers of the shipping business, I know a secret about the federal government’s relationship with Amazon: The U.S. Postal Service delivers the company’s boxes well below its own costs. Like an accelerant added to a fire, this subsidy is speeding up the collapse of traditional retailers in the U.S. and providing an unfair advantage for Amazon.
This arrangement is an underappreciated accident of history. The post office has long had a legal monopoly to deliver first-class mail, or nonurgent letters. The exclusivity comes with a universal-service obligation—to provide for all Americans at uniform price and quality. This communication service helps knit this vast country together, and it’s the why the Postal Service exists.
In 2001 the quantity of first-class mail in the U.S. began to decline thanks to the internet. Today it is down 40% from its peak levels, according to Postal Service data. But though there are fewer letters to put into each mailbox, the Postal Service still visits 150 million residences and businesses daily. With less traditional mail to deliver, the service has filled its spare capacity by delivering more boxes.
Other companies, such as UPS and FedEx , compete with the Postal Service to deliver packages. Lawmakers, to their credit, wanted a level playing field between the post office and its private competitors. The 2006 Postal Accountability and Enhancement Act made it illegal for the Postal Service to price parcel delivery below its cost.
Amazon is getting too big and the government is talking about it
Hedge-fund manager Douglas Kass says government talks about antitrust issues have begun
Fresh off its biggest Prime Day yet, the Whole Foods Market Inc. bid, and a slew of announcements including Amazon Wardrobe, Amazon.com Inc. was the subject of two investor calls Thursday that raised concerns that it is getting too big.
In one case, hedge-fund manager Douglas Kass said government intervention could be imminent.
“I am shorting Amazon today because I have learned that there are currently early discussions and due diligence being considered in the legislative chambers in Washington DC with regard to possible antitrust opposition to Amazon’s business practices, pricing strategy and expansion announcements already made (as well as being aimed at expansion strategies being considered in the future,” wrote Kass, head of Seabreeze Partners Management.
Kass said he is taking a short position on the stock, or a bet that it will fall. The investor said the stock could fall 10% overnight once the market gets wind of the talks.
It’s time to bet against Amazon, says money manager Doug Kass
Party on Wayne? Investors will be looking to see if Fed Chairwoman Janet Yellen spoils the stock-buying spree she started yesterday with her just-right testimony on Capitol Hill.
For now, the Dow is aiming at a fresh record, and global stocks have not hesitated to punch higher. But as quick as markets went up yesterday came the usual words of warning that have trotted alongside this bull market.
We’re in record territory all right, noted LPL Financial’s Ryan Detrick at the close of yesterday, but just not the kind that makes you want to phone your broker. It’s only the sixth time since 1950 that the S&P 500 has gone over a year without a major correction, he says, predicting a 5% pullback before the year’s end.