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Comment by cowpig | Hacker News Reader

A simple law that I think would solve a lot of the perverse incentives that exist in platform economies:

Make it illegal to compete on your own platform.

Amazon would no longer be allowed to sell products on Amazon. Google would no longer be allowed to promote its own services on Google. etc..

It's pretty obvious to me that platforms are natural monopolies: the best platform experience is where there's just one and it has all the inventory.

I wonder what the side-effects of a law like this would be? Would it create new problems I'm not thinking of?

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Do you extend this to store brands?

Should Kroger be able to offer Kroger Private Selection alongside other brands?

-edit-

Here's another one. Should Amazon be forced to let Kroger sell Kroger Private Selection in their Whole Foods stores (and vice-versa)? Why or why not?

Maybe stores shouldn't be allowed to do this either?

I suppose if Amazon can't, then it would make sense that competitors like Target, Walmart and Kroger shouldn't be able to either.

Sure. My goal here was to just call it out and ask the question for others to consider. I don't see a meaningful distinction between physical stores or online stores in this context.

That's a really good question. There aren't many ways to distinguish the two cases except maybe this: on Amazon's platform, Amazon takes zero risk in hosting other sellers. They don't buy inventory that they don't know will sell, and they don't pay to market products to customers, and they don't even need to hold the inventory at their own expense. They can just sit back, collect data, and enter high-reward markets while letting sellers do all the hard work of finding them. It's not quite so easy for a supermarket to do the same.

The difference is that when you go to Kroger you search the shelves with your own eyeballs. When you go to Amazon, their opaque algorithm does the searching for you, and it could be (and probably is) prioritizing Amazon brands or "Amazon's choice" over other brands. I suppose an argument could be made about the layout of store shelves serving a similar purpose to the prioritization inherent in search engine algorithms, but I don't think it's a perfect parallel since the shopper arguably has more agency in determining what products they see and when in a meatspace store versus online.

>The difference is that when you go to Kroger you search the shelves with your own eyeballs. [...] I suppose an argument could be made about the layout of store shelves serving a similar purpose to the prioritization [...] the shopper arguably has more agency in determining what products they see and when in a meatspace store

For example of Kroger or any other retail store, the shopper doesn't have full visibility of buying options because the curation also happens before any product gets stocked on the shelf. E.g. the hidden retail-corporate-buyer-and-vendor relationships. Kroger example[1]. Costco example[2].

Because shoppers are not sitting in grocery chain's corporate headquarters to see what products the company rejects/prioritizes, they will still be influenced by self-interest of the retailer. Those are private negotiations of vendor contracts that influences what shows up on shelves so they can be as opaque as Amazon's recommendations algorithms. If Kroger wants to remove Kraft Macaroni & Cheese from the shelves and just promote their own-store-brand Kroger Macaroni & Cheese[3], the shopper doesn't really have any more agency.

[1] https://www.thekrogerco.com/vendors-suppliers/become-a-suppl...

[2] https://www.costco.com/vendor-inquiries.html

[3] https://www.kroger.com/p/kroger-original-macaroni-cheese/000...

Those are excellent points that I had not considered (or even been aware of). Still, though, while the set of brands and products available at a brick-and-mortar store is predetermined in a way that the customer has little to no influence over, it's at least much more visible if I go into Kroger one week and there's a full selection of different brands of mac & cheese, and then come back the next week and it's all Kroger brand with no sign of any other brand; whereas if I go to Amazon and search for, say, AA batteries, or Lightning cables, and all I see is AmazonBasics batteries and AmazonBasics Lightning cables, is that because Amazon stopped stocking Energizer batteries and Anker cables entirely, or because Amazon forced them to a later page of results to bolster sales of the AmazonBasics brand?

I think OPs point is that online platforms are natural monopolies. Physical stores are not.

Ok. Why are they natural monopolies? What do you mean by natural monopoly?

I'm not OP, and probably doesn't share their opinions.

But you can make a "network effect" argument that for online platforms, the biggest will always be the best, and thus be impossible to compete with.

"Natural monopoly" is an established Economics concept: https://www.investopedia.com/terms/n/natural_monopoly.asp

The distinction here is that Kroger doesn't allow 3rd party retailers to sell in its stores. Amazon allows 3rd party retailers to sell in its stores (it may or may not handle fulfillment for them). Totally different scenario.

No, because stores like Kroger aren't building a marketplace platform, they are building a single thing to sell their products -- this is evident in the fact that there's aren't grocery monopolies. A single market is not a marketplace.

I think something along these lines would be great. The problem with Amazon competing in their own marketplace is that there is far too much information asymmetry -- they know about how their marketplace sellers are setting prices and they know the cumulative sales of all items and trends, whereas the marketplace sellers only see their end of things. Amazon then has the ability to just cut those sellers out as it wishes (either through undercutting, making their own Amazon-branded versions, or even just kicking the seller off the platform with no recourse.

This provides Amazon with the ability to do what financial marketplaces are forbidden: front-running, insider trading, etc with their own "stock" of merchandise.

This is a nice-ish idea. But... does that mean that Apple and MS would not ve allowed to make any apps if they make the OS?

It would, but would that be the end of the world? So they'd spin off Office into a separate company. What would that hurt?

This is possibly going to happen due to the anti-trust investigations into Apple, Amazon, Google and Facebook:

> One possibility is what he described as a Glass-Steagall law for technology platforms. That Depression-era law separated commercial and investment banking until it was repealed during the Clinton administration. For tech companies, it would mean prohibiting them from running a platform and competing on it at the same time.

> That’s a common complaint about Amazon in particular because it both runs a marketplace and competes with third-party sellers with its own line of products.

https://www.bloomberg.com/news/articles/2020-08-26/house-ant...

https://www.macrumors.com/2020/08/26/antitrust-investigation...

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