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Today marks a significant milestone for Jeff Bezos: it’s the first time he’s testifying before Congress.
The chief executive of Amazon (AMZN), alongside his counterparts at Alphabet (GOOG), Apple (AAPL) and Facebook (FB), faces the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law for a hotly anticipated hearing on antitrust concerns facing each of the big four. His traditionally tight-lipped nature coupled with Amazon’s particularly expansive and multi-dimensional business model have put a bright spotlight on Bezos’ performance.
Bezos released a written statement Tuesday evening, outlining the purpose of Amazon, which he founded 26 years ago — to make it “Earth’s most customer-centric company” and rattling off the many ways the company has elevated small- and medium-sized businesses. It’s a sentiment that’s frequently echoed in his annual letters to shareholders. It can also be argued that this self-proclaimed “obsessive customer focus” has been at the expense of Amazon’s work culture — both white and blue collar employees.
And as Bezos points out, while “third-party sales now account for approximately 60% of physical product sales on Amazon,” being both a platform and a player immediately creates an uneven playing field — in terms of selection, speed and pricing. And in order to garner prominent placement, these third-party sellers are incentivized to pay for advertisements and sponsored spots on the platform.
Beyond the retail business, a New York Times investigation found that Amazon’s cloud computing service (AWS) had been used to copy open-source software from smaller firms and the company masqueraded it as its own.
Frances Frei, a professor of technology and operations management at Harvard Business School, lays out the two key challenges that Bezos faces.
“He essentially has to communicate and convince us that the benefits outweigh the harm...one as a retailer — does he have safe work conditions and fair wages..[and] is he taking unfair advantage of his platform? Is Amazon disproportionately benefiting from the platform? And those are varsity sports to be able to convince people on that,” Frei said in a Tuesday interview on Yahoo Finance’s On the Move.
Still, even taking into account the inevitable tense grilling, the investor community overwhelmingly believes there will be very little material impact, given how influential the mega-cap tech names have been for the U.S. economy and stock market. As Charles Schwab chief investment strategist Liz Ann Sonders points out, the top five stocks by market cap (Apple, Microsoft, Amazon, Google and Facebook), now make up nearly 23% of the S&P 500. “That means 1% of the stocks—measured in simple, equally-weighted terms—now practically make up their own quartile in market cap terms. That is significantly higher than the prior 2000 peak of about 18%,” she wrote in a recent note to clients.