Free market capitalism or crony capitalism – where you stand depends on where you sit

Small startup organizations favor free and open competition.

A change in attitude can hit when the startup becomes the industry standard. Maybe at that point, it would be better to put roadblocks in the path of your new competitors. Might even be worth calling on the government to do some blocking for you.

We are used to seeing the really big companies asking governments to look at some practice of their big competitors. Won’t provide any examples, but you can think of many headlines over the last few years of one tech company or another tattling on someone else, hoping the regulators will slow down their competitors.

I think that’s what we are seeing with Amazon.

The Foundry points out Cronyism: Companies like Amazon, Craigslist Use Government to Crush Competition.

“A few years back, Amazon was waging a scorched-earth campaign against states that attempted to collect sales taxes from internet businesses,” blogger Megan McArdle reminds us. Now the company is actually lobbying in favor of federal legislation that would force companies to collect sales taxes for the buyer’s home state.

Now that Amazon is big enough to deal with the sales tax issues and sees an advantage to having a presence in states where they couldn’t without creating nexus, their position has changed.

They can cope with 50+ sets of rules on taxing identical products in different ways in different states. They can cope with the rates and rules of over 7,000 (or is it 9,000?) taxing jurisdictions in the U.S.

They have cleared that hurdle. It will be tougher for their competitors to do so.

Small retailers can’t afford that hassle, so Amazon is using the government’s power to tax as a way to reduce competition.

There are two completely different mindsets. Free enterprise or cronyism.

Here’s the explanation in more detail from the end of the article:

Young start-ups usually try to find ways to produce newer or better products at lower prices. But as companies get older and larger, they too often turn to using the power of government to rig the game, finding ways to use regulation to limit their competition.

On the other hand…Amazon is using the new ability to move into states where they didn’t operate as an opportunity to reduce delivery time, which gives them another competitive advantage. Now that is free enterprise. Pushing for sales tax on all on-line sales? Not so much.

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