The ‘Amazon Amendment’ Would Effectively Hand Government Purchasing Power Over To Amazon

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BY: David Dayen 11.02.17

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This week, representatives of three major internet platforms — Google, Facebook, and Twitter — are testifying before Congress about their role in facilitating Russian meddling in the 2016 election. But a fourth giant sat comfortably removed: Amazon.

Instead of getting yelled at by lawmakers, Amazon is on the verge of winning a multibillion-dollar advantage over retail rivals by taking over large swaths of federal procurement.

Language buried in Section 801 of the House-passed version of the National Defense Authorization Act, which is being hashed out in a conference committee with the Senate, would move Defense Department purchases of commercial off-the-shelf products to “online marketplaces.” Theoretically, that means any website that offers an array of options for paper clips or office furniture; in reality that signals likely dominance for Amazon Business, the company’s commercial sales platform.

Section 801 stipulates that the program should be designed “to enable Government-wide use of such marketplaces.” Scale, then, is key. Over time, this change would give platforms like Amazon access to all $53 billion in federal government commercial item purchases.

“It seems like Amazon wrote it,” said Stacy Mitchell of the Institute for Local Self-Reliance, which has written critical reports about Amazon in the past. “It will accelerate the transfer of more and more government spending to Amazon.”

The online marketplace provision, which still has to get through a House-Senate conference, coincides with a significant ramp-up for Amazon Business, which only launched in 2015. Last week, the company introduced Amazon Business Prime, a $499 membership that comes with free two-day shipping for its business-to-business products. The announcement tanked the stock prices of its main industrial supply competitors, Fastenal and W.W. Grainger.

Amazon Business has already surpassed 1 million customers and $1 billion in sales. Its business-to-business growth made up part of its 34 percent revenue increase in the last quarter. But federal procurement is the holy grail,the lucrative market to tap. Perhaps that’s why, for the head of Amazon Business’s public sector division, the company hired Anne Rung, who ran the Office of Management and Budget’s Office of Federal Procurement Policy until fall 2016. This made Rung effectively the top purchasing officer in the United States.