As they say, there is no honour among thieves. And there definitely is no honour amongst Capitalists. They will do anything to remain the Competition King. It’s one thing to have a better product, offer better value, or offer a lower price. But it’s another thing to use your power to bludgeon the competition to death.
There is, of course, predatory pricing: lower prices now to drive out cash-poor competitors. Either the competitor will agree to be bought, or they will die. Amazon used this strategy with Quidsi, the owners of Diapers.com and Soap.com. They were able to sell the diapers at 30% below cost, where “Amazon was losing $7 for every box of diapers”. They also did this with Zappos:
“…Amazon began selling shoes at loss, eventually losing an estimated $150 million. The strategy worked: Unable to sustain similar money-losing prices, Zappos agreed to a merger. Today, Zappos is Amazon.”
Although Walmart, Google, and Amazon, would be among the biggest bullies, you may be as surprised as I was as to how RCA and CVS kicked the other competitors off the mountain.
#5 Walmart: You got to pay, to play
Walmart uses its market power to force supplies to submit. If you want to get stocked in the #1 retailer, you need to pay up or else. As reported in the WSJ:
“Wal-Mart is pushing hard to lower prices to compete. Executives at the world's largest retailer by revenue have told suppliers that its prices should be 15% lower than competitors' 80% of the time."
So this kills other retailers because how are they going to keep up? Think of the classic ma and pa, store they can't offer the suppliers the same type of benefits. But there is more. Walmart also stabs suppliers in the face with this move:
“At the same time, Wal-Mart is spending billions to drop prices strategically on certain products, eating into its own margins to lower prices, sometimes without telling brands in advance, according to managers at large consumer-goods companies that sell through Wal-Mart. When one retailer drops prices, that can challenge brands because other retailers will ask suppliers to match.”
So if you're a small-time supplier, you will lose market share because you can't supply it at a loss to Walmart's competitors.
This is in addition to what I previously posted. Walmart is the pinnacle of creating “synergies” by buying out markets, which ultimately results in the decline of jobs in a given market:
"Walmart today runs 5,229 stores across the United States, the equivalent of many tens of thousands of 1950s-era stores.” Furthermore, “A study published in 2008 in the Journal of Urban Economics examined about 3,000 Walmart store openings nationally and found that each store caused a net decline of about 150 jobs (as competing retailers downsized and closed) and lowered total wages paid to retail workers." [Emphasis Added]
How could Islam stop such tactics? Walmart is only able to impose prices on suppliers due to its size. And the only way it can afford to give such deep discounts is because it has stockpiled $14.35 billion in cash. Although Walmart did raise $5 million in its 1972 IPO, it has over $50 billion in short/long term debt. Both financing methods are haram in Islam. Without this premier access to the capital, it's unlikely a company would be able to operate a mega-supply chain that would force the suppliers to lower their prices. Furthermore, they would not be able to offer deep discounts on such strategic products because they wouldn’t have the cash.
#4 Foundem & Yelp: You’ve just been Googed
Capitalism likes to perpetuate the myth of "rugged individualism." Examining how Adam and Shivaun Raff's brilliant idea got crushed by private enterprise, we can easily see through this lie. The Raffs are the inventors of Foundem.com. In 2005, they had an idea to build a shopping comparison website that “could be used to sort the vast iceberg of deep data hidden in the databases behind websites. A single configurable system could search and retrieve everything from property to flights to TV sets.” Soon after they launched, Google squashed their site. Within 48 hours, they went from the first site found "now languishing on Google, mired 12 or 15 or 64 or 170 pages down. On other search engines, like MSN Search and Yahoo, Foundem still ranked high.” Traffic jumped up “around 10,000” as soon as Google whitelisted the domain in 2009. As noted in the Wired article:
“…Google's gaming of its rankings was growing more pervasive. The focus was its product comparison service, which went by the name of "Froogle." The service wasn't popular: a 2006 internal document, uncovered by the Competition Commission, admitted that "Froogle simply doesn't work." So, in 2008, Google rebranded it "Google Product Search" and started boosting it to the top of search results – an in-house version of black hat SEO. At the same time, it artificially demoted rival sites in the same way as Foundem: down to, the Competition Commission found, a minimum of page four on average, causing drops in traffic of 90 per cent.” [original links maintained]
Concerning Yelp, Google attempted to buy them. Due to Yelp's refusal, Google just took their content like did in the past, " But in this case, they were offering no link-back or no attribution." When Yelp complained to Google about this, Google told them to:
"de-index yourself; you can go to robots.txt and say, “No follow” and effectively, you know, giving us this false choice of like if you don’t like how we’re treating your content, you can basically kill yourself and knock out this thing that gives you 80 percent of your traffic or whatever.”
And that's how 'free market competition' really works: capitalists use their market dominance – not superior products – to kill rivals. Google's product was inferior. So, it cheated to destroy the competition.
How could Islam stop such tactics? Artificially boosting the rankings of Google properties while artificially depressing the rankings of Foundem.com (or other competitors) is a deceptive practice. The user thinks that Google's product ranking is high due to organic factors, not Google pumping it up. To lie and deceive is illegal in Islam. As for passing off Yelp's work as Google's own is also lying. Prophet Muhammad (saw) said: "The two traders (the seller and the purchaser) have the choice (to conclude or cancel the deal) before they departed (from each other). If they were honest and explained (the commodity and the currency), their sale will be blessed. But if they hid (the defect) and lied (to each other) the blessing of their sale will be eradicated." [Bukhari]
Would someone be arrested for this? In Islam, this would be the partner who is accountable for the business. There must be a "body," i.e. an actual person who takes responsibility for the partnership (there are no corporations in Islam, as previously discussed). So, if that person was found guilty of deception, then they would be punished.
In sha Allah, in part 2 we will look at how Amazon uses its monopoly of the Marketplace against the very businesses that dare to use their site.