Trump is hitting Amazon where it hurts

President Trump is using the bully pulpit to break investors' faith in Jeff Bezos and Amazon.With a series of ...

Posted: Apr 4, 2018 12:35 PM
Updated: Apr 4, 2018 12:35 PM

President Trump is using the bully pulpit to break investors' faith in Jeff Bezos and Amazon.

With a series of broadsides against Amazon on Twitter and reports that he is raising the threat of antitrust lawsuits and tighter regulation, Trump has accomplished what Walmart, Target and rivals have failed to do: slow down one of the most successful companies in American history.

Jeff Bezos has built Amazon into a 21st-century General Electric: A massive conglomerate with business units in multiple growing sectors of the economy. Amazon's founder and CEO has extended the company's reach from an online bookseller in the 1990s to a retailer, grocery store, cloud leader, movie studio, and voice assistant today. Bezos has become the world's richest person in the process.

Yet Amazon has fallen 7% and has lost close to $60 billion in market value since Axios reported last week that Trump wants to "go after" the company. Trump has taken shots at Amazon five times on Twitter since then. Amazon did not respond to request for comment.

Related: Trump's latest tweet takes down Amazon stock and the Nasdaq

Investors don't believe competitors can beat Amazon's model. But regulation or the courts could. That's where Trump is aiming his attacks.

"They pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.)," Trump said on Friday. "This Post Office scam must stop. Amazon must pay real costs (and taxes) now!" he tweeted Saturday.

His Amazon tweets make several misleading statements: Amazon collects sales tax in every state that charges one and remits it to the states. It also pays the post office to deliver packages to customers' doors.

Related: Trump vs. Amazon: Let's set the record straight

But Trump is marshaling the same protectionist tactics to derail Amazon and boost its competitors that he used by slapping tariffs on imported steel and aluminum to prop up US manufacturers, said John Coffee, a professor of corporate governance at Columbia Law School. Both come at the expense of consumers, Coffee argued.

Increasing the rates Amazon pays to the Postal Service wouldn't cripple the company, said RJ Hottovy, an analyst at Morningstar. Amazon could be forced to raise fees for Prime memberships or to third parties that sell products on the website.

Raising postal fees could actually be counterproductive, he said. Amazon might choose to rely less on the Postal Service and small businesses could lose a crucial revenue channel.

Related: Amazon does big business with Trump's government

An antitrust case against Amazon would also be hard to prove.

The government must show that Amazon hurt consumers or limited competition through predatory practices.

Consumers aren't directly harmed from low prices and Amazon's "war of cost cutting," said Christopher Sagers, a law professor at Cleveland State University. But one antitrust theory against Amazon could focus on suppliers.

"Amazon has made itself so desirable that suppliers have to sell to them at lower prices," Sagers said. If Amazon is using its powers to squeeze suppliers, that could harm consumers by reducing the quality of products, discouraging innovation and leading to suppliers selling fewer products.

Even if Amazon does face stricter regulation or an antitrust case, it could continue to succeed.

Shareholders, convinced of Bezos' vision and Amazon's ability to keep growing, have gobbled up the stock despite the company's often secondary mission to turn a profit. Amazon attempts to undercut rivals by offering lower prices.

"He's almost alone with Steve Jobs and Bill Gates in this rare generation of founders who were able to predict the future," said Brad Stone, a senior executive editor at Bloomberg Technology and author of "The Everything Store: Jeff Bezos and the Age of Amazon."

Amazon has been able to pour money into new investments and technology and bulldoze over competition because investors have bought into the plan Bezos first laid out in his 1998 shareholder letter: "We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability consideration," he told investors 20 years ago.

Related: Amazon's corporate bulldozer is fueled by Wall Street

Amazon's expensive price tag isn't a concern for investors either. Shareholders are willing to pay $222 for every $1 of earnings. The average price to earnings ratio for S&P 500 companies is under 20.

"There's a certain audience that will pay a premium for growth," Hottovy said.

Bezos takes risks and experiments in ways that would look puzzling for other companies. Investors cheer when Amazon enters a new industry or region because it means another way for Amazon to take market share from competitors and grow sales.

"Bezos and Amazon have proved themselves able to mint new businesses," Stone said.

-CNNMoney's Chris Isidore contributed to this story.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 145636

Reported Deaths: 3745
CountyCasesDeaths
DeSoto963299
Hinds9584195
Harrison6848109
Jackson6124118
Rankin528598
Lee484295
Madison4633105
Forrest368186
Jones345287
Lauderdale3350143
Lafayette315049
Washington3097107
Lamar281849
Oktibbeha239261
Bolivar239083
Lowndes228863
Neshoba2164115
Panola211749
Marshall208350
Leflore200890
Pontotoc194728
Monroe190277
Sunflower189755
Lincoln186165
Warren172257
Tate164251
Union160925
Pike160458
Copiah158940
Yazoo151239
Scott150229
Itawamba147634
Coahoma147443
Pearl River144467
Simpson144253
Alcorn143925
Prentiss140429
Grenada136945
Adams136548
Leake131843
Holmes124961
George122224
Tippah121530
Covington117636
Winston116624
Wayne115823
Hancock114139
Marion111046
Attala107833
Tishomingo106142
Newton102729
Chickasaw102432
Tallahatchie95527
Clarke88553
Clay87027
Jasper81122
Walthall75028
Stone72414
Montgomery71925
Calhoun71613
Carroll70614
Lawrence70214
Yalobusha69427
Noxubee69217
Smith68816
Perry65225
Tunica59619
Greene58422
Claiborne57416
Jefferson Davis54217
Humphreys52618
Amite51214
Benton48417
Quitman4796
Webster42014
Kemper40917
Wilkinson38622
Jefferson33811
Franklin3235
Choctaw3077
Sharkey30617
Issaquena1114
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Alabama Coronavirus Cases

Cases: 236865

Reported Deaths: 3472
CountyCasesDeaths
Jefferson31043491
Mobile19446360
Tuscaloosa12684150
Madison12528146
Montgomery12122235
Shelby992276
Baldwin837684
Lee759765
Morgan626247
Calhoun6049113
Etowah600564
Marshall596153
Houston510838
DeKalb469635
Cullman421136
Limestone408844
St. Clair403955
Elmore398961
Lauderdale387253
Walker356199
Talladega339044
Jackson302524
Colbert297641
Blount282236
Autauga266139
Franklin246233
Coffee236615
Dale228454
Dallas222331
Russell21923
Chilton218537
Covington215933
Escambia196931
Tallapoosa171790
Chambers171448
Pike156014
Clarke155319
Marion135535
Winston126623
Lawrence123936
Geneva11848
Pickens117618
Marengo117424
Barbour116710
Bibb115717
Butler114341
Randolph100321
Cherokee99624
Hale93231
Washington89918
Clay89623
Fayette86216
Henry8436
Lowndes78929
Monroe77911
Cleburne75614
Macon71720
Crenshaw70330
Bullock69019
Conecuh68214
Perry6726
Lamar6337
Wilcox62818
Sumter56222
Choctaw41813
Greene41317
Coosa3144
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