Keir Starmer appoints Jeff Bezos as his “first buddy”
Picks and Shovels is a new, standalone technothriller starring Marty Hench, my two-fisted, hard-fighting, tech-scam-busting forensic accountant. You can pre-order it on my latest Kickstarter, which features a brilliant audiobook read by Wil Wheaton.
Turns out Donald Trump isn't the only world leader with a tech billionaire "first buddy" who gets to serve as an unaccountable, self-interested de facto business regulator. UK PM Keir Starmer has just handed the keys to the British economy over to Jeff Bezos.
Oh, not literally. But here's what's happened: the UK's Competitions and Markets Authority, an organisation charged with investigating and punishing tech monopolists (like Amazon) has just been turned over to Doug Gurr, the guy who used to run Amazon UK.
This is – incredibly – even worse than it sounds. Marcus Bokkerink, the outgoing head of the CMA, was amazing, and he had charge over the CMA's Digital Markets Unit, the largest, best-staffed technical body of any competition regulator, anywhere in the world. The DMU uses its investigatory powers to dig deep into complex monopolistic businesses like Amazon, and just last year, the DMU was given new enforcement powers that would let it custom-craft regulations to address tech monopolization (again, like Amazon's).
But it's even worse. The CMA and DMU are the headwaters of a global system of super-effective Big Tech regulation. The CMA's deeply investigated reports on tech monopolists are used as the basis for EU regulations and enforcement actions, and these actions are then re-run by other world governments, like South Korea and Japan:
The CMA is the global convener and ringleader in tech antitrust, in other words. Smaller and/or poorer countries that lack the resources to investigate and build a case against US Big Tech companies have been able to copy-paste the work of the CMA and hold these companies to account. The CMA invites (or used to invite) all of these competition regulators to its HQ in Canary Wharf for conferences where they plan global strategy against these monopolists:
Firing the guy who is making all this happening and replacing him with Amazon's UK boss is a breathtaking display of regulatory capture by Starmer, his business secretary Jonathan Reynolds, and his exchequer, Rachel Reeves.
But it gets even worse, because Amazon isn't just any tech monopolist. Amazon is a many-tentacled kraken built around an e-commerce empire. Antitrust regulators elsewhere have laid bare how Amazon uses that retail monopoly to take control over whole economies, while raising prices and crushing small businesses.
To understand Amazon's market power, first you have to understand "monopsonies" – markets dominated by buyers (monopolies are markets dominated by sellers – Amazon is both a monopolist and a monopsonist). Monopsonies are far more dangerous than monopolies, because they are easier to establish and easier to defend against competitors. Say a single retailer accounts for 30% of your sales: there isn't a business in the world that can survive an overnight 30% drop in sales, so that 30% market share might as well be 100%. Once your order is big enough that canceling it would bankrupt your supplier, you have near-total control over that supplier.
Amazon boasts about this. They call it "the flywheel": Amazon locks in shoppers (by getting them to prepay for a year's worth of shipping in advance, via Prime). The fact that a business can't sell to a large proportion of households if it's not on Amazon gives Amazon near-total power over that business. Amazon uses that power to demand discounts and charge junk fees to the businesses that rely on it. This allows it to lower prices, which brings in more customers, which means that even more businesses have to do business with Amazon to stay afloat:
https://vimeo.com/739486256/00a0a7379a
That's Amazon's version, anyway. In reality, it's a lot scuzzier. Amazon doesn't just demand deep discounts from its suppliers – it demand unsustainable discounts from them. For example, Amazon targeted small publishers with a program called the "Gazelle Project." Jeff Bezos told his negotiators to bring down these publishers "the way a cheetah would pursue a sickly gazelle":
The idea was to get a bunch of cheap books for the Kindle to help it achieve critical mass, at the expense of driving these publishers out of business. They were a kind of disposable rocket stage for Amazon.
Deep discounts aren't the only way that Amazon feeds off its suppliers: it also lards junk-fee atop junk-fee. For every pound Amazon makes from its customers, it rakes in 45-51p in fees:
Now, just like there's no business that can survive losing 30% of its sales overnight, there's also no business that can afford to hand 45-51% of its gross margin to a retailer. For businesses to survive at all on Amazon, they have to jack their prices up – way up. However, Amazon has an anticompetitive deal called "most favoured nation status" that forces suppliers to sell their goods on Amazon at the same price as they sell them elsewhere (even from their own stores). So when companies raise their prices in order to pay ransom to Amazon, they have to raise their prices everywhere. Far from being a force for low prices, Amazon makes prices go up everywhere, from the big Tesco's to the corner shop:
Amazon makes so much money off of this scam that it doesn't have to pay anything to ship its own goods – the profits from overcharging merchants for "fulfillment by Amazon" pay for all the shipping, on everything Amazon sells:
Amazon competes with its own sellers, but unlike those sellers, it doesn't have to pay a 45-51% rake – and it can make its competitor-customers cover the full cost of its own shipping! On top of that, Amazon maintains the pretense that its headquarters are in Luxembourg, the tax- and crime-haven, and pays a fraction of the taxes that British businesses pay to HMRC (and that's not counting the 45-51% tax they pay to Jeff Bezos's monoposony).
That's not the only way that Amazon unfairly competes with British businesses, though: Amazon uses its position as a middleman between buyers and sellers to identify the most successful products sold by its own customers. Then it copies those products and sells them below the original inventor's costs (because it gets free shipping, pays no tax, and doesn't have to pay its own junk fees), and drives those businesses into the ground. Even Jeff "Project Gazelle" Bezos seems to understand that this is a bad look, which is why he perjured himself to the American Congress when he was questioned under oath about it:
https://www.bbc.com/news/business-58961836
Amazon then places its knockoff products above the original goods on its search results page. Amazon makes $38b selling off placement on these search pages, and the top results for an Amazon search aren't the best matches for your query – they're the ones that pay the most. On average, Amazon's top result for a search is 29% more expensive than the best match on the site. On average, the top row of results is 25% more expensive than the best match on the site. On average, Amazon buries the best result for your search 17 places down the results page:
Amazon, in other words, acts like the business regulator for the economies it dominates. It decides what can be sold, and at what prices. It decides whose products come up when you search, and thus which businesses deserve to live and which ones deserve to die. An economy dominated by Amazon isn't a market economy – it's a planned economy, run by Party Secretary Bezos for the benefit of Amazon's shareholders.
Now, there is a role for a business regulator, because some businesses really don't deserve to live (because they sell harmful products, engage in deceptive practices, etc). The UK has a regulator that's in charge of this stuff: the Competition and Markets Authority, which is now going to be run by Jeff Bezos's hand-picked UK Amazon boss. That means that Amazon is now both the official and the unofficial central planner of the UK economy, with a free hand to raise prices, lower quality, and destroy British businesses, while hiding its profits in Luxemourg and starving the exchequer of taxes.
The "first buddy" role that Keir Starmer just handed over to Jeff Bezos is, in every way, more generous than the first buddy deal Trump gave Elon Musk.
Starmer's government claims they're doing this for "growth" but Amazon isn't a force for growth, it's force for extraction. It is a notorious underpayer of its labour force, a notorious tax-cheat, and a world-beating destroyer of local economies, local jobs, and local tax bases. Contrary to Amazon's own self-mythologizing, it doesn't deliver lower prices – it raises prices throughout the economy. It doesn't improve quality – this is a company whose algorithmic recommendation system failed to recognize that an "energy drink" was actually its own drivers' bottled piss, which it then promoted until it was the best-selling energy drink on the platform:
There's a reason that the UK, the EU, Japan and South Korea found it so easy to collaborate on antitrust cases against American companies: these are all countries whose competition law was rewritten by American technocrats during the Marshall Plan, modeled on the US's own laws. The bedrock of US competition law is 1890's Sherman Act, whose author, Senator John Sherman, declared that:
If we will not endure a King as a political power we should not endure a King over the production, transportation, and sale of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.
Jeff Bezos is the autocrat of trade that John Sherman warned us about, 135 years ago. And Keir Starmer just abdicated in his favour.
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KPMG audits the nursing homes it advises on how to beat audits
Tomorrow (May 10), I’m in VANCOUVER for a keynote at the Open Source Summit and a book event for Red Team Blues at Heritage Hall and on Thurs (May 11), I’m in CALGARY for Wordfest.
Auditors are capitalism’s lubricants, who keep the gears of finance capital smoothly a-whirl, allowing investors to move their money in and out of companies without having to go pore over their books and walk through their facilities. Without auditors, the gears of capitalism would grind themselves to dust:
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Unfortunately for capitalism, auditing is irredeemably broken. The Big Four auditors (PWC, EY, Deloitte and KPMG) have merged to monopoly, becoming “too big to fail” and “too big to jail.” These four gigantic firms have spun up fantastically lucrative “consulting” divisions that advise companies on how to cheat on their audits and attain incredible (paper) gains. The work of these “consultants” is worth far more than the accounting and auditing jobs the companies do, and the weaker the audits are, the more profitable the consulting is:
This crisis has been a long time brewing. Back in 2001, the accounting/consulting giant Arthur Andersen was at the center of Enron’s fraud, which lit $11B in shareholder capital on fire. Enron had been making everyday people angry for years, engineering rolling blackouts and incredible energy-price gouging, but no one cares about working peoples’ complaints. By contrast, stealing $11B from rich people was something the authorities couldn’t ignore. They gave Andersen the death penalty, trying to teach the surviving accounting firms a lesson about what happens when you fuck with plutes.
But those other firms learned the wrong lesson: the collapse of Andersen was so disruptive that it soon became clear that the authorities would never take another giant consulting firm down, no matter how egregious its conduct was. They doubled down on crime, and then doubled down again.
It’s hard to pick a winner in the Big Four Accounting Firm Corruption Olympics, but KPMG is a strong contender, with a long history of just being monumentally inept and wrong. Back when Enron was unspooling, KPMG devoted itself to threatening people who linked to its website “without a license to do so”:
A couple years later, they declared war on wifi, trying to convince normies that wireless networks were an existential risk to human civilization:
http://news.bbc.co.uk/2/hi/technology/2885339.stm
But there’s not much money in wifi scare stories or licenses to link. KPMG are good dialectical materialists, devoted to money over ideology, and boy did they figure out some wild ways to make money. For one thing, they figured out that they could get more accountants certified by cheating…on ethics exams:
There’s hardly a month that goes by without another KPMG scandal somewhere in the world, with enormous monetary and social fallout. During the lockdowns, Justin Trudeau’s Liberal government outsourced the creation and maintenance of ArriveCAN (a contact tracing app for people who entered Canada) to a grifter called GC Strategies, who billed millions for their services. GC Strategies didn’t do any work — instead, they paid KPMG $1,000-$1,500 day to hire freelancers to build the app. The app itself was a catastrophic failure, and that failure didn’t just embarrass the government — it also failed to protect Canadians during a once-in-a-century global pandemic. KPMG raked off a 30% commission:
In the USA, KPMG helped Microsoft work up a radioactively illegal tax-evasion scheme. Microsoft poured the millions it saved by cheating on its taxes into dark-money operations that lobbied to defund the IRS so that KPMG and Microsoft could cook up even more illegal tax-evasion schemes:
But KPMG doesn’t content itself with screwing over everyday people and rotting our democratic institutions — it also engages in the dangerous business of helping billionaires steal from millionaires. KPMG was the auditor that signed off on the scam “oil company” Miller Energy Partners, a fraud that operated for years thanks to KPMG’s rubber-stamp on its crooked books:
The company was run by serial fraudsters with long rapsheets for stealing millions. They staffed their C-suite with executives from disgraced companies that had been busted for running Ponzi schemes, issuing press releases praising those execs’ “proven track records in raising capital.” KPMG ignored every red flag, ignored the hundreds of millions in fraud on the books — and when the whole thing came crashing down, the responsible KPMG partner kept his job for years, until retiring with a full and fat pension.
More recently, KPMG made millions by confidently certifying the stability of a large regional bank, assuring investors and depositors that it was managing its risk and could be trusted. The name of the client that KPMG was so bullish on will be familiar to you: Silicon Valley Bank:
KPMG epitomizes the idea of Too Big To Fail and Too Big to Jail. Despite being at the center of virtually every major finance scandal, it continues to thrive and grow. Remember the Carillion bust, in which billions went up in smoke and swathes of privatized government services vanished overnight? Not only did KPMG sign off on fraudulent Carillion books, but it escaped fines for doing so — and got paid to help administer Carillion’s bankruptcy:
Despite this, KPMG continues to find willing buyers for its services. After all, when the sector is dominated by four giant, lavishly corrupt firms, there’s not much choice in the matter:
This is bad news for the investor class, of course, but it’s even worse news for the people who rely on the services that KPMG certifies, even as it helps grifters destroy them. Every kind of business relies on audits, from transit to aviation to day-care to eldercare.
Here’s a scary one for you: in Australia, the job of auditing residential eldercare homes’ compliance with safety and anti-abuse rules has been outsourced to KPMG. While KPMG earns a mid-sized fortune from these audits, it earns far more advising the owners of residential aged care homes on how to beat those audits:
KPMG says that the division that ensures the safety and dignity of elderly people is firewalled off from the division that advises companies on how to spend as little as possible on that safety and dignity — but KPMG also went to great lengths to keep the fact that it was selling services to both sides a secret.
Once the secret got out, an anonymous KPMG spokesmonster said, “When considering a request to perform an audit, we undertake a detailed process to ensure the engagement is free of conflicts.”
It’s hypothetically possible that this is true, but anyone who believes anything KPMG says is a sucker. The company’s rap-sheet goes back decades. This is, after all, a company that cheated on its ethics exams.
Catch me on tour with Red Team Blues in Vancouver, Calgary, Toronto, DC, Gaithersburg, Oxford, Hay, Manchester, Nottingham, London, and Berlin!
[Image ID: Two business-suited male figures seen side on; each has a bomb for a head, and each is holding a lit lighter that has ignited the other's fuse. Each bomb is wearing a green accountant's eyeshade. In the background is a fiery mushroom cloud. They wear KPMG logos on their lapels.]
