by Brad Stone
An RFP for this contract, evocatively dubbed JEDI—for Joint Enterprise Defense Infrastructure—was issued in July 2018 and promised to be worth $10 billion over ten years. Such a lucrative, publicly validating reward in the hotly competitive field of enterprise computing immediately turned JEDI into the subject of one of the most bitterly contested battles in the history of government procurements. “I never in my mind even dreamed of the political interference that would take place,” said Teresa Carlson, the Kentucky-born former speech pathologist and vice president of AWS’s public sector business, who steered Amazon’s bid. “I was not prepared to see the behavior that occurred.”
Rancor dogged the process almost from the start. After previewing the specifications of JEDI, many tech companies concluded that it was positioned exclusively for AWS, which controlled a commanding 47.8 percent share of the cloud market in 2018 and which had possessed a high level of security clearance ever since winning a 2013 cloud contract with the CIA. At least nine tech companies, including Microsoft, IBM, and SAP America, banded together to protest that the process was biased in Amazon’s favor and to lobby Congress and the Pentagon to split the contract into multiple parts.
One of those companies, Oracle, then went even further. Acting in the flamboyant and antagonistic style of its founder, Larry Ellison, Oracle sued the Department of Defense, challenging the legality of a single-winner award and sowing doubts about the sanctity of the process. Its complaint alleged that several Defense Department officials had either worked for or advised Amazon in the past and had improperly influenced JEDI. Separately, a mysterious thirty-three-page dossier started circulating in Washington, claiming that a web of inappropriate personal and professional relationships that existed between several Defense Department officials and executives at Amazon had undermined the integrity of the process. The dossier was traced back to RosettiStarr, a D.C.-based private investigation firm. But most observers saw the unmistakable fingerprints of Oracle on it.
In its review of Oracle’s lawsuit, the General Accountability Office acknowledged a few minor improprieties but ruled that they were insignificant and tossed out Oracle’s complaint. Oracle escalated its case to federal court and would subsequently receive an undignified stream of legal defeats over the next few years. But in one respect, its crusade succeeded. The JEDI process was now mired in highly publicized controversy and was about to capture the attention of a more formidable figure—Trump himself.
On April 3, 2018, venture capitalist Peter Thiel brought Oracle’s co-CEO Safra Catz to dinner at the White House. Catz, a registered Republican who had served on Trump’s transition team in 2016 and was a major donor to his reelection campaign, complained to Trump that the contract seemed designed for Amazon. Trump listened and said he wanted the competition to be fair, according to a Bloomberg News report at the time.
That October, as final bids were due, Alphabet dropped out of the competition, saying that it didn’t have proper security certifications for some aspects of the work and that the project conflicted with its corporate values. Leading up to its decision, Google employees had publicly protested their company furnishing powerful artificial intelligence technologies to the U.S. government.
If Amazonians had the same concerns, they were more circumspect about expressing them in the face of Bezos’s outright advocacy for defense work. “If big tech companies are going to turn their back on the U.S. Department of Defense, this country is going to be in trouble,” Bezos said in a speech at the defense forum at the Reagan Library in Simi Valley, California.
Four companies eventually submitted bids. Two of them, Oracle and IBM, were promptly eliminated from the competition in April of 2019, leaving Amazon and Microsoft. As Trump tweeted at Bezos that spring over everything from the post office to tax avoidance, Amazon Web Services employees toiled over provisioning the necessary resources in case they won. But they couldn’t help but wonder if their efforts were doomed. “It came up more than once that Trump is not going to let this happen,” said a high-level AWS executive who spoke on condition of anonymity.
In July of 2019, Trump was asked at a joint press conference with the Dutch prime minister about the contentious JEDI contest. “Which one is that, the Amazon?” he replied. “So, I’m getting tremendous complaints about the contract with the Pentagon and with Amazon. They’re saying it wasn’t competitively bid…. Some of the greatest companies in the world are complaining about it… different companies like Microsoft and Oracle and IBM.”
A few hours later, Donald Trump Jr., the president’s son, magnified the unseemly optics of injecting politics into the procurement process by tweeting, “Looks like the shady and potentially corrupt practices from @Amazon and No Bid Bezos may come back to bite them.”
The contract was supposed to be awarded in August, but after Trump’s comment, his new secretary of defense, Mark Esper, suspended the process to examine the growing conflict-of-interest complaints. The contract then remained in limbo for another eighty-five days. In the midst of that delay, Esper recused himself because his son worked for IBM, adding yet another element of farce to the situation.
Finally, on October 25, 2019, the Pentagon announced a winner, effectively crowning a new leader in the burgeoning field of public sector cloud computing: Microsoft. The enterprise technology sector was stunned by the outcome, and most media outlets treated it as a major upset. AWS’s Teresa Carlson said she had girded for such a result, but several AWS employees later admitted to being disappointed. “The amount of work we put into the bid process was massive,” said the anonymous AWS senior executive, echoing the complaints so recently articulated by losing cities in the HQ2 contest. “We toiled endlessly, nights and weekends. It was devastating.”
Even Microsoft CEO Satya Nadella seemed to concede that political calculations played a role in his unexpected victory. “To me, it goes back to, if anything, Microsoft staying out of politics and staying focused on what the customer’s needs are,” he told the tech news site GeekWire.
Amazon promptly sued in federal court, setting off yet another sequence of complex litigation that is unresolved even as of this writing more than a year later. In its defense, the Pentagon claimed that Microsoft had submitted the more economical bid. But executives at AWS were such ardent believers in the superiority of their technology that they couldn’t possibly broach the possibility that Microsoft had won on the merits; there simply had to be political interference. These were the same hardcore devotees, after all, who in 2019 declared a rousing success a sparsely attended, and somewhat disastrous, music festival dubbed Intersect, which accompanied the annual AWS re:Invent conference. In other words, the corporate Kool-Aid at AWS was potent.
“We are the best partner,” Jassy told me after the JEDI loss. “If you really evaluate the options, it’s very clear-cut that we have a lot more capability for them and a lot more experience having done what we’ve done in the intelligence community.”
Left unsaid was the way that Amazon’s sprawling lines of business and Bezos’s own empire of personal holdings were starting to create artificial limits to the opportunities for Amazon’s fastest growing and most profitable division. Just as competing retailers Walmart and Target avoided AWS and Walmart asked its suppliers to do the same, it was easy to believe that Trump had nudged the Pentagon away from delivering a consequential government contract to an avowed political enemy. By purchasing one of the most prominent political newspapers in the U.S., Bezos had alienated an impetuous and vindictive man who, for four tumultuous years, was the most powerful person on the planet. Here finally was the true purchase price of the Washington Post: in the end, it likely cost Amazon $10 billion.
* * *
In the late 1990s, the legal departments inside many technology companies drew important lessons from the U.S. government’s antitrust case against Microsoft and the damning emails, deposition transcripts, and meeting notes that were entered into evidence. At Amazon, executives were put through rigorous
compliance and competition training, where they were instructed how to properly react to various scenarios and avoid the same mistakes that Microsoft made. If they ever heard colleagues talking about setting prices or colluding with partners, for example, they were instructed to “knock over the closest cup of coffee in the room,” stand up, and vocally object, according to Amazonians who recounted details of internal sessions.
For David Zapolsky, a former Brooklyn prosecutor turned forceful and protective corporate attorney, preparation for potential legal scrutiny went even further. Zapolsky felt that “language matters in law,” and after being appointed Amazon’s general counsel in 2012, he started keeping a list on his office wall of certain indelicate words that he never wanted used in internal documents or discussions. Employees shouldn’t use the word “market” unless they specified exactly what market they meant, or “platform,” which loosely suggested a kind of distant, all-powerful authority over other firms. Other phrases on the wall included “dominating,” “big data,” and business jargon he found annoying such as “drill down” and “level set.”
Words mattered, Zapolsky preached constantly; they had power, and the wrong ones could be used against Amazon. “Those terms aren’t helpful, and they are particularly unhelpful when regulators start using them as buzzwords,” Zapolsky said, “because they can actually do damage.”
That advice, it turned out, was prescient. As pressure on the company mounted from Trump and the 2020 Democratic candidates, Amazon was also the subject of a separate strain of scrutiny from legal theorists, lawmakers, and regulators. They aimed to prove that Amazon was engaged in illegal, anticompetitive conduct and should be treated the same way as the fearsome monopolists of the past, such as the Standard Oil Company, U.S. Steel, and AT&T.
The person most responsible for initiating this argument was Lina Khan, who in her last year of Yale Law School in January 2017 published a ninety-three-page article in the Yale Law Journal titled “Amazon’s Antitrust Paradox.” The paper challenged the recent history of lax antitrust enforcement in the U.S. and invited authorities to take a harder look at the e-commerce giant, which she believed uniquely demonstrated how current laws had failed “to capture the architecture of market power in the twenty-first century marketplace.” Coinciding with mounting criticism over Amazon’s tax avoidance and its treatment of independent sellers—as well as newfound skepticism of big tech—the article not only struck a nerve; it arguably started a movement.
Khan was an unlikely figure to challenge decades of conventional wisdom on antitrust. The oldest child of Pakistani parents who immigrated to the U.S. when she was eleven, she majored in political theory at Williams College and wrote her thesis on the philosopher Hannah Arendt’s 1958 book The Human Condition, which examines how modern technologies affected democracy.
After graduation in 2010, Khan joined New America, where Elizabeth Warren would deliver her original anti-tech stem-winder, and worked with Barry Lynn, a senior fellow and a prolific author of books and articles that advanced a critical view of modern monopoly power. For one of her first tasks, Lynn assigned Khan to write a report on the history of Amazon’s first and most dominant market, the book industry.
A few years later, Khan applied the same skeptical, journalistic approach to her article for the Yale Law Journal. Her paper took its name from a seminal 1978 book by Robert Bork, The Antitrust Paradox, which argued that regulators should curb market power only when it might result in higher prices for consumers. Khan soberly countered that the so-called “consumer welfare standard” was ill-suited to the consolidating effects of the internet and to a company like Amazon, which ruthlessly lowered prices to bleed out competitors and amass market share—a perpetually money-losing strategy that was nevertheless endorsed by its patient investors.
The paper challenged not just Amazon but an entire regulatory status quo. Set against the rapid growth of Amazon and the other tech giants, it became essential reading in policy circles in D.C. and Brussels. Politicians started referencing it in interviews and urging a “reconsideration of antitrust” to examine not only price effects but the impact that dominant companies have on workers, wages, and small companies. One critic of Khan’s paper derisively called it “hipster antitrust.” The moniker, not necessarily pejorative, stuck.
Khan’s article also drew attention in Seattle. Six months after it was published, David Zapolsky called Barry Lynn at New America out of the blue and said he was in Washington with an Amazon policy team and wanted to meet. Lynn invited Khan, who was in town that summer, as well as Jonathan Kanter, an antitrust lawyer and former FTC staff attorney.
The hour-long meeting at New America’s offices was cordial. Zapolsky asserted that Amazon wasn’t a monopoly because it controlled only a small portion of the $24 trillion global retail industry and argued that its impact on competition and smaller companies was positive. He asked his critics what they believed Amazon should be doing differently and invited them to contact him if they heard about any problems caused by its conduct—presumably instead of writing acrimonious law review articles or giving hostile interviews to the press. “It was just this sort of surreal moment between folks who were going to be looking down the barrel of each other’s guns for a long time,” said Kanter.
It turned out that Zapolsky was withholding a piece of information that his adversaries would find especially ominous. The next day, on January 16, 2017, Amazon announced the acquisition of Whole Foods Market. In a sign that regulators were yet to be swayed by Khan’s article or by Barry Lynn’s relentless commentary on big tech, the FTC approved the merger in a swift sixty-eight days.
But Khan and Lynn’s provocative ideas about curbing tech’s power were slowly seeping into the regulatory firmament. A year later, Margrethe Vestager, the European Union’s dynamic competition commissioner, opened an investigation into whether Amazon improperly exploited data from its independent sellers to bolster its private-label products. A year after that, in May of 2019, Makan Delrahim, the assistant attorney general for antitrust at the Department of Justice, and Joseph Simons, the chair of the FTC, followed her example and began investigating the four big tech companies. The DOJ would examine Google and Apple while the FTC looked at Facebook and Amazon.
Lionized only a few years before for their innovative prowess and wealth creation, the big tech companies were now facing an extraordinary groundswell of government scrutiny. In the midst of this wave, Rhode Island Democratic representative David N. Cicilline, a former criminal defense attorney who had called on the House Subcommittee on Antitrust, Commercial and Administrative Law to scrutinize Amazon’s acquisition of Whole Foods, approached Lina Khan. He had just taken over as chairman of the subcommittee, issuing a call to “hold big tech companies accountable.” Khan had finished law school and a stint as a legal fellow at the FTC; would she be interested in serving as counsel in the most prominent government investigation yet of big tech’s unassailable economic might?
Khan jumped at the opportunity. Announced in June 2019, the bipartisan examination of competition in digital markets would last a grueling sixteen months. The investigation, steered in large part by Cicilline and Khan, had to navigate a host of improbable obstacles: the impeachment of President Trump by the full House Judiciary Committee; the withdrawal from the Judiciary Committee of the ranking Republican, Doug Collins, after he decided to run for Senate; and the chaos that was generated by his replacement, Ohio’s Jim Jordan, who was obsessed with examining not just monopoly power but anti-conservative bias by the social networks. Then there was the onset of the Covid-19 pandemic in early 2020, which upended the world and forced congressional investigators to work remotely for months.
Against these formidable odds, the subcommittee managed a wide-ranging and provocative examination of the way the tech giants accumulated and preserved power. From Amazon, it requested all internal communications related to acquisitions, product pricing, and the rules that governed its third-party marketplace. It la
ter published a trove of these documents, which revealed Amazon execs strategizing back in 2009 to run the company’s diapers business at a loss to combat the company that operated Diapers.com, and to buy the internet doorbell company Ring in 2018—not for its technology, but to gain a dominant position in the market.
In January 2020, the subcommittee convened a hearing in Boulder, Colorado, and heard firsthand why many brands and sellers have such a strained relationship with the e-commerce giant. David Barnett, founder of a company called PopSockets, which made decorated grips for the backs of smartphones, testified that Amazon allowed knockoffs to proliferate on the site and sold his products below their mutually agreed-upon price. When he tried to control his prices by moving away from a wholesale relationship with Amazon and establishing himself as an independent seller on the marketplace, the company wouldn’t let him—and effectively booted PopSockets off the site. “Jeff Bezos can’t possibly know that this is how this unit is behaving,” Barnett later told me. “If he did, he would step in and stop it.”
One of Cicilline’s goals throughout the investigation was clear: to get Bezos and the other tech chiefs to testify before Congress under oath. But Amazon’s policy executives clearly didn’t want to subject their CEO to the same public drubbing that Facebook’s Mark Zuckerberg had repeatedly endured. They answered the subcommittee’s invitation to Bezos not with a reply signed by the CEO but with one from Brian Huseman, the public policy vice president who had presided over the HQ2 fiasco. “We remain prepared to make the appropriate Amazon executive available to the Committee to address these important issues,” Huseman wrote evasively.