Would Amazon Spin Off AWS and Break Up the Company? Here’s the Case for and Against It

Either way, it'll be the ecommerce giant's decision

Elizabeth Warren, Jeff Bezos and Amazon-related imagery
Elizabeth Warren has a plan to break up Big Tech if elected president, and Amazon is a part of it.
Illustration: Trent Joaquin; Sources: Getty Images, Amazon

If elected as the 46th president of the United States, Sen. Elizabeth Warren says her plan to break up Big Tech includes severing Amazon’s Marketplace and Basics line of products from the company and reversing what she calls its anti-competitive acquisitions of Whole Foods and Zappos.

At least four other candidates vying for the Democratic nomination have also voiced support for antitrust action, although they’ve been lighter on specifics.

And yet when it comes to prognosticating Amazon’s future, experts like NYU marketing professor Scott Galloway and Atlantic writer Franklin Foer say that if anything, it’s Amazon’s highly profitable cloud-computing business Amazon Web Services, more commonly known by its acronym, AWS, that will become a separate company.

There are strong opinions for and against a spinoff, but one thing seems clear: Whatever happens, it will be Amazon’s decision.

The case for spinning off AWS

Spinning off AWS, the company’s $400-billion business, is all about self-preservation. No one Adweek spoke with thinks Amazon wants to sever AWS, but some said it may choose that path to control its own destiny, effectively making AWS a sacrificial offering to the regulatory gods.

Matthew Wilson, associate professor of political science at Southern Methodist University, sees spinning off AWS as a potential strategy to preempt regulators.

“If the writing is on the wall and pressure is building for regulatory action … then [Amazon] might decide to do it in a way they can control,” Wilson said.

The goal for Amazon would be retaining its other properties thereafter and keeping them intact.

Amazon did not respond to a request for comment on this sacrificial-lamb theory, but an AWS spinoff might also appease consumers who happen to be voters. And those voters will start to demand elected officials step in if big companies act like bullies.

“Politicians respond to … pressure by voters,” said Bill Wilmoth, a former U.S. attorney who now practices at the firm Steptoe & Johnson. “Everyone sees Walmart decimate downtowns and Amazon getting rid of retail. … People may end up getting tired of that conduct by big companies in any industry and start demanding the federal government step in and be more aggressive.”

More fuel to the fire: Consumers are more aware tech companies have played fast and loose with their personal data. This, in turn, could prompt the public to rise up, which Wilmoth said would be the moment Amazon decides it’s best to spin off AWS.

“They always seem to be a step ahead and the government doesn’t move very quickly,” Wilmoth said. “If it happens, it will be Amazon’s idea.”

An AWS spinoff is also more likely if a Democrat is elected in 2020. That’s in part because Republicans are far less likely to pursue an enforcement action or try to extend antitrust laws, said Colin Kass, a partner at the law firm Proskauer who is also co-chair of its antitrust group.

“Substantially reducing the size and footprint of the company by spinning off AWS may help to mitigate [additional scrutiny under a future administration],” Wilson said. “So, while it’s not the primary consideration, the partisan political climate is one factor shaping Amazon’s decisions on how to structure itself going forward.”

However, if Amazon can simply keep its nose clean, it might be able to avert antitrust action altogether, Wilmoth said.

“I’m in West Virginia. Here, we say, ‘Hogs feed, but pigs die,’” he said. “If [Amazon is] a hog and continues to grow nicely and [doesn’t] get too aggressive, they will thrive, they’ll feed. If they overreach, the government will eventually perhaps intervene and cut them up.”

The case against spinning off AWS

The argument against spinning off AWS centers on lack of motivation, evidence and precedent.

Recommended articles