Amazon's Tacit Collusion with Whole Foods

In Chapter 9, we learned and discussed the various ways in which organizations can collude in order to gain an advantage over their competition.  Companies can directly communicate with one another in explicit collusion to negotiate and agree on strategies to maximize firms’ profits.  However, tacit collusion involves more indirect actions or communication in order to benefit a firm’s bottom line.  As I read more about tacit collusion and specifically about substitutions for tacit collusion, it sounded a lot like how Amazon operates and how they’ve been able to achieve their current status within the overall industry.

One way in which a company can engage in tacit collusion is through strategic alliances.  A few years ago, Amazon formed a strategic alliance with Whole Foods.  Initially, this alliance was perplexing to some as the two were not directly related.  However, Amazon began implementing a package storage program called Amazon Locker where you could retrieve your Amazon package from your local Whole Foods store after you had finished your grocery shopping.  After this implementation, the alliance started to make a lot more sense.  At first glance, this seemed to be Amazon taking one more step to make shopping with them that much more convenient and easy.  There was more to be discovered. 

Not long after this program had been implemented, Amazon purchased Whole Foods for a cool $13.7 billion in cash.  Interesting because another substitution for tacit collusion is horizontal diversification which is defined as a firm acquiring its rivals.  Whole Foods, which had previously been a distant rival turned strategic ally, had now just been completely acquired by Amazon.  While there was initially backlash and controversy surrounding the acquisition, this seems to have subsided and Whole Foods has gone on to become yet another one of Amazon’s cash cows. 

While some may argue if the progression from distant rival, to strategic ally to then full acquisition was tacit collusion, I find it difficult to disprove.  Either way, this yet another example of how Amazon continues to prove its innovation and forward thinking.  Years ago, most people would probably have never put Whole Foods and Amazon in the same category but Amazon wants you to know they are after every category.