The article links to Krugman's post. One point Krugman makes that isn't discussed at all is that Amazon uses its market power to keep book prices low. That makes the article's points about it being easy to setup an online store somewhat moot: What point is an online store if no one buys from it because prices are dramatically lower elsewhere.

Krugman also makes the point that Amazon is a (and perhaps the dominant) discovery mechanism for books. Of course, if you aren't in Amazon you miss that mechanism. Combine these two things, and it makes creating a competitor very, very hard. That's doesn't make it illegal, but it's a very big concentration of market power. Edit: notably, this makes it difficult for even publishers to compete: if the dominant discovery mechanism for your items excludes you, then it's a problem. Note the similarities to Google here, and how careful Google is to emphasise the algorithmic nature of their search ranking. Amazon can't use that defense.

I'm not sure I totally buy Krugman's argument that Amazon is actually using its power in ways that "hurt America". But, I am more amenable to his argument that it has too much market power in the book market as outlined above - not totally convinced, but I think his points in that area are much stronger than the Economist makes them out to be.

But publishers control the supply, so unless Amazon is willing to subsidize the difference (and purchase books through unexpected channels) they really can't undercut prices.

What's going on here is that publishers want to use Amazon's platform, but they want to dictate the terms of that usage.