Every retail store does this.

Many retail stores do this to their vendors. Amazon does it to it's "sellers", which are really just a category of "customers". As an amazon seller, you pay for the privilege of selling through their platform.

Retail stores charge manufacturers for shelf space. It's often called a slotting fee.

https://en.wikipedia.org/wiki/Slotting_fee

Plenty of vendors pay for shelf space

To me this a form of bundling and should probably be illegal.

You would forbid the entire existing system of retail? Do you have an example of any country that operates this way?

https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence

Well, because marketplaces like Amazon have a strategy for that: learn from sellers, imitate their products, offer your imitated product prominently on your "neutral" marketplace and crush the competition with a lower price until they have to give up or let themselves be bought [1]. That's nothing really new. The difference with Amazon is just the scale.

[1] https://www.thenation.com/article/archive/amazon-doesnt-just...

Why sellers would use a market place that is obviously going to compete with them is beyond me.

Because for any individual seller there’s a heavy short/medium term advantage to using the marketplace in the form of dramatically increased reach and simplified logistics.

You got two answers that are telling you this is good and normal, but I have a third one:

They're the only game in town at this point.

You could ask why people start businesses that rely on buying stuff for x and then selling it for y when that business model has already been fully exploited?

There is a supermarket chain called Aldi who's entire business seems to rely upon copying branded products yet they are lauded for offering great value?

Because there's not another marketplace where you can, with some effort and very little actual innovation, turn a $5,000 investment into a six (and sometimes seven) figure a year revenue stream.

it's the normal development of the capitalist market, right before eating itself.