This part in specific only benefits consumers.

1. https://www.ftc.gov/advice-guidance/competition-guidance/gui...

It's no different than Google using ads to subsidize failing ventures in order to gain market share.

Beyond that, I don't think this kind of analysis is meaningful because it fails to account for second order effects. For example, even if retail is breakeven on a net basis, it still subsidizes a gigantic fleet of machines used to power retail from which AWS came from. Negotiating in bulk to build data centers with a significantly larger internal customers leads to better unit economics for the AWS side of the build out even if retail is break even on a first order basis or even has losses. The same argument can be made for ads as well. Amazon is great at monetizing infrastructure /because/ they can sell not just significant volumes of the end product, but and the infrastructure used to deliver it.

I think you could make the same argument for Google, which is that technically, they should be able to use the second order effects of assets they've needed to put together to run search and ads to sell better infrastructure. Theoretically, this should mean that GCP is king, but it doesn't. I'm not sure there's an obvious answer to this question, or even a great clue behind first mover advantage AWS had in cloud.

However, I thing that your last point is not relevant. What-about-ism has no place in the law or it necessarily creates a slippery slope. If Google is also able to do this and purposefully did it in a predatory manner to accomplish a market advantage they both need to be legally pursued - and GCP not succeeding doesn't necessarily mean that Google didn't try underhanded actions to get it to succeed - it either means those actions weren't enough or they were incompetent (but still malicious). Either way each case needs to be judged on its own.

Per-item margin is the metric you need to use to judge whether they're deliberately trying to price out their competitor.

If you sell Widgets and Sprockets, but you have a competitor that only sells Widgets, you can price of your Widgets so low (on 1-2% margins, for example) that the competitor is unable to compete and goes out of business because you can use Sprocket sales to keep your company in business during that time.

Now that the other company is out of business, the price of your Widgets doesn’t matter because you no longer have competition in the market. You’re getting 100% of the potential sales and despite selling on a lower margin, you’re sales volume is now way up making those margins acceptable.

You don’t have to worry about making a better Widget, or improving the Widget making process, because you have no competition. And you’ve priced yours so low, no other company can come in and attempt to enter the market because they can’t compete at your volume and margins.

If there’s a high-demand material needed to make a Widget, you can put pressure on the producer to lower material prices since you are now their primary customer, or purchase the company that produces it and prevent access to the material.

Predatory pricing consolidates market control and can be used to prevent access to the market. Anti-trust laws were designed to prevent this.

Please don't re-define words. This is not what's normally called predatory pricing. Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition. The thing you are describing is nothing more than having a low margin strategy.

Is every dropshipper undermining brand-name (high-margin) apparel?

That is not necessary for the definition of predatory pricing.

I don't like this analogy because you're not comparing items of equal quality. They're not fungible.

Why would you raise prices after? That would just invite competition again. Keep the prices low and competitors away. Maybe raise them to at-cost, but if your Widgets can comfortably cover the cost, then there is no reason to raise prices.

The assumption of predatory pricing is that it's not easy for a competitor to just show up. Supply chains would be destroyed, capital equipment scrapped, etc and replacing them would be time consuming and expensive.

Sometimes that's a reasonable assumption to make, sometimes it's not. Even if the assumptions are unreasonable, many CEOs won't let mere reason stand in their way.

> Maybe raise them to at-cost, but if your Widgets can comfortably cover the cost, then there is no reason to raise prices.

So, the Widget-making capital would just sit there producing 0 ROI? Someone's gonna object to that. A company pursues market dominance to make money.

Nobody can compete with you on the price and it is clear you can unbundle your Widgets from your Sprockets at any time if you ever feel threatened.

The other party is being tested for cooperation. Amazon raises the price and then reverts if competitors don't follow suit. They didn't revert after seeing sales drop or something, it sounds like they reverted based on a lack of "cooperation" from competitors.

This is tricky stuff to define wrong doing. What if a company wants to see the going rate for a product and just looks to Amazon to get an idea? You know, because a lot of people will shop at Amazon by default unless there is a reason not to, like saving a bit of money. These kind of algorithms become anti-consumer the more they get automated, but they may seem reasonable on the surface or in isolation.

If two algorithms are fine in isolation, but when used together cause overall market prices to rise what should we think of that? In the above example, Amazon would raise their price and the competitor would follow but not quite to the level of Amazon. Then if markets really are competitive (and fast) someone else may step in at a lower price than either, but I don't believe a lot of markets are fast or efficient when it comes to lowering prices.

Now it's possible that there was some separate agreement, for example Amazon and a competitor may have both agreed to raise a price some percentage and then they made small adjustments to look like it was just an automatic response. But the fact that algorithm seems to have accidentally lowered prices on some occasions would seem to suggest it genuinely was acting unilaterally. Or perhaps those failures were a deliberate part of a larger ruse. Ultimately it will be for a jury to decide but the FTC has its work cut out for them.

I'm OK with a computer making the pricing decision, but like HFT it's the frequency that leads to problems. It's a bit sad that the "free market" has to be regulated like this, but beautiful theories break down when you get to the quantum level.

What problems?

I'm sorry, huh?

Who exactly do you think is participating in this "market"?

I'd argue that the 'lower prices' just let amazon disperse the cost of markdowns across all of the vendors. Meaning Amazon still benefits from the lower pricing because they get possibly extra sales but only absorb the cost on 'their' products which were still matched to their 'competition' who were stuck matching Amazon.

Half the stores I walk into have price matching.

That is, it makes it sound like Nessie was intended to bust some broken price matching logic that would allow other competitors to stick Amazon at lower prices due to interactions with other parties.

A better headline would be:

Amazon Used Secret ‘Project Nessie’ Algorithm to Steer Prices

Using the word “steer” instead of the word “raise”.

"Amazon Used Secret ‘Project Nessie’ Algorithm To Attempt Market Price Manipulation"

Lowering prices in the short/medium term to throw out of the market the competition is a way of rising prices in the long term.

Diapers.com is just an example.

And once you look global, there's plenty more 100B+ revenue retailers, many of which also sell in the US.

I hardly think there is even close to an "absence of competition." Heck, Amazon is not even the biggest US retailer by a large margin. Each of these posts is full of fear and implications the evidence and statistics show to be unfounded.

[1] https://nrf.com/research-insights/top-retailers/top-100-reta...

I think you misunderstand the reasons prices actually become lower for many goods over time. Or why some producers get replaced over time by more efficient producers. Without this process there's be no lower prices or more efficient production over time.

Do you call this "efficiency"? How many companies in the world can afford it?

[0] https://arstechnica.com/tech-policy/2020/07/emails-detail-am...

The proper way to asses things is not to post select evidence, but to pick every example of price lowering at a given time, and see how many become the situation you now describe. So, care to tell us what percent of price lowering incidents end up as extreme? I'd guess well under 1 in a million, but I may be off an order of magnitude in either direction.

By your reasoning, every time a person enters my house I should inform them they may kill me, since once in a while a person does enter a house, then kill the occupant.

However, I'd be a nut to act this way. Because the vast majority of cases does not end up in murder.

So, just like that, bringing up extreme cases for normal actions is also fear mongering nonsense. Yes, this could end up tis way. They could use this as a leverage point to take over the entire planet, enslave all humans, and turn us into Matrix-human-batteries. But continuing to harp on this as if any of it is likely is statistically unwarranted.

So, please answer - what fraction of price lowering events do you think ends up in the situation you keep implying this might be an example of?

> This is the “consumer welfare” standard, a theory as economically bankrupt as it is historically unsupportable. Let’s be clear here: The plain language of America’s antitrust laws make it very clear that Congress wanted to block monopolies because it worried about the concentration of corporate power, not just the abuse of that power. This is inarguable: Think of John Sherman stalking the floor of the Senate, railing against autocrats of trade, declaiming that “we should not endure a King over the production, transportation, and sale of the necessaries of life.” These are not the statements of a man who liked most monopolies and merely sought to restrain the occasional monopolist who lost sight of his duty to make life better for the public.

[0]: https://archive.ph/aTv47

When my uncle had a heart attack, he wasn't in a position to shop ambulances, emergency departments, surgeons, cardiologists or anesthesiologists. As with internet providers, emergency healthcare is not a competitive market, and that's reflected in extortionate pricing.

It seems like reducing consumer harm should be the primary objective of regulators.

You're not wrong, but the definition of "consumer harm" used in practice hinges on short-termism and is price-centered right now. "This won't raise prices...for now, at least" is, by itself, an alarmingly strong argument in this arena, irrespective of market health or sustainability of competition.

The Biden administration has made some steps to counter that, we'll see if it's really a thing.

I guess I need to cut back on the heroin.

My reply wasn't asking for help to find an internet service provider. There are actual monopolists extracting monopoly rents right this minute. They're causing genuine consumer harm right now, so stopping this harm should be the priority of regulators.

Where there is no ability to access competitive offerings, these actual monopolists are a different league of economic pathology from markets where consumers can access competition by clicking around in their browsers.

But yours isn't a hard case of monopoly either, the main thing preventing you from creating a competing ISP is your local laws, which are failing antitrust to the point one wonders how they ever came to be ?!?

(We also shouldn't discount the importance of network effects.)

I have the latest dish model, live on a one acre property with a relatively large clearing, and I still struggle with the extremely wide field of view of the clear sky (no trees, hills or other occluding items) which it needs - I simply can’t get 24hrs of uninterrupted service, and performance is extremely variable. This is even after mounting it some 25ft in the air to reduce occlusion issues as much as possible. Starlink needs an unobstructed view right down to surprisingly low on the horizon for 24 hours of solid service, which many, many homes simply won’t be able to provide.

Starlink is incredible for what it is, but it’s not magic and becomes very hard to use reliably in urban areas at least with the current dishes and tech stack they are using. In many urban neighbourhoods it will be close to impossible to get a reliable 24 hrs of service unless you can knock down your neighbours homes and trees too.

Starlink is best used in situations where there are almost no other options, or as a backup connection to another more reliable one, for most people. It is not a great replacement for almost any fixed line service, if you have that option. Perhaps this changes in future, but people should stop just suggesting starlink in its current form as the panacea to all ISP problems.

Occlusion appears to be the single biggest enemy of starlink, and it’s super easily occluded - so much so, the app helps you measure/approximate the occlusion in your intended use space via your phones cameras before you buy.

There are approximately ~1 gazllion wireless internet providers where I live.

2) For many people, wireless and wireline internet providers are not substitutable.

You couldn’t get me to put up with 5G latencies because I play multiplayer video games and you couldn’t get me to put up with 5G bandwidth because I need to ship hundreds-of-gigabytes video files around and I’m not putting up with sub-gigabit upload speeds.

Just be glad you weren't around 15 years ago

Even if I didn't have symmetric gigabit, I also was working with 720p and 1080p video up until about 2013 and not 6K. Requirements shift over time.

any other examples of local monopolies

Maybe that is not legally possible where you are, but there is nothing inherent about emergency services resulting in extortionate pricing.

This feel similar to the myth of shareholder primacy. In both cases, the "agreed on standard" has little to no basis in the law, but happens to enrich the powerful and well connected over the little man.

https://corpgov.law.harvard.edu/2019/08/22/so-long-to-shareh...

1. The Dodge brothers - minority shareholders in Ford Motors, wanted to set up their own automotive company. They planned to use the money from Ford's dividends to support their company.

2. Henry Ford would have liked to keep his monopoly on affordable cars. He cancelled the dividend and claimed he's going to spend the money on improving society (by selling the Model T even cheaper) as a thinly veiled excuse.

3. The courts in Michigan saw what's happening and forced Ford to issue dividends.

As you can see in that case case, it was the lack of shareholder primacy that enriched the powerful. In the last 20 centuries of human history the powerful have always crushed the little man with the excuse they are serving the public interest. Beware of anything that empowers powerful individuals (like corporate CEOs and directors) to take arbitrary actions in the name of "social responsibility".

Was this not happening before the estimated birth of Jesus of Nazareth?

Christianity couldn't have been a tool of the rich and powerful in the first century, because it only began acquiring powerful followers around the third century crisis.

FWIW that's just logic.

Whether it's de jure or de facto, the owners of something will own it to their interests.

If you had 100 dollars would you invest it into a company where the CEO could just take the entire company hostage and potentially make you lose your entire investment?

It's pretty much like that already, the CEO can run the company into the ground for funsies if they are insane.

But if the investor catches the CEO doing this they have the right to sue to prevent it from happening and the legal system and shareholder primacy are what allow for this. Otherwise, what does the concept of ownership even mean if the owner can't decide what is done with the business?

Company actions will maximize company value. Employee actions will maximize employee value. Customer actions will maximize customer value.

That's a false dichotomy. You can own something (or a share) and the purpose of it need not be "return as much value as possible, via buybacks, in the next quarter".

Also, why would investors want to invest in a company where they could not remove a ad CEO that isn't delivering returns? They would probably just reinvent shareholder primacy through investment contracts.

Which means most CEOs and boards focus on managing shareholders at least as much as anything else they do.

Thank you for asking for clarification. I realize I responded precipitously and was too cryptic to contribute anything meaningful to the discussion.

And it's a check towards their own interests. Just like the CEO acts in his own interests. I can't for the life of me understand why anyone thinks the CEO is more likely to act in the best interest of employees or society than the shareholders are.

Probably because shareholders can just care about money in the immediate term and don't need to actually care about any one company or its long term success. They may never know or even interact with the employees of that company on any meaningful level, and may have investments in several other companies including direct competitors so that if any one company tanks they'll still have other investments making them money hand over fist.

A CEO, particularly when they're a founder, might actually care about the company doing well and may personally know the people working for the company. They might care a lot more about the employees they work closely with on a daily basis as opposed to a shareholder who just watches numbers go up and down while deciding when best to sell. The CEO's day to day will change drastically if their company fails. A shareholder whose company does poorly just adjusts what they buys/sell the same as any other day.

For more info: https://en.wikipedia.org/wiki/The_Antitrust_Paradox

You are smarter than me.

Thank you for allowing me to be here on HN.

That's what happens when legislation is vague and it's up to the judiciary and/or executive to decide what it actually means. See also: Roe v. Wade and Dobbs v. Jackson Women's Health Organization. Live by the sword, die by the sword.

Standard Oil would be labeled "pro consumer" by today's crowd: cheap prices, and highly standardized products that you could rely on wherever you travel (like McDonald's or Starbucks is today). the notion that antitrust can be boiled down to "consumer harm" is new. the history isn't vague, and thereby neither is the "theory". the legislation, i'm not sure about, but since it's rooted in those two things and vagaries are easily cleared up by consulting the former.

Not just that amzn algorithmically finds the optimal market clearing price.

They may be finding an optimal dumping price to reduce competition and then an optimal profit maximizing price to capture monopoly profits.

If true, this would be a clear violation of anti trust law, despite being algorithmically implemented at scale. Unclear if intentionality matters for the law - even if the algorithms learned this behavior implicitly as the solution to a legal objective, it could be illegal.

Can you provide an example of a product where Amazon enjoys a monopoly (or even something close to a monopoly)?

We should not be shepherding a new tech baron era, but enforce competition in markets. Competition should be the highest thing we value in an economy. This experiment of consolidations, mergers, and acquisitions since the 80s has been disastrous. We're reaching the point where we should break up nearly every multinational conglomerate, they've abused too much and suffered too little.

aga98mtl pointed out this isn't actually true in practice.

It sounds like you're describing a different form of potentially anti-competitive behavior, which is not the same as the one yonron accused Amazon of.

Some of the world's most innovative products were designed by subsidized Business Units. The original Mac Lisa wouldn't have been developed if it wasn't propped-up by the success of the wildly-popular Apple II/IIc. Even though it failed, there's not a single nerd on either side of the Apple row that would call that anticompetitive or a mistaken product.

This is a form of automated collusion. I'll raise my price and if my competitors don't follow suit I will lower it again. It only works well for them if the competitors are watching prices too and looking for an opportunity to raise theirs. You know it's anti-consumer because of the conditional reversion after watching competitors prices not following.

I have a feeling there is currently a LOT of this going on across all industries in the US. We've seen it rent pricing software, now Amazon, and I think fast food and restaurants are dojng something similar. Food has gotten obscenely expensive expensive outside a grocery store.

Raising prices then checking if so-called "competitors" follow is the illegal part - that's automated collusion, definitively illegal.

There is grey area around intent/motive, but the OP article is clearly on the bad side.

(Also, "standard practice" doesn't mean legal or moral)

This is completely false. Collusion, legally, requires an agreement between competitors. Tacit collusion is *not* illegal, see Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp. (1993).

Amazon can raise and lower their prices all day, algorithmically or not, as long as they aren't calling up their competitors and telling them to raise their prices too.

It is not unkown for 'competitors' to stage cost cutting dramas and pantomine competitive pricing in order to create artifical demand and customer loyalty to either or both scrappy underdogs.

... but in this case? Amazon has massive access to otherwise-secret price knowledge that they require sellers provide to participate in the marketplace. More than people realize and more than is shown in the UI (I did some work for a company that specialized in providing that data).

If they used it to feed this algorithm, there's a real solid case that they used their unique market position to make things more expensive for no consumer benefit, and the antitrust case writes itself.

The rest of this is just "Amazon uses pricing algorithm."