Loss leader pricing when used to force other businesses to close is quite illegal in the US[1] - when used for other reasons the legality varies on a state by state basis in the US... it is illegal in quite a few places. I'm not particularly familiar with international laws here.

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

There was a pretty big fight over this not too long ago.

Is there evidence that Nessie was used to sell items below cost?

Given Amazon's retail profit margins....the answers must be yes, right?

Why?

Because Amazon is using AWS to literally carry every division they have. I don't think retail has ever been profitable for them, happy to be proven wrong; but some of their newer ventures in hardware: Alexa, Kindle, Fire TV, Ring, and Echo have all been losers. If each were normal companies they would all likely be going out of business, bankrupted, or chopped up for parts for PE.

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

I think "literally carry every division they have" is incorrect; on a margins basis, Ads are significantly more performant than AWS, although AWS wins on volume of profits and still has great margins.

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.

It is certainly my gut feeling that Amazon is evil as hell but I think that I'd really like to see an actual investigation by folks who study this stuff to know whether Amazon was using their pricing predatorily or not. People, especially executives, are dumb - there's bound to be an email somewhere about John congratulating Fred about managing to shut down Plug's Stuff Hut a small family business if that was the intent and these actions were being made to accomplish this goal.

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.

For a long time (less so recently), Amazon retail made no or essentially no profit.

Gross profit is the measure to look at to determine dumping, not net or EBIDTA.

The profit margin includes costs of reinvestment (such as all the capital costs associated with their fleet of planes etc).

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

An offer to sell at a particular price is equivalent to an order.

You should run a sales team where you pay commission on how many offers to sell they make.

It’s called predatory pricing. Pricing products to eliminate competition is illegal.

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.

> 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.

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?

> Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition.

That is not necessary for the definition of predatory pricing.

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

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

Perhaps I've let my feeling of decline of quality in brand-name apparel color my argument. Sorry.

> Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition.

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.

> Why would you raise prices after? That would just invite competition again. Keep the prices low and competitors away.

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.

Haha. That’s a short-sighted strategy if I ever heard it. Why would you play a long-game like this to play a dumb short-game at the end? No, what you do is make it so you can no longer buy “just Widgets” you can still get your cheap Widgets through us, but you can only get them buy buying a Sprocket & Widget bundle. We are so sure you’ll love our Sprockets too!

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.