Dictating how retailers can interact with your competitors is anti-competitive. Dictating what prices they can offer when they put up listings is a part of that, it is anti-competitive.
It's annoyingly a pretty standard practice. And they will see through the "different SKU" trick simply by comparing the product images.
Customers are so lazy they want the government do everything for them. If you don't like Amazon, close the tab and go to eBay.com or Walmart.com. It's very easy, and can be done in seconds. This isn't like telecom monopolies where you can't actually switch.
Downvotes don't mean anything. Most of the folks on here have no idea how e-commerce works. Amazon will win. It's simple to see - them losing would imply they are obligated to feature higher prices, which is clearly worse for customers and inherently at odds with what the FTC is supposedly trying to accomplish.
A company makes a product - it costs $10 per unit to make. To list and sell with Amazon, they are charged $12 per unit. To make a profit the company adds and additional $1 per unit. They sell the product on Amazon for $23 per unit.
Online retailer Foo also has a store, and provide the same services that Amazon for their online shop at $5 per unit. The online retailer adds a profit of $2 per unit. Total price $17 per unit. Retailer Foo is more $ efficient for those services as a result customers price compare. Foo is rewarded for their effi with higher volume, manufacturer is rewarded with higher profit and consumer is rewarded with lower prices. Enforcing market competition led to all 3 parties involved being rewarded. Retailer Foo over time grows a larger customer base as people learn to price compare with them and forces Amazon to stop rent seeking.
But the above doesn't happen in the real world. Amazon enforces that the retailer lower their price on Amazon to $17, while still collecting $12 per unit. The company now can sell on foo, but only by selling on Amazon at a loss. They can't afford that amount of loss from Amazon and stay in business. So Amazon avoids competition. They can't pull their product from Amazon because not enough customers vist Foo retailer yet to make up the volume.
So in the end Foo retailer is more dollar efficient, but is prevented from growing and benefiting the marketplace. Amazon leverages its outside market size to avoid competition. Market participants preventing competition is against the benefits of capitalism and harms the consumer. So, it benefits the consumer to ensure Amazon has to actually compete with the more efficient competitor and stop rent selling behavior.
Furthermore, again, no one is obligated to sell with Amazon. There are thousands, if not tens of thousands of sellers who do not sell their stuff on Amazon. It's not some requirement to do business in the 21st century.
In any case, we can come back to this case a year from now, and we can pretend to be shocked when nothing meaningful happens to Amazon.
Yes I'm the short term Amazon's customers don't get the discount they could get om Foo retail. Bit then they become Foo retailer customers and they benefit. Too many things optimize for the small scale.
Similarly Amazon's upon losing customers to Foo retailer has to become more efficient overall (or reduce its rent seeking fee) to stop losing customers. So now all of Amazon's customers for that product benefit, even those that didn't move. And potentially even those customers for other Amazon products.
This is the purpose of capitalism - marker competition. Nobody wins with laisse-fair capitalism except rent seekers. Society benefits from market competition in capitalism and this is pushing for it.
If I make light bulbs and sell them to customers through my own channels – exactly who is the rent seeker?
In my industry there are actors that are as dominant as Amazon are in retail, but there's also a huge part of the industry who just sell directly to the customer. It's your own choice. If you don't accept Amazon's terms, you don't have to do business with them. And vice versa.
For me the last straw was when Amazon Prime deliveries stopped arriving in two days despite being claimed to arrive in two. It made a difference because in two days it could be a hassle to drive to the store but in five days I can easily find the time.
Not long after that, Prime service became officially five days at my location while Amazon was shouting to the rooftops that other people were getting one day. Around this time it seemed every other retailer was trying to impress me with fulfillment and often shipping is free if you buy $200 of camera equipment or $80 worth of games, even when it isn't it isn't very expensive but it is always faster than AMZN, I even get Ebay packages from Japan faster than AMZN gets me packages from the next state.
There was also the rising problem that the quality of the listings was going down on AMZN; I'm not so concerned that the $24 product is crowding out the $17 product but rather that there are so many junk products that crowd out good products. On top of that there are many product listings that make no sense at all and it all adds up to a stressful process of sifting through a lot of junk and then not knowing if some absolute garbage is going to show up at my door.
So I went from buying something on AMZN probably several times a week to now less than once a month... I canceled my Prime subscription because I couldn't have any self respect if I was paying a subscription for something that was worse than average as opposed to better than average. And boy is it annoying to shop on AMZN now. The only thing you have to click more times than to cancel AMZN Prime is to order something from AMZN without signing up for a free trial of Prime.
https://www.law.cornell.edu/wex/monopoly "For instance, the term monopoly may be referring to instances where: [...] There are many buyers or sellers, but one actor has enough market share to dictate prices (near monopolies)"
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I'm not replying to anything you might reply with because the rest of your comments in this thread have clearly been in bad faith. But this was one of the few smoking gun comments betraying either a biased position you hold or your lack of background on the topic, so it was easy enough to just post a link to an authoritative source + definition and just move on.
If it has “significant and durable market power” [0], it is by the only definition that matters.
[0] https://www.ftc.gov/advice-guidance/competition-guidance/gui...
What's your move in this position?
You can't just imagine all companies as perfect frictionless spherical interchangeable cows. In reality companies as large as Amazon can have significant market distorting effect, while much smaller companies might have to choose between their principles and going out of business.
What I'm describing is already what happens, by the way. Look at Anker for an example.
Which is why your scenario here wont happen. Thanks for clarifying so well why your argument "there is no consumer harm" is bullshit, what you said here means you know that what Amazon does here increases prices.
Prices then rise back up as your nearest competitor was smart enough to not lower price below their cost.
Or do you somehow believe that price competition currently only exists everywhere EXCEPT on Amazon's platform?
What about taking out an ad to let people know where to buy your cheaper item? People didn't know walmart.com existed until a tv ad told them. Doesn't seem unreasonable to take some of the saving from not selling on Amazon and use it for services the platform was providing (discoverability).
Nothing changes until it changes.
It does, since losing sales on Amazon costs them more than raising the price on other platforms then that is what they will do, since companies are motivated by profit. Amazon knows this, that as a dominant market player if they add this rules the vendors will have to abide it since they will lose more from not using Amazon.
This is how anti-competitive practices works and why we have laws against them.
If they decide to raise prices, then that has more to do with the seller than Amazon.
You are right that this policy is very simple, it's very clear both mathematically and logically. Companies cannot lower their prices lower than their costs. If costs are variable across platforms but prices are fixed to a single value than this will de-facto result in INCREASED prices. If this policy causes someone to leave a platform, that STILL doesn't result in prices any lower than they would absent the rule.
In fact, the sheer existence of the rule is a clear statement from Amazon that they believe they have significant and durable market pricing power, since if they didn't, this policy would clearly lead to sellers and buyers leaving their platform.
In a free market sellers will leave the Amazon ecosystem and move to a platform with less restrictive agreements, resulting in lower consumer prices (albeit with less availability). That’s exactly what GP is arguing. Obviously GP believes in a free market.
Amazon’s belief in their own market power is irrelevant.
No seller is obligated to sell on Amazon to begin with, so this entire premise is false.
Clearly the FTC disagrees with your logic, and I'm glad they do. FedEx, UPS and USPS should be sued too if they did what Amazon is doing.
If the FTC fails to implicate them, rest easy. At least Europe knows how to keep their market on a leash.
It is literally Amazon’s business to offer pricing at equal to or better than their competitors.
> …the only reason they care is that they want to crush the competition.
Every company wants to beat their competition, and many (most?) want to “crush” their competition. Don’t you think Target wants to crush Amazon? Don’t you think Google wants to crush Apple in smartphone sales? Don’t you think a local retailer would love to crush Amazon for products in their niche?
The only question here is whether Amazon is doing this in an abusive way and/or a way that negatively impacts consumers.
We’ll find out in the trial…
For their own products they can.
For third-party items, Amazon is free to lower their margin.
I have personalky spoken to wholesalers who sell widgets X (lighters etc) to retail stores.
If the retail stores undercut everyone else and drop the price below MSRP, they will exclude them in the future. There is centralized price control even though the retailers are free to do what they want.
That is done by auto dealers and anyone else who does MSRP. The difference is that they are still competing in that product category. Amazon on the other hand is a platform that stands BEHIND them. This leads to an emergent price cartel, just like in the propu lica piece on NYC real estate:
And as you've stated, it's done by anyone who publishes a MSRP.
https://www.deltafaucet.com/for-professionals/product-resour...
https://assets.ctfassets.net/zlhl2y58oyef/3wENIXr7qvqyOoVD6R...
This is no different than what non-e-commerce stores (such as Walmart) have been doing for years.
As a simple practical manner a small manufacturer can more cheaply sell products at their factory than the overhead of selling through Amazon or anywhere else. You often see this where mid sized brewery offers beer kegs more cheaply on location.
Amazon’s policy simply increases prices without any benefit to consumers or the overall economy.
The move that Amazon's price be no higher than offered elsewhere is the most pro-consumer move possible. Hilarious people are complaining about it. Any second-order effects of this are on the actual seller, not Amazon.
Your conclusion that this increases end pries for consumers has nothing to do with Amazon, but the sellers themselves.
Yes, but at the end of the day Amazon to remove the seller for any reason, so even if the FTC succeeds here, Amazon will simply purge those sellers who are not offering the best price, even if not explicitly stated.
There is no reality where Amazon allows their site to be inundated with higher priced goods compared to competitors.
Dictating how you sell elsewhere is a clear step beyond that.
There is no obligation to sell on Amazon, nor a requirement for them to raise prices on other platforms. They could simply offer the lowest price everywhere. The result? Lower prices for Amazon customers. If they raise the price, then that's the seller's fault, not Amazon.
While true, this ignores the important point that Amazon is only able to do this anti-competitive practice due to their market dominance that effectively forces many sellers to sell on Amazon.
> nor a requirement for them to raise prices on other platforms.
That is what this whole thing is about. Sellers that sell on Amazon aren't allowed to sell for lower prices on other platforms that are cheaper to sell on.
If Amazon was able to offer lower prices for its customers by offering sellers a marketplace with lower costs compared to competitors that would be great. Instead, they abuse their market dominance to prevent any competitors from offering lower prices by being more cost efficient for sellers. This is extremely nasty as it effectively prevents any competitors to Amazon from building a market share since consumers will have no price incentive to switch and sellers will not want to switch due to the smaller market share on those competitors' platforms.
It could not be more clear that this is anti-competitive behavior achieved through abuse of a dominate market position.
Yet here we are with sellers WANTING to sell their items at a lower price on places other than Amazon, but if they do, they'll go out of business. That doesn't sound pro-consumer.
I'm a consumer. I'd like to be able to buy items for the lowest price the seller wants to offer me. That's not happening in some cases because if they do, Amazon will exclude them and they'll go out of business. Yeah, definitely not pro-consumer. Pro-amazon, sure.
Do you agree with the look and feel lawsuit that Apple had against MS? Or think that Roku, Amazon, Google , etc did something untoward because they came after Apple with set top boxes?
As far as Amazon copying others as a marketplace owner, ever heard of the Kirkland’s brand? Store brands have been around forever.
https://www.reuters.com/legal/litigation/amazon-copied-produ...
> thousands of pages of internal Amazon documents examined by Reuters – including emails, strategy papers and business plans – show the company ran a systematic campaign of creating knockoffs and manipulating search results to boost its own product lines in India, one of the company's largest growth markets.
A big company can stall a copyright lawsuit for as long as it wants. Small companies cannot win against Amazon in court.
https://www.latimes.com/archives/la-xpm-1986-07-14-fi-19337-...
Small victories like the chain wrench lawsuit against Sears happen. But they are rare.
https://www.chicagotribune.com/business/ct-bionic-wrench-sea...
And CVS follows the formula of name brand OTC drugs down to the very ingrediant to make house brands. You can’t copyright a shirt measurement.
And before you call me an “Amazon shill”. I got PIPed from Amazon less than two months ago. I’m the last person who has any love for Amazon. Honestly I don’t have any feeling either way. It was just my 8th job over 25 years, they gave me a nice check and I had a comparable offer within two weeks.
Like with the sears example, large 'mall' like organizations do outright steal designs and stonewall the original copyright holder.
A random housebrand does not have access to Amazon's statistics, logistics or reach. Amazon is looking at stats that they hide from their providers, to choose who to copy, then out-price the original seller. (Due to inhouse logistics)
They are not even remotely the same thing.
And Walmart sells a lot more than Amazon.
You don’t think that every store knows how to undercut other products in its own store with house brands?
People act as if you have to sell on Amazon. You don't. That assumption and expectation is why Amazon is dominant to begin with. Sellers should leave if they don't like it, and that will naturally soften Amazon dominance.
Imminent collapse and bankruptcy when they leave due to Amazon's dominant market position. That you can set up a shop anywhere does not mean anything when all of your potential customers are only going to the Amazon digital strip mall.
37% is not a monopoly. If you have a differentiate product, you can set up your own website through Shopify or any number of places.
And if you haven’t been paying attention, the FTC has been laughed out of court for the last five years every time it has gone after BigTech
The government has a “monopoly on the legal use of force”.
Look no further than Florida to see what an overzealous government can do when you disagree with them or the police that raided a newspaper office because they reported on police corruption.
I’m much more worried about when the police are behind me because “I don’t look like I belong” in my own neighborhood than the Google car mapping my street.
The government at least has the obligation to appear as if it's beholden to your will and rights. Corporations have no such qualms.
Also please tell me a scenario where Amazon takes over all retail?
If you haven’t been paying attention, the justice system and political parties gerrymandering hasn’t even been trying to act like they are behaving fairly.
The governor of Florida has actively been punishing companies both big and small that have been speaking out against him.
But that's not how this works.
It's technically true that fiber has competition if another ISP is offering dialup in the same area. No one in their right mind would agree that's actually a competitor in anything but name.
And so it is here.
If not selling on Amazon is an existential risk for your company, Amazon is effectively a monopoly, and THAT is what the law cares about.
Amazon is not exactly cheap for sellers, so the price has to go up everywhere.
You right now can set up a site on Shopify and sell your goods.
If you are selling a differentiate product instead of cheap crap imported (or drop shipped) from China, you can create demand without going through Amazon.
For instance, I was specifically looking for Samsonite zipper less luggage because I trusted that brand and it wasn’t available on Amazon. They chose not to sell on Amazon and I bought it directly
I'm not going to bother explaining further, but thanks for confirming you don't understand the issue. It's not my job to educate you.
Amazon is saying that sellers cannot offer a fair low price to customers on other platforms if the seller can't also offer it on Amazon. This is 1) anticompetitive, 2) anticonsumer, and 3) insane.
Consider this test:
- Seller buys a crappy LED bulb from China for $0.80
- Seller is happy to list the bulb on Walmart, Target, etc, for $2.00. Net of fees and shipping and stuff they make enough money
- Amazon charges $3 in fees. Obviously the seller can't afford to sell for $2 on Amazon. They sell for $5 instead.
- However, now the seller also can't sell for $2 on competing sites. Amazon, leveraging its market share, has dictated that the seller must price Amazon's fees into pricing on non-Amazon sites, so consumers pay $5 to Target for something the seller would have been happy getting $2 for.
This is insane.
Let's use your example. The sellers should stop selling that item on Amazon, and sell their light bulb on Walmart, or where-ever. Customers who really need that will go find it at Walmart, or where-ever. This strengthens the competitors to Amazon, which is bad for Amazon and good for the consumer. The consumer also find the lower price that they wanted. Alternatively, they buy the alternate product on Amazon which would be cheaper than the inflated price (per your example). Again, good for the customer. Everyone wins in every scenario except for the seller, which is how Amazon and every wholesaler operates.
Suppose the FTC wins this case and sellers can put whatever price on whatever site. Amazon, like any store wants the lowest price. Not to mention there are only some many items you can show on the first page of results. They will find some other reason to remove these sellers and/or their items.
Now maybe there's another case to stop that behavior too. The result is that companies are not obligated to let sellers on their site. That is insane.
In summary, there will never be a scenario where Amazon allows sellers to sell the exact same item for more than Amazon's competitors, unless the government forces Amazon to let sellers sell whatever on their site.
Math doesn't check out. Not to mention that if sellers stopped selling on Amazon they wouldn't control so much. How exactly is making everyone sell on Amazon going to solve everything?
Sellers should stop using Amazon if they don't like their policies, and the issues will correct themselves.
Your 'feelings' about how this works only matters to you. The US branch of oversight for trade has declared (with a lawsuit) that this behavior is unconscionable and either is or will be illegal by the time this suit is finished.
You're welcome to dispute the FTC and the crowd here on HN, but you need to provide some sort of data to back up your claim of: Sellers should just stop using Amazon...the issues will correct themselves.
The FTC's suit alleges the exact opposite of what you allege. The FTC states that there is harm to the entire economy if Amazon is allowed to continue this practice.
Please cite the studies, data, or metrics you used to claim '...will correct themselves."
Thanks @endisneigh.
> the study corroborates the general sentiment
Seems fishy ... Good thing that even corporations like Amazon get a day in court.
(and I'll be generous and I'll pretend Walmart has zero fees)
Amazon: ($5 selling price - $3 fees - 0.80 COGS) * (100k * 35%) = $42,000
Walmart: ($2 selling price - $0 fees - 0.80 COGS) * (100k * 7%) = $8,400
And even if they price the same on Walmart as they would on Amazon: ($5 selling price - $0 fees - 0.80 COGS) * (100k * 7%) = $29,400
See the issue? The problem is that one seller on Amazon moving to another platform won't change the fact that Amazon has the majority market share. That's how market momentum works and it's why we have antitrust laws.
Even with exorbitant fees, they are still where sellers need to be. And they are using this market share to force sellers into overpricing on other platforms so that they maintain this unfair position.
If Amazon's market share is 35%, then the non-amazon customers comprise the other 65% (which, being greater than 50%, constitutes "most").
Amazon: ($5 selling price - $3 fees - 0.80 COGS) * (100k * 35%) = $42,000
Not-Amazon: ($2 selling price - $0 fees - 0.80 COGS) * (100k * 65%) = $78,000
If a seller raises prices to match Amazon, they can be undercut elsewhere by those willing to forgo Amazon for the larger overall market share.
Amazon is convenient to small sellers in that they offer more customers on a single site than any other, and with limited bandwidth sellers logically want to minimize how many different sites they need to interact with, but charging for convenience is not inherently anticompetitive behavior. Amazon may have abused it's position in the particulars of its MFN implementation, but MFNs in general are fine.
1. We're ignoring fixed costs associated with onboarding with an ecommerce platform. Selling on one website has significantly lower fixed costs than it is to sell on every ecommerce site on the internet minus one. We're talking thousands upon thousands of retailers, not a handful.
2. Not all ecommerce sites represented in that 65% permit third party sellers.
This is a problem in terms of organisation. If lots of people stop selling on Amazon this would be true. The problem is individually each seller is motivated to deal with Amazon so long as lots of other sellers are. A mass exodus from Amazon would in short order make the Amazon store far less relevant, but nobody wants to leave before everyone else is doing it because until then it costs them
It's probably an impossiblity if your business model is selling cheap imported Chinese garbage at a profit, but that's the businesess you chose. Others have chosen to sell quality items on their own terms. Those are the businesses I want to reward.
So here's a weird externality. As a decently well off tech-worker, I don't care if I'm paying 5$ or 2$ for lightbulbs, even if I'm re-lighting my whole house. The seller will sell on Amazon, because it is the largest market and will set their prices on other markets to match Amazon. I'll buy on Amazon, because it isn't worth my time to check multiple websites to get the best price (especially when SKUs differ and I have multiple other items I'm buying, etc). And now people who do need to save money, can't also find this lightbulb at a cheaper price on competing marketplaces, even if this lightbulb is actually the best quality.
It's the opposite of what you're saying. Sellers not selling particular items on Amazon is good for consumers who are price conscious, because if they need that particular item they will search for it and find it cheaper on another store, strengthening that one and hurting Amazon.
And if they don't care they will find cheaper items on Amazon. Everyone wins except for the seller, which is Amazon's MO.
Sellers don't just 'not sell this item on Amazon', because it is the largest single market. This is like, the whole issue in question.
> because if they need that particular item they will search for it and find it cheaper on another store, strengthening that one and hurting Amazon.
This is the exact thing that isn't happening, because Amazon is abusing its market position.
But, even if this was the case and the seller chose to sell on a different marketplace and take the Amazon ban, then it still wouldn't be as good as having just having the item listed on both marketplaces at two different prices. Because then I wouldn't be able to buy the best lightbulbs in one convenient location.
That's be much harder work, though, so regulation might well still have the intended effect.
Either their reason will need to be through their seller terms and conditions, or it'll have to be done on an individual seller basis.
Amazon relies on scale, and therefore standard terms and conditions for all sellers that can be scrutinized by regulators.
If it's done on an individual seller basis, I don't think they'll be able to do it while having the same effect in practice.
Online retailer Foo also has a store, and provide the same services that Amazon for their online shop at $5 per unit. The online retailer adds a profit of $2 per unit. Total price $17 per unit. Retailer Foo is more $ efficient for those services as a result customers price compare. Foo is rewarded for their effi with higher volume, manufacturer is rewarded with higher profit and consumer is rewarded with lower prices. Enforcing market competition led to all 3 parties involved being rewarded. Retailer Foo over time grows a larger customer base as people learn to price compare with them and forces Amazon to stop rent seeking.
But the above doesn't happen in the real world. Amazon enforces that the retailer lower their price on Amazon to $17, while still collecting $12 per unit. The company now can sell on foo, but only by selling on Amazon at a loss. They can't afford that amount of loss from Amazon and stay in business. So Amazon avoids competition. They can't pull their product from Amazon because not enough customers vist Foo retailer yet to make up the volume.
So in the end Foo retailer is more dollar efficient, but is prevented from growing and benefiting the marketplace. Amazon leverages its outside market size to avoid competition. Market participants preventing competition is against the benefits of capitalism and harms the consumer. So, it benefits the consumer to ensure Amazon has to actually compete with the more efficient competitor and stop rent selling behavior.
I think this speaks to the nut of the problem. Unless there is an incentive upstream of the misalignment of parties, then any number of lawsuits after the fact will have a "war on drugs" level of futility.
What to do then? In an alternative universe perhaps the FTC was implemented to improve trade by promoting standards, ontologies and authenticity verification that lead to greater freedom of trade and less gatekeeping.
Amazon demands that sellers increase their prices on selling platforms with lower overhead. A demand to increase prices does harm consumers.
Demanding the lowest price does not harm consumers. Overstock, Wayfair, Walmart and others do the same thing. The result is the lowest price for a given product on all sites. This is unquestionably good for consumers.
If the price is higher than the fault is simply that of the seller for raising it. All e-commerce sites want the lowest price for their customers.