Amazon's Japanese headquarters raided by nation's regulator | Hacker News Reader

Amazon's Japanese headquarters raided by nation's regulator

theguardian.com

103 pointsjonbaer35 comments

So it sounds like the issue is that Amazon is using its weight to force suppliers into eating their platform fees rather than pass it on to the consumer.

I'm not sure of the exact numbers, but imagine Amazon takes a 10% cut of any sale on its platform. If a supplier sells a widget for $100, they'd only get $90 from an Amazon sale. Amazon is unfairly preventing them from marking up their offerings on Amazon... i.e. preventing the suppliers from selling their widgets for $100 on their direct website, and $111.1 on Amazon (so that a sale is a sale and always gets them $100 in revenue).

If a suppliers margins are razor thin this could cause them to lose money on Amazon sales... so they'd either have to mark up their product everywhere and risk losing their competitive edge, or eat the loss on Amazon... or just not "collaborate" at all with Amazon.

I don't really see why this is necessarily unfair, unless there is literally no other way to reach consumers other than through Amazon: shouldn't their own product pages show up in Google search results, for one, not to mention other online stores?

It's not really about whether it's unfair. It's about whether it's against Japan's democratically defined laws.

Of course; I know very little about Japan's antitrust laws, it's really beside the point whether they are democratically defined or not. It's on Amazon to argue about their interpretation through Japanese courts or by whatever is the mechanism of redress they have in this case, if any.

I was responding to the parent comment calling the arrangement as described in article unfair.

Actually, I never said it was unfair, I just elaborated on what Amazon had allegedly done to warrant a raid from the antitrust regulators.

> unless there is literally no other way

is this a useful standard? this is ostensibly always true - if nothing else, you can grab a sign and walk into any populated area to 'reach consumers'.

Well maybe not to that extent, but to my knowledge things are not that bad in Japan yet :) Let's just not confuse market share with monopoly (in economic sense of course, which is what we are talking about here -- the Japanese legal definition may well be different, and it is that one that matters for Amazon.)

> Japan’s antitrust law prohibits a firm from abusing a superior bargaining position to illicitly make a business partner accept unprofitable trade conditions

If the trade conditions are really so unprofitable, why would the partner do business with you? This seems like ridiculously broad regulatory overreach. It sounds like it's illegal to be good at business in Japan.

> If the trade conditions are really so unprofitable, why would the partner do business with you?

Because you have no choice. Because they are a monopoly. Which is the basic point of antitrust law.

Probably lack of business imagination on my part, so can you explain a situation where a company would be forced to do something that would lose it money?

If you agree to a deal you must be getting some benefit out of it, right?

> If you agree to a deal you must be getting some benefit out of it, right?

Well I suppose they get to enjoy the benefit of not simply going out of business.

The sharecropper working the land for his fief lord gets "some benefit" out of it, yes, in that he and his family get to eat and thus live. That doesn't make it a good situation.

Sure. Suppose you live on a sunny carribean island and own a banana plantation and sell bananas for export profitably every year and live a normal life and raise a family.

Then someone comes along and creates a shipping trust and corners the market on boats leaving the island and says sell your bananas to me at a loss or leave them on the docks to rot.

Option A is to sell them at less than the cost it took for you to pay your workers to harvest them, option B is to watch them rot in a matter of days.

Yeah sure the free market says that this will cause someone else to come along and create a shipping alternative. But the shipping trust knows this too. So they say if anyone tries to compete with us we'll drop the cost of shipping off the island to free temporarily until your new shipping business fails, and then go back to high rates.

Nobody will finance the new shipping company given this predicament, so they can't even get enough money together to buy a boat.

Meanwhile, the trust is making a total killing selling bananas at premium prices while buying them below cost, rapidly building a war chest to permanently be able to outlast even a well funded upstart shipping competitor in a price war.

Yes the "free market" should solve this problem but the whole point is that trusts and monopolies subvert the free market and prevent market forces from functioning. Thus the role of government in stopping them.

That sounds plausible in a world without contracts. But with them, the upstart will lock-in a few customers at a decent rate, which they will have to pay even when the big company drops theirs.

A more plausible explanation here, in my humble opinion, is that it's only unprofitable for some of the suppliers. By squeezing the margins in the market, Amazon forces everyone except the leanest out.

Not only is it plausible it's completely common. It's just a textbook description of how trusts work.

The upstart can't lock in contracts when another well-funded monopoly company is engaging in predatory activities. The monopoly has market power which it can use to put competitors out of business and extort profits from suppliers.

It's really just econ 101 and a pretty settled concept. Now there is certainly an argument to be made about the degree to which Amazon is actually doing this, but from a theoretical standpoint none of this is confusing at all, and there are numerous real world examples of this in action.

I admit my ignorance. Can you give me one of those examples?

The article mentions an example:

>the JFTC found the firm had required suppliers sell items on Amazon Japan at the same or lower price as any listings they may have on on other platforms.

Correct me if I'm wrong but this seems odd. I was under the impression that Rakuten had a larger market share than Amazon Japan.

Not anymore.

According to JETRO’s 2017 report, in terms of domestic e-commerce, Amazon had a 20.2% market share in 2016, compared to Rakuten’s 20.1%. [1] This is not a monopoly per se, but 20% of the market is too big for any business to ignore, giving Amazon (and Rakuten) significant leverage, particularly over smaller businesses.

[1] Summary in Japanese: https://netshop.impress.co.jp/node/4590 (link to the JETRO report is at the bottom)

Trade conditions in Japan are generally more restrictive than in the US or UK (e.g. resale price maintenance, which has been ruled illegal in each, but is accepted as fact by consumers in Japan). The impenetrability of Japanese markets was a famous point of complaint by Americans in the "tiger" years of the 1980s.

Without ascribing too much to history, the postwar Japanese economy has a history of accepting some inefficiency if it helps the community, and distrust of large, monopolistic corporations -- cf. the collective memory of the zaibatsus, which were dismantled after the war.

While that specific application of that strategy is illegal in the US, manufacturers get around it by setting a MAP (Minimum Advertised Price) limit with their distributors. The most common example of this being used in practice is when you see an item on Amazon or Newegg with the price listed as "See Price in Cart". It's obviously easy to work around that legal loophole as a consumer (it's just 1-2 more clicks) but it's much harder for corporate customers who typically have to solicit a quote or multiple competitive quotes before making any significant purchase.

Wouldn’t they keep everything important in the cloud?

Given that it's Japan, it's very likely that a good deal of it is stored in paper, especially faxed copies and hard contracts.

Title should point out this is the antitrust regulator, not tax or securities regulators.

Does it have to? I sort of assumed it would be the antitrust regulator. Amazon is too big and smart to engage in outright tax or securities fraud.

Yes? It could've been their environmental regulator for all we know.

Or labour, if they had illegal working conditions, or anything at all, really...

This is something I've been told when I worked for a hedge fund that had an office in Tokyo: Japanese regulators can raid you, download all your information, and that information can somehow end up in the hands of your rivals. It sounds like regulator raids can be used for corporate espionage and it can happen quite arbitrarily. I don't know if it is true but the fund certainly believed in it enough to setup a whole separate network in Tokyo that was not connected back to the network in the US. Everything done with the US was done via remote console.

Nobody is too big to engage in tax or securities fraud.

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