Amazon very often competes directly with sellers on the Marketplace, and often undercuts them on price.
There are products they sell below the purchase cost, sometimes below manufacturing cost. You can't compete with that unless you have piles of money to burn.
They sell at a loss until they shake everyone loose from a product, then dominate all sales of that products on the Marketplace, raising prices to profitability when they feel like it.
Don't forget they get all product sales information and statistics from every seller on the Marketplace - basically all the market research necessary to pick only "winner" products to sell. Then, when they feel like it, they require sellers to produce original invoices proving purchase of the items. These invoices conveniently contain all necessary information for Amazon to start buying the items directly themselves so that they can sell the item at a loss until you can't compete anymore, leaving Amazon as the sole source for the product.
Wanna be part of Vendor Central - selling directly to Amazon? They dictate the pricing and strong-arm you into selling exclusively to them in many cases. There is no negotiation - there is no adjusting pricing based on quantity ordered. And as much as people might want to think Amazon just buys enough quantity to get what they want - they don't. They just tell you what it will be.
> or exclude competition to that extent?
They can ban you from their Marketplace (the largest consumer Marketplace in the world) at will, with little to zero recourse on your part, via an opaque "Seller Performance" team that only responds to email, sometimes, and provides vague responses to what policies you might have broken.
That is, if you somehow get the eye of the Seller Performance team upon you. The reasons they go after certain sellers and leave others alone are as mysterious as the team behind the decisions.
If Amazon can actually compete with you in a given product niche, then you're not bringing any value to the table (since they own the customer relationship, the fulfillment, the logistics, etc.), so why do you deserve to make money? There are a gazillion product categories on Amazon. There's no way they can bring products to market in all of them. They focus their attention on markets where brand differentiation isn't very important. Usually those markets are that way because what consumers care about is price, convenience, and surpassing some minimum level of quality. Those are the spaces where Amazon puts forward their own product. And if your livelihood is tied to being a relatively generic brand in a product category where consumers really only care about convenience and price, then you need to find a different way to make it in the world.
Then Amazon requires the seller to produce invoices showing purchase of the items, usually with some sort of vague threat of suspending your account if they can't "verify the authenticity" of your products. The invoice, of course, has everything needed for Amazon to start sourcing the product themselves - and now they know your cost.
So they proceed to purchase the product, sell it at a loss until you can't hang anymore, and now Amazon is the sole source for the product.
It's brilliant, actually. But it's definitely Anti-Competitive.
Just like the "dumb pipes" argument with Net Neutrality - If you wanna run a Marketplace, you shouldn't be allowed to "compete" in the very same Marketplace. You should not be allowed to collect and then abuse all the data the Marketplace produces.
No, it does not. They are missing the most important piece of information: Cost of Goods Sold. They also don't know where you sourced the product. Or which features are important to customers and which are not.
> Then Amazon requires the seller to produce invoices showing purchase of the items, usually with some sort of vague threat of suspending your account if they can't "verify the authenticity" of your products.
This is only for trademarked products where the trademark owner has registered with Amazon. And the purpose is to protect consumers: by requiring proof that a product has been sourced from an authorize reseller, rather than some factory making knock offs or somebody buying stolen goods.
> So they proceed to purchase the product, sell it at a loss until you can't hang anymore, and now Amazon is the sole source for the product.
The only sellers this alleged strategy would harm are sellers who are selling a trademarked brand for which they are not authorized. But why should those sellers even be on Amazon? And how would this be any different than Amazon buying these products directly from the manufacturer and being the only seller on their website? In other words, they don't need to do what you're alleging. They are free to just claim certain products as 1st party only.
Separately:
I sell speaker wire on Amazon. I compete against their Amazon Basics brand. I have a viable business that is growing. Because I know more about this market and its weird little crevices than Amazon ever will.
I can tell you first hand, this is not true. This is the "official party line", as it were, but not true in practice. Particularly if you FBA anything.
Get enough returns of a product and Amazon will freeze the listing until you provide an invoice - FBA and FBM.
For us, "enough" returns was 4 on a single ASIN in a week, out of the thousands we carry. It's a totally random system.
> I have a viable business that is growing
I wish you best of luck! In our case, we're an ecommerce company operating our own warehouse and multiple sales channels including our own websites. Amazon is but one of those channels, and we don't rely on it for company livelihood. I would be terrified to live solely off Amazon, knowing the rug can be yanked out at any time for any reason and with zero recourse. You can do everything right and still get canned.
Is there evidence of Amazon driving a company out of business by abusing this position? If there is then that could be a problem.
No, it really is not a problem. Amazon does not have a monopoly on consumer purchases. If your livelihood is dependent on selling on Amazon, a company which sells tons of products first party, then you need to be prepared from day one for the possibility that Amazon is going to bring a product to market in your category under the Amazon Basics brand, or that they will go directly to the manufacturer whose products you are selling.
Period.
Amazon isn't running their business so you can make money. They're running it so they can make money. As long as they think their interests are aligned with yours, then there's a chance for you to participate profitably on their platform. The minute that changes, you better have a plan B.
To operate a 3rd Party Marketplace while also harvesting said marketplace's data and then deliberately targeting top products, killing those 3rd parties in the process?
I just don't get it. Do you think someone selling a generic product that only differentiates on price has some unalienable right to make money on Amazon.com? Or that some wholesaler buying branded products has an inalienable right to somehow not get squeezed out when the only value they provide is placing POs with a vendor?
It's not about what intrinsic value any particular seller can bring - it's whether or not Amazon has become a defacto monopoly and/or practices anti-competitive behaviors.
It's not anti-competitive behavior, it's just ordinary competitive behavior. Sometimes Amazon decides to compete with the sellers on its platform, and woe betide them when it happens because Amazon is an extremely competitive business.
Anti-competitive behavior is when you interfere in someone else's ability to compete with you. No amount of outcompeting competitors can make a business anti-competitive. It's almost a tautology.
Is it theoretically possible? Yes. Practically? At scale, its hard to say for sure.
People have also been saying Walmart is quite anti-competitive for years for what that's worth too.
No? When exactly did they start selling large numbers of items on their website that aren't in stores?
Hell, Frito even has their own employees stock the shelves, which is why the chip aisle tends to look immaculate compared to the rest of the store.
Something sounds odd, because I interviewed with a no-name company that handles this sort of thing close to a decade ago, and while I don't remember if they did it for Walmart, they provided similar fulfillment services for several large e-commerce websites.
At what point is it a defacto monopoly? A huge share of people shop exclusively on Amazon, particularly when compared to 10 years ago. There's no sign it'll stop growing any time soon.
Choosing not to, or being prohibited from selling on Amazon effectively blocks you out of a significant share of ecommerce sales. There's no way around that.
If the argument is that Amazon might become a monopoly in coming years, I can totally see that. But I don’t see how it is one now.
> The first quarter 2019 e-commerce estimate increased 12.4 percent (±1.1%) from the first quarter of 2018 while total retail sales increased 2.7 percent (±0.4%) in the same period. E-commerce sales in the first quarter of 2019 accounted for 10.2 percent of total sales
I don't think e-commerce is the right market. Most companies selling widgets just want to get their goods in consumer's hands. They don't really care how. Amazon makes it easy and does a lot of the work but sets the terms. Otherwise they'd be going after that 87.6% that's not done through e-commerce.
[0] https://www.census.gov/retail/mrts/www/data/pdf/ec_current.p...
People should ask why. Is it the prices? No. Is it the discoverability? No. It's because when you have a problem with whatever you bought you get reimbursed. No "call Samsung hotline", no "we'll add this totally not free warranty package in your cart".
Consider for comparison my recent experience purchasing a wedding gift from Bed Bath and Beyond. They had done everything right to capture my purchase: They hosted the wedding registry, kept the new couple's address hidden, and by not allowing me to select "I'm buying this somewhere else" made it difficult for me to get the item cheaper from another retailer.
Despite all of that, I still abandoned the cart and came back to Amazon. BB&B requires Verified By Visa, and I require my credit card provider to not be stupid about security, so my card was declined with no recourse.
Mind you, Amazon has declined my payment before, too. But they only did it once, more-than paid for their mistake, and haven't troubled me since.
Amazon is a monopoly like Visa and Mastercard are monopolies. They enrich themselves while facilitating commerce. While I'm uncomfortable with that power they hold, I wouldn't want to be without it.
Whether or not any individual sells on Amazon has absolutely nothing to do with their anti-competitive practices.
But my argument was poor.
Even ignoring that, do you have an example of products that don’t exist outside of amazon (other than amazon labeled products).
Is there any report from sellers that were banned just because? I mean, authentic sellers, not fake etc.
Edit: still googling, but it seems in many cases there is a ToS violation, like multiple accounts, or shady practices. One seller got kicked because "we grew up too quickly and we were unable to deliver in time". I am really wondering which sellers got kicked despite being respectful of the rules. All of them, including the user experience, because I think that's main reason amazon kicks you out - if I can get scammed or my items don't ever make it on time, why would I even bother using their service, instead of buying elsewhere?
This has actually happened? Can you point me to examples with price charts?
If I look at this article[1], they have a screenshot of size 4 pampers for 22 cents each, in 2010. In 2019 dollars that's 26 cents. The current amazon brand is 23 cents each, and the same pampers are 26 cents.
It doesn't seem like they've abused any dominance here. It's very possible they could do it in the future, but that's not the same thing.
[1] https://www.businessinsider.com/amazon-diapers-price-war-201...
Not only did Amazon not carry it, but Amazon also prevented third party sellers from listing the competing devices as well. That is textbook anti-competitive behavior, which is probably why Amazon finally started selling them again recently.
Apple also sells third party hardware on their site. Should they be forced to sell Dells besides their Macs?
- If Apple banned the Amazon app from iTunes, then that would be anti-competitive behavior.
You can still access Amazon in all these situations at amazon.com, and just like with the chromecast and Apple TV, whether or not there is access somewhere is irrelevant to the nature of the behavior being anti-competitive. Amazon was being anti-competitive by banning competing devices on it's - platform.
Google removes and deprioritizes sites all the time that breaks rules. CVS stop selling cigarettes in their stores.
CloudFlare just kicked off 8Chan.
Spotify bans musicians. Which one of these are anti competitive and which ones aren’t?
If Apple opened stores that sold a wide range a goods, including from other sellers, and then banned Dell, then yes, your hypothetical would be anticompetitive.
Does a physical store have to sell every product imaginable?
This type of question has already been answered. Are you aware of what sea-lioning is?
In the case of Amazon there are sufficient barriers to entry that if Amazon were to make profit maximisation its goal, then it could increase prices and enjoy above market returns for a significant period even in spite of the eventual 'possibility' of competition.
To suggest that regulators should wait until the market is fully captured before considering a firm a monopoly is patently absurd since by then the efficiency losses would have already been realised and the remedy becomes harder to implement.
Also, I urge you to find anyone who agrees that there has been an increase in the quality of products available on Amazon. On the contrary, there are countless stories of people lamenting the decline in product quality.
Wikipedia has a long but layman-accessible section on Europe's competition laws: https://en.wikipedia.org/wiki/Monopoly#Law
Has Amazon come up with a way to dominate markets without controlling prices or excluding competition? Right at this moment, my answer is, "maybe?"
Cartels are also bad for markets, but aren't monopolies either. Monopolies have become a deprecated technology, but vertical integration lives on in new ways that resemble a feudal system more than a single empire. The economy as a whole has gotten so big that there is room for more than a single player at the top, and so we get cartel-like behavior between the largest players instead of full-blown monopolies. Each of them is large enough that they can ignore unrest from their customer base, and as a result they have more incentive to cooperate than to compete. The difference between Microsoft and Apple isn't the quality of their product anymore, it's a brand of tribal identity.
As abusive, anti-competitive practices continue to be improved on, we should not be constrained by outdated theories that only focus on 19th and 20th century phenomena.
The same applies to censorship. Manufacturing Consent described how the western powers could have the effect of censorship without outright censorship, and that's from over 3 decades ago.
Amazon got this big because no one wanted to be as customer obsessed as Amazon. Not because they stifled competition.
Competition breeds innovation - lower prices, better customer service, new ways of doing things... none of those things happen without competition, because there is no incentive to improve.
Look at Comcast / AT&T regional monopolies, which started out promising lower prices until they cornered markets then started raising prices while lowering service quality... or, even before that, Bell Labs suppressed inventions like early hard drives out of fear it would hurt their telephone monopoly.
Those are the three things Amazon has done amazing at (lower prices, better customer service, new ways of doing things). Isn't that a paradox? You take the stance that only competition can breed this but in this case Amazon has done those things while still reducing competition. In fact, it is helping consumers that has led to people buying things on Amazon and it getting this big. Not the other way around.
Is it that people are afraid that at some point Amazon might stop doing these things? I agree that if what amazon is doing has lead to higher prices, worse customer service, and stagnant methods of doing things that would be bad. But thats not whats happening here.
It's neither.
It wasn't active competition (or the lack of it, or it being reduced) that generated that outcome. It was Bezos (just as it was Sam Walton before him), he dictated that approach as the basis for Amazon's best likely ability to reach massive scale. There were no possible alternatives, if the goal was to get very large as a retailer. Amazon is Jeff Bezos, he has raised it like a child from day one, totally in control of what it is and what it became.
Bezos was facing a scenario of: approach it that way, or Walmart will take care of it for you eventually and make you redundant.
More precisely it was Bezos looking at the future and having to compete with a Walmart that fully awakened to online retailing. In that future forecast sense it was motivated by the threat / fear of competition that would inevitably crush a smaller Amazon. And if it wasn't Amazon or Walmart, someone would have done it most likely, Bezos surely understood that; that the Internet would make a mega platform like Amazon possible.
For another example of this premise in action: Microsoft wasn't so wildly aggressive and competitive due to the marketplace, or other competition or animal spirits in the water, it was solely due to the personality of Bill Gates. It mirrored his personality, aggressive nature and competitiveness. Gates ultimately made Microsoft in his image (that earlier version of Microsoft anyway). He dictated what it became, he controlled the growth and nature of its culture (and once you set that in order, it flows in that mold forward, a persistent mimic, until something breaks it).
Because - I believe - people are overwhelmingly reactionary, easy to excite and short-term focused. Microsoft was the end of the world. Google is the end of the world. IBM before them. Yesterday Walmart was the destroyer of worlds that was going to kill every small business in every town in America. Countless articles were written for a decade espousing that as fact, inevitable, unstoppable. They were pure evil, everyone knew it. Nobody could compete with them. That reactionary emotionalism against The Corporate Overlords, is now retrained on Amazon as the destroyer of worlds, the evil entity that will crush everyone. Tomorrow it will be someone else.
The most interesting story about Amazon - which is being almost universally ignored - is that the growth in their retail business has already mostly stopped (some shareholders are finally noticing). In the next few years that growth will continue to trend toward between zero and low single digits. The mighty retail conquerer of worlds is running out of retail growth and mostly that is being ignored because it doesn't bolster the story of the moment that Amazon is going to eat everything.
Because it doesn't matter who ultimately made an anti-competitive world marketplace, it's still anti-competitive and ultimately impossible to run morally when you participate in it in parallel. eg if ebay was undercutting other people's auctions via buyout prices under their own brand
In that scenerio, and captialism in general, eBay doesn't owe sellers on its marketplace the right to sell items at all. They've just been given a chance to make hay while the sun shines.
I feel like a lot of people jump to attack Amazon on the basis of what they could do (because they're so big) instead of what they're doing currently.
Not if they are reducing competition by virtue of causing less-competitive businesses to lose market share. I feel like there's some cart-before-horse going on in your perspective on this. Competition is wonderful. Competition is amazing. Competition is good for consumers because competitive businesses drive less competitive businesses out of business. Amazon is a perfect example of everything we want to see, panning out in just the way we want. Amazon has materially raised the bar of customer satisfaction, and if Amazon's competition wants to stay in business, they will have to do even better. I look forward to seeing what they come up with!
For the later if there is a proprietary format on something major and it shuts out competition for no benefit like say "screws only they manufacture and cannot easily take other standards" that would be "anti-competitive" as it does nothing to compete better.
For the previous say "better infastructure to lower per unit cost" and producing at an industry standard percentage profit margin could be called hypercompetitive as it does nothing to stop those with sufficient capital from scaling up.
In practice however both are classically anti-competitive. The later would by definition reduce the number of potential competitors to those with more resources.
There could be some arguements about how they are relatively bad they are and should be treated. Even if both should be "illegal" they are two different types like say arson and murder.
https://news.slashdot.org/story/19/08/05/2129248/amazon-sque...
"Monopolization Defined"
https://www.ftc.gov/tips-advice/competition-guidance/guide-a...
> at what point does it become problematic?
I don't know , probably at the point where that company becomes a net negative to the economy.