Amazon Is Accused of Forcing Up Prices in Antitrust Complaint
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A few days ago, I was watching Goodnight Mommy (2014) on Prime video (I'm a prime subscriber). I stopped before I finished the movie and went to sleep. But this evening, I decided to resume the movie, but Prime wants to charge me $3.99 to rent it.
This is not the first time I have noticed this. There were a couple of other movies that I returned to watch in a matter of a couple of days and Prime decided to start renting it.
What's worse, a couple of days after seeing them asking for $3.99 to rent that movie, the video became available again for free for me to watch!
I feel like it could either be coincidental (i.e. Prime taking the movie off for rental) or by design. Regardless, I lost my faith in Prime a little after repeated experience like that.
Seems like a classic bait and switch and probably shady.
If he sells some custom widget he can do whatever he wants with it. Amazon won't even know and/or care about what happens off Amazon. The Amazon.com Retail team probably won't be interested in buying it and selling it for $5 if he's selling it for $4 on his own site, but the marketplace/FBA side of things doesn't care at all… assuming it's actually a custom widget.
You don't explicitly pay for the Prime badge. You need a Professional account to sign up for Seller Fulfilled Prime, but your eligibility is based on volume and performance.
Incorrect. They used to ban it, now it's officially allowed but they will actively monitor and block the buybox if your price is cheaper elsewhere. I've spoken to many sellers caught by this.
> That's both not true and not the issue here.
> The Amazon.com Retail team probably won't be interested in buying it and selling it for $5 if he's selling it for $4 on his own site, but the marketplace/FBA side of things doesn't care at all… assuming it's actually a custom widget.
> You don't explicitly pay for the Prime badge. You need a Professional account to sign up for Seller Fulfilled Prime, but your eligibility is based on volume and performance.
Oh and I used to work at Amazon so these practices are not surprising.
[1] - https://www.inc.com/guadalupe-gonzalez/amazon-removes-price-...
As a consumer if I see a prime logo and it's not Fulfilled by Amazon I would feel scammed. Amazon Logistics is the only courier where I live that is reliable and on-time and I have little interest in buying anything on Amazon that is fulfilled a different way.
https://www.engadget.com/2018/05/31/fulfilled-by-amazon-coun...
Think about it this way, Amazon is customer-centric, so when it delivers search results it's implicitly saying "hey this is the relevant item at the best price per your search term". If it can't back that up then it'll often give a product substitute that is the best price.
IIRC, they got in trouble for this earlier this year for outright suppressing listings and had to back down a bit from this - instead of suppressing the listing wholesale you just get low traffic instead.
Some of the unfairness lies in that with the same-ish offerings, Amazon's search will favor the Amazon offerings - FBA instead of 3P shipping, Amazon.com as seller vs third party when the price/shipping is same, etc., but otherwise I think a lot of other things people complain about (cloning products and approaching manufacturers to cut off middlemen) are reasonably OK features meant to benefit customers. As a manufacturer and 3P vendor I kinda made my peace with Amazon on that I guess...
I was one of those sellers and now I'm working on an opensource solution to help sellers migrate and not be dependent on Amazon FBA alone.
If your 3p seller account is an "authorized distributor" of your product, then Amazon has no power to require that your website sell the product for the same or more money.
They are just middlemen. It is a good thing that they are going away.
It results in power prices for consumers.
This doesn't make any sense though, as an argument.
If I am selling to 3rd parties, it is also true that I can set whatever price I want.
So, if I set the price to 5$, no 3rd party will be reselling my product below 5$. So I can still set the price...
Ronald Coase wrote the paper that first got to the heart of this, one of the most important economics papers ever published: https://en.m.wikipedia.org/wiki/The_Nature_of_the_Firm
And all 3p sellers are not middleman. Some are manufacturers and others are simply willing to take a smaller margin or are even selling used or refurbished products that people like me usually buy when given the opportunity to save a lot of money.
On the plus side, 3p vendors contribute by getting a product from 0->1 or 0->100 units per day. This is what the industry calls "prospecting", and confirming that there is product-market fit for some product, and a lot of times marketing it in a way that causes it to sell. Supporting the customers, troubleshooting the various issues along the supply chain... this is something that a 3P seller usually contributes to (since a lot of times the manufacturer is focused on designing and making large quantities of product and not really focused on the rest of the supply chain).
This up-front work basically gets paid over time till it becomes rent-seeking behavior, at which point it gets disrupted by a direct relation between vendor and manufacturer. And basically the marketplace needs to hash out what's "fair" from prospecting to rent-seeking.
Sadly nobody will care about breaking up the physical retailers.
In particular, if you use FBA you aren't held responsible by Amazon for late deliveries but if you use other services you are. Also, their data shows only 15% of Amazon deliveries are actually meeting the 2-day timeline.
It's not uncommon to offer both FBA and FBM on the same item, in case you run out of stock of the FBA item or vice-versa. Same price, same delivery dates... but the FBA product will outpace your FBM product dramatically.
So those merchants that try to FBM exclusively are put at a double disadvantage - rank worse in search, and get harshly penalized if a product is delivered late (even though once it leaves your warehouse, it's up to the USPS/UPS/FedEx meet their delivery promise).
Also, the article alleges FBA fees are not in-line with market rates for 3PL, and the close tie between Amazon's Logistics Network and Marketplace has caused a price increase to consumers, which harms consumers unfairly - thus the Anti-Trust case.
I've bought FBM and had stuff come from china in a flimsy envelope crushed. I've no idea how they can justify shipping this crap internationally.
FBA from a customer standpoint is simply more predictable. I can get extremely short delivery times (most are next day where I am for some reason instead of two day).
Did they do any analysis of whether customers are willing to pay more for FBA? I wouldn't be surprised if they were. You also tend to get fewer boxes if you do FBA. I did a bunch of third party orders once for an electronics project (think 30 different small things) most were FBM and all came in separate small boxes which is ridiculous.
I'm not sure what their deal is but the local Kohl's will actually PACK and ship your stuff back to amazon - then gives you a 40% discount to the store in my case.
I just actually screwed up and bought something expensive that turned out not to be a good fit from a non amazon seller (no return). I'm going to eat the loss and buy from amazon for the next - my own fault there.
This is by Amazon's design too.
If you use the "Buy Box" (add to cart button on the product page), it's quite difficult to see who you're buying from and from where the item ships from.
However, if you select "More offers from..." button, hidden on the page pretty well, you can see exactly where the product ships from, and expected delivery dates, as well as seller feedback ratings and number of feedbacks (giving you an idea of size of the seller).
Many of us FBM's have primary websites we sell on that make majority of our annual revenue, and our own distribution network.
Guess what? The same products we sell on Amazon are cheaper on our website - and we'll still get the product to you in 2-3 days, often with Free Shipping too. We don't have to pay Amazon fees that way, and we stand behind our company name - we're not going to screw you over in some shady way like pretend to be American but actually ship from China.
It's insane that we've spent all this money, and decades building our own fulfillment network, warehouses, and processes - but when we sell on Amazon, we're compelled to use their FBA just so we can sell enough product there to be worth our time.
I bought direct from an Instagram ad. Turns out they wanted me to wait for their next shipment despite saying "in-stock" - 2-3 months. When I said refund me they said no wait, we DO have it in stock! That is shady.
All this took lots of back and forth. I couldn't just cancel without talking to them, I had to figure out their system for submitting requests etc.
Amazon sells predictability in part. Their business accounts let me ad a GL code to my order and ties into a statement that can be paid by check within 30 days through an AP system on our side (also electronic).
I don't drink coffee but I imagine Starbucks does the same otherwise why would everyone go there?
Amazon's big risk is their marketplace and the crap in there. They should clamp down HARD there. That is getting us to consider moving business purchases elsewhere.
Sounds like you were buying from an arbitrage seller, our more commonly called a drop shipper our crossdocker in industry terms. Basically they don't stock the products they sell. They buy goods when they sell goods, and hope you won't notice. Sometimes it works out, if their source can ship quickly... But in your case... It didn't. That's not really an online store... Unfortunately, only online reviews will be able to help you stay away from that.
I can't speak for all online stores, and certainly if your organization has an approved vendor list then things are set... But many of us are happy to accept PO's, setup NET accounts, and more. You'll also get a more personal touch with a company that cares about your business instead of you just being another number.
As an aside, take a look at Quill for office supplies. They'll treat you right.
There's more to this game then you seem to think. The thing Amazon has that you're missing is customers that trust you. That's not cheap.ans easy to acquire.
Go sell it on your website with free shipping. Nobody cares.
So try a few online stores... There's a few you've probably heard of, Newegg, DSW, Chewy, and more. We'll earn your repeat business, otherwise you move on to some other online store.
That's how this business works.
How'd you come to trust Amazon in the first place? You tried a purchase, and were satisfied with the experience. They earned your trust just, like any store, physical or virtual.
People develop trust relationships with the online places they shop. They aren't trusting their credit card, they're trusting the merchant to not need to use the credit card security/safety features.
None of those stores you mentioned are anywhere near amazon or have amazon's customer service reputation.
The idea isn't "howd you come to trust amazon" but "how do you compete with amazon while they have more trust and better shipping than you."
I and everybody else dont shop at infinite places. You check the usual suspects when looking for something. You dont say "I'll take a bet I'll get this at the advertised price and shipping time because I have a credit card."
I want that thing. I dont want to fuck around with my credit card company and then order the thing from someone else.
You are mistaking the problem amazon had with the problem everyone else has - trying to compete with amazon.
Initially, you didn't trust Amazon. They earned your trust somehow, no?
The same with any other company.
I highly doubt Newegg is going to throw away their entire business and reputation just to screw you out of $100.
In fact, I'd wager they take your customer relationship more seriously because they are smaller than Amazon.
Meanwhile, as evidenced in this thread and others anytime Amazon comes up... Amazon seems perfectly willing to throw away their relationship with you over $100 of counterfeit goods.
You'd be dead wrong. Newegg was bought by Liaison Interactive in 2016 and has been in steep decline since.
They lost their customer service advantage to amazon years before that.
Customer service isn't a checkbox its a series of systems and when one company does it better they win.
If you're unhappy with your purchase amazon will take it back, most of the time you won't pay shipping. Newegg doesn't enjoy the same reputation.
Amazon does have an issue with counterfeit goods I don't understand given their data driven supply chain, so I hope they can solve it soon. If not someone else will eventually figure it out do better.
Also, we shouldn't laser focus in on just one company. Newegg was an example... and it's still the place to buy computer hardware. Their customers do enjoy free returns, and often free shipping too.
Zeroing in on just Amazon is like cutting off your nose to spite your face.
In the end, I guess we'll have to agree to disagree.
Amazon could figure out which 3rd parties supplied it and get them to better police their supply line.
Newegg is not "the place" to buy computer harware. and its reputation is garbage.
The real trick would be to account for shipping in the calculations.
And... it's more expensive than FBM if you've already got your own staff, warehouses, carrier agreements, etc... which is part of the Anti-Trust argument the article is making (being compelled to use FBA).
It would be great if someone had numbers on how often Amazon logistics are late, as compared to third party services. If their logistics are indeed much more reliable, then I can understand where their policy is coming from. If a merchant wants to use a 3rd party service that is cheaper/faster but less reliable, that does seem like something the merchant should be penalized for. It all depends on their relative rates of reliability though.
Either way, the optics certainly don't seem to favor Amazon here. They may have to restructure their pricing and penalties, to avoid the perception of bias.
More to the point, Amazon themselves use UPS/Fedex under the hood in addition to their own system. But they hold sellers responsible for using UPS/Fedex if it's late only when not using FBA.
Those numbers are for delivery speed. Not percentage of deliveries that are late relative to the date promised to customers when they made the purchase
VendorExpress was an initiative designed to get rid of 3P sellers and create a direct relationship with manufacturers. It sort of worked. The 3P sellers started pretending that they were manufacturers though. They recently sunset/sunsat/sunsetted that program.
The new program, OneVendor, will give Amazon a lot more control of who sells what and how. And their new Transparency program will eliminate a lot of the middle men playing the arbitrage game all together.
It's worth noting that most of the complaints against Amazon are from middlemen, scammers and arbitrageurs who make a living as leeches. When Amazon destroys their "business", they sue. While it's true that prices on Amazon are going up that's not necessarily a bad thing. You often have a situation where a manufacturer's items are leaking out into the Amazon ecosystem through arbitrageurs. When they finally take control of their own product listings they want to raise prices to parity with the rest of retail. The arbitrageurs lose. Amazon wins. The manufacturer wins. Traditional retail wins because Amazon is no longer undercutting them so deeply. And while the customer does lose, in a sense by paying more, the customer service is greatly increased.
I’m assuming you aren’t being sarcastic.
Transparency isn't that new, over a year old by now. And it doesn't eliminate middle men since it requires the manufacturer to label all their products regardless of source.
They don't need to avoid the perception of bias because they're free to run their marketplace however they want. They have absolutely no obligation to look out for anybody's interest except for their own.
But, FWIW, it totally makes sense for them to have different rules when the third party merchant fulfills orders. Amazon and merchants selling on their platform have different incentives. Amazon cares a lot about their customer experience and has an extremely long-term perspective on customer satisfaction. Many third party sellers are either 1) incompetent, or 2) actively malicious. As a result, Amazon has to structure incentives accordingly whenever they let a third party seller handle part of the customer interaction.
That's only true if they don't wield monopoly power.
Personally, I think there's a very strong argument that they do.
It would be interesting to see to what extent courts agree.
For instance, Amazon holds a significant percentage of online book sales—and, in fact, of online retail sales in general; see one of the sibling comments for references.
When you get as big as Amazon is, along with the cushy tax breaks and cozy relationship with government that go along with that size, your decisions and business practices need to come under closer scrutiny, the end.
On a slightly different topic, the fact that the seller said he was held to binding arbitration made me very sad. I am super excited for these bullshit "binding" arbitration clauses to get shot down in court, they need to go.
I'm sorry but this is not true. There are tons of labor laws, just to give one example, that depend on how many employees a company has.
Further, GP also claims that “being a monopoly” is the only scenario in which size matters, but monopoly power is not about overall company size — it’s about market dominance. You can be a (relatively) small company and still exert complete dominance in a market, and engage in anti-competitive behavior that will attract regulatory scrutiny.
Funnily enough, I notice the same for intellectually dishonest comments that are _critical_ of big tech companies, or at least certain ones. It seems like the fact that you only notice one side of this dynamic is a bias _you_ should examine within yourself.
See there's two points this comment can be coming from, the first one is as a legal statement, like they don't need to do it because legally speaking there is no way that they could be forced to run their marketplace any way but the way they want, and it seems like that is what you mean - but the fact that governments exist means that nobody is really free to run their market in any way they want. There are always restrictions. And if someone were to think otherwise I would wonder what led them to think that.
The second way is as a moral viewpoint, which is what your next sentence "They have absolutely no obligation to look out for anybody's interest except for their own." also implies (as obligations are often referred to in the context of morality, while in a legal context we requirements are more often referred to - at least in the vernacular).
So which is it? Do you believe there is no way they can be legally bound as to how they run their marketplace, or is it just that you believe there is no moral obligation as to how they should run it (or ethical obligation, I actually prefer the word ethical in this case).
This lawsuit is the equivalent of a consumer goods brand bitching and moaning because a supermarket imposes conditions on them if they want to get valuable shelf real estate.
Trying to acquire a monopoly via these practices is also not allowed.
Sometimes they'll just outright lie, say the package is delivered, and it will show up in the next 48 hours.
But I dropped Prime a while back and stopped using them, and am still happy with that choice.
Haven't had that issue working from home but now everything seems to come UPS or USPS; I haven't had deliveries from Amazon drivers. Not sure why.
I suspect the drivers are given an impossible number of packages to deliver, and there’s a misalignment of incentives where everyone is better off pretending they delivered the package on time. It’s not hard to imagine how this situation would arise when the delivery company is also the merchant, and there’s a command from on high for everyone to get one-day delivery. If the package is marked as delivered, everyone up the chain makes their numbers. @bezos, are you paying attention?
I agree with you about performance metrics being gamed, wouldn't surprise me.
I don't always get these pictures so I suspect it is Amazon spot checking their delivery people.
Packages delivered by USPS, the country's national mail carrier, are often marked as delivered 1-2 days before they are actually delivered.
The first couple of times this happened to me, I stepped outside after seeing the delivery notification from Amazon, and got worried that someone had taken the package. But now I know it's a common issue due to the way USPS collects and displays data:
https://immortalephemera.com/8970/usps-delivery-confirmation...
https://sellercentral.amazon.com/forums/t/usps-tracking-info...
https://www.reddit.com/r/Silverbugs/comments/9hhx52/usps_tra...
Anecdote time. A few weeks after moving here, someone rang every single apartment buzzer one-by-one at 2:30AM. AM!! I assumed the first was a mistake. The second made me get up. By the third, I was angrily making my way to the callbox. Before I could answer, I heard my neighbor angrily screaming into the phone. Turns out, it was an Amazon delivery driver who clearly had no way to make a delivery at that hour. I suspect they did the mark as delivered “trick”.
That wasn’t the only time this happened since I moved here either. It happened again but this time at 6:00AM. I was expecting a package that day, but certainly not at that hour.
I’m not angry at those delivery drivers. Their job has unrealistic expectations and low pay. What does anger me is how Amazon is abusing the worker pool to the point where people need to behave poorly to accomplish their jobs. It’s pushing Amazon’s inability to deliver onto society. That is pushing the limits of what is acceptable to the point where I’ve recently started reconsidering purchasing from Amazon anytime I shop online.
A one-day shipping ordeal could turn into a week. A two-day shipping will arrive past its "guaranteed" day for a solid 10-20% of all packages I get. And usually that guaranteed date will suddenly change on the day of. So you're expecting, and nothing gets there.
Basically, if you want to have a guaranteed delivery time on a package, do not use Amazon.
I feel like this is not unexpected. If on-time delivery is non-negotiable for Amazon then that will be built into the price.
Anyone who builds anything is trying to get permission to relax one constraint in order to facilitate another.
3 businessmen are in prison, and they ask each other why each one is there.
- I'm here because my prices were lower than the other companies, so I was charged for dumping the other companies.
- I'm here because my prices were higher than my competitors, so I was charged for economic power abuse.
- Well, I'm here because my prices were equal than everyone else, so I was charged for cartel formation.
Amazon has robust competitors in the shopping space (hello Walmart). And does not often serve niche markets. Hobby electronics (think old radio shack or current adafruit), sewing, wood screws in volume are all places where amazon falls flat and there is plenty of room for others to succeed.
What amazon is doing is brilliant, it isn't monopolistic, it is vertical integration. Something that doesn't happen as much as it once did.
Amazon owns 49% of US online retail. [0]
If 49% still allows for robust competitors, at what % does that change?
https://techcrunch.com/2018/07/13/amazons-share-of-the-us-e-...
https://www.census.gov/retail/mrts/www/data/pdf/ec_current.p...
Amazon has a leg up on Walmart for online sales, but Walmart is still the number one retailer in the U.S.
This complaint isn't about the shopping space, it's about the selling space. Small businesses who want to sell online will typically get a whole lot of nowhere if they don't use Amazon.
In that sense, one definitely should not make an analogy with a traditional marketplace. The terms you agree to when selling on the Amazon marketplace is typically orders of magnitude worse than what you'd get at a plaza - imagine Amazon committing not to raise costs for the next 5 years.
Amazon isn't a market place - it's a store. When you sell on Amazon, think of it as selling it at Walmart - you don't get to pick where Walmart will place it on the shelves, and you have no guarantee that Walmart won't drop your product altogether.
Decentralization technologies can help use build public platforms without the conflict of interest.
I don't buy things on Amazon because it's expensive.
Maybe this matters more to giants who are nearly forced to. But it can be avoided.
It's kind of funny that Amazon actually has a much worse problem with all the things that kept people away from eBay.
The reason they were so aggressive about forcing Prime onto people was to engineer the behavior into people of buying from Amazon by default. Rather than ask questions about where's the best place to buy.
For something I can get at Best Buy, for example, I wouldn't buy online and wait for shipping, I use their price match (if I need to) and get it same day. And often when I look up the same item at different online retailers, the price is the same or one site undercuts the other by a penny. Not a coincidence, they all have to stay competitive.
That unfairly harms the consumer, which is the basis for this Anti-Trust argument.
Effectively, Amazon has built the world's largest Marketplace by losing billions and billions for years and years, turned said Marketplace into an almost necessity to sell on, decided it will also sell on said Marketplace often at unfair prices below manufacturing cost of the goods, and now has made their own Logistics Network an effective requirement for selling on the very same Marketplace.
In my case, this wasn't a problem. I chose to get into the market specifically to sell FBA. As such, I knew cheap items were not viable for FBA, so I didn't sell cheap items on it.
That minimum commission fee is the reason you don't see anything on Amazon for below $6 (unless there's some weird accounting going on for the seller). Above $6, the fee turns into a percentage and is easier to manage.
That fee is also the reason you'll often see packs of 3 or some item when you only want 1... it's just not profitable to sell the 1 at a reasonable price anymore.
As an aside, the SNL program doesn't get all the same benefits as FBA. In some cases you don't get the Prime badge, and in other cases you're an "Add-on Item" to get free shipping for the buyer.
Amazon is good for the occasional sales, stuff that’s hard to find locally, or stuff I need quickly. That’s about it.
Yeah, and their website isn't even that good to boot (search sucks, for instance). I think they're coasting based on customer inertia and market dominance.
Of course there is almost no resistance to their dominance because we live in a time where legislators favor large businesses (because Citizens United). Examples of a broken regulatory environment... FCC turns a blind eye to deceptive practices like Amazon’s false advertising (BuyNow button for ebooks that you don’t really buy). The patent office gives patents for trivial improvements like the OneClick purchase button, which obviously helps large businesses with big legal expense accounts. And the grand daddy of anti-competition is the ability of technology giants to spy on other businesses, Amazon, Google, Apple etc snoop via their platforms and analytics services to choke out competitive threats. How do they choke them out? They control the search engines and browsing platforms as biased referees, so they decide what we see via recommendation tweaking (which is also why the Advanced Search features in these platforms, appstores, market places, search engines, are quietly disappearing, they make it harder to skew the playing field).
No. They've been driving cost to rock-bottom - not price. It's margin they're after.
Their 'dynamic pricing' is the biggest issue. It's completely opaque to everyone except Amazon's algorithms that want to maximize margins/profit.
E.g. frequently items will be at some discount level one moment, but then based on some trigger (e.g. increased views) it leaps up. I've have many cases where I found an item on sale - sent the link a friend and by the time they go look (sometimes just minutes later) the price has jumped.
Look at camelcamelcamel and see the wild price graphs - and then understand that Amazon doesn't even share many of the intraday price changes with 3rd party services.
All they will say is that buyers prefer amazon logistics and will pull out some user surveys and delivery rate statistics to prove it.
I don’t see the argument. Walmart and others are sucking while Bezos is executing.
Unless Bezos crosses the line with onerous contracts not allowing manufacturers to sell with other online retailers he should be ok. Wise for Bezos to put antitrust friendly language in all contracts.
When you choose to enroll your book in KDP Select, you're committing to make the digital format of that book available exclusively through KDP. During the period of exclusivity, you cannot distribute your book digitally anywhere else, including on your website, blogs, etc.
Related: If you include a link in an ePub to any other retailer, the book will be rejected by Amazon.
I don't know what world you're in, but Walmart is kicking ass as a company and is still posting a net profit larger than Amazon's, despite Amazon making boats of money off of AWS. At this point people prefer shopping at Walmart to Amazon.
https://www.cnbc.com/2019/11/04/walmart-appears-to-be-gainin...