From my brief overview of the situation, it seems ethically questionable for Amazon to do this, but not unlawful.

Should it really be against the law to reduce the visibility of a competitors accessory for your own product on your own site? I don't think so.

I would have a different position if Amazon started harassing competition on other sites, like eBay.

It's more of a question of bad business on the M-Edge side. Don't rely on your competition for business. You'll get stuck when they decide to change.