Amazon used algorithm to test how much it could raise prices: FTC
wsj.com
wsj.com
We could easily manually lower the price, however raising it was very difficult and required managerial approval.
One thing I felt was anti-competitive was price matching Costco at the "each." This would result in absurd 2-day shipping prices that could not possibly be profitable. e.g Costco sells a 24 pack of soap for $1 per soap bar. We would price match the individual soap bar such that it was a $1 delivered to the customer's door.
France caught on to this "pro" customer behaviour and is implementing laws requiring minimum shipping charges so that E-commerce platforms can't use "free" shipping in a predatory pricing manner.
The soap will no longer be $1 when competitors are driven out of business.
For a real life example, the major grocery chain in Australia (Woolworths) did this with milk, selling their brand for $1 a litre, where everyone else had to do $2+ just to break even.
Effectively selling it at a loss so that they get market dominance. They make up the loss on other products in their big chain.
I think there needs to be a break-up between "the retailer" and their home brand being sold there, because it means the profits made on selling the competition works to the home brand advantage.
I think I can guess.
They had to raise their prices so they don't become a monopoly.
Did you guess "there needs to be market regulation and monitoring?" Because: Bingo! You got it!
>[Chairman of the Australian Competition and Consumer Commission] Samuel said the major impact of discounted milk prices appears to have been a reduction in the supermarkets’ profit margins on house brand milk, rather than a gain.
https://www.smartcompany.com.au/startupsmart/advice/startups...
> "Effectively selling it at a loss"
Sure, maybe it wasn't a total loss, just less profit.
>They had to raise their prices so they don't become a monopoly.
You seemed to be suggesting that what was happening with milk was anticompetitive and the consumer protection body got involved to stop it. I pointed out that what actually happened is that the body determined that there wasn't anything anticompetitive going on and that the companies ceased the "milk wars" on their own because they were losing money (which is exactly what I was alluding would happen with soap if one company tried to drive competitors out of the market).
Seems like a big difference to me.
https://www.upcounsel.com/lectl-california-antitrust-law
> Loss Leader Sales
> The Act also bars "loss leader" sales, defined as sales (1) below cost, (2) to induce, promote or encourage the purchase of other merchandise, and (3) with the intent to injure competitors or destroy competition. Business and Professions Code 17044.
If that were not the case, cell carriers couldn’t sell phones below cost to sell service plans and the entire “razor vs razor blades” model would be illegal.
That also means that game console sales would be illegal.
there is no way Costco isn't losing money on their $4.99 chickens or $1.50 hot dog and drink. and I assume the point is to get you in the door so you will buy other stuff from them and not Amazon or Walmart.
“IGA coordinates anti-consumer buyout of Woolworths milk”
“Why is IGA skimming your milk?”
“Woolworths vs IGA — Calf scalps bull’s milk”
https://en.wikipedia.org/wiki/Herbert_Henry_Dow#Breaking_a_m...
No government intervention necessary!
https://devblogs.microsoft.com/oldnewthing/20120119-00/?p=85...
https://www.abbreviations.com/term/1424467/customer
(Confusingly, most of the search results I found point at "customer experience" which doesn't fit as well here. I've definitely seen support write about "the CX has an issue with ..." so I'm pretty sure this is a standard term.)
Eventually, they are either sold to Amazon or fold, and Amazon can increase the price to $2.20/bar and mint another $100M/year for the next industry to attack with $1.1B. Rinse & repeat and eventually the customer is charged some percentage more for the same product once the competition is kowtowed.
"Predatory" pricing is not sustainable.
This is a losing proposition for Amazon.
Spread that over its product line, and it is not sustainable.
1. https://en.wikipedia.org/wiki/Unilever
> It is the largest producer of soap in the world,[3] and its products are available in over 190 countries.[4]
Is everyone forgetting just how small Amazon is when you consider all of retail?
https://www.statista.com/statistics/274255/market-share-of-t...
June 2022, 37.8% of all ecommerce market share.
Not sure why you're comparing to physical retail considering the antitrust practices alleged are in the ecommerce space. And even if we were to compare all retail in the US, Amazon is likely to overtake Walmart across all retail come next year. https://www.ascentialedge.com/press/ecommerce-shakes-top-5-r...
And it was also predicted by analysts that Windows Phone would overtake the iPhone by 2017
https://www.computerworld.com/article/2473666/windows-phone-...
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)"
> And it was also predicted by analysts that Windows Phone would overtake the iPhone by 2017
And is Amazon raising prices?
And how is 1/3 of the market enough to dictate prices?
It’s “plain silly” to cite a prediction as evidence.
It’s also very short sighted.
Which I guess is a great example of the unidimensional labeling being ridiculous in politics : the anti-government, pro-monopoly, anti-free-market top right being radically different from the pro-free-market, anti-monopoly bottom right.
(IIRC Marx said that the bottom right were useful idiots for the top right ? But this is probably his failure at seeing history as something cyclical, I very much doubt that both the current situation can continue for long and that it spells doom for capitalism in general.)
>The focus on matching Walmart on price also created some issues, like when Amazon's pricing tool would repeatedly lower the price on an item to match its competitor, leading to what insiders dubbed a death spiral. Amazon created a specialized team to try to determine how and when to decide that its pricing tool should pull back and no longer match Walmart's lowest price on a given item, but instead match the next-lowest price from a competitor. The initiative was called Project Nessie. In the end, the program was scrapped when it was determined that the tool did not lead to more profitable outcomes.
This sounds like a trends/spike monitoring algorithm that Amazon used to figure out when to give up trying to price match the very lowest competing offer.
https://www.amazon.com/Winner-Sells-All-Walmart-Wallets/dp/B...
I think this is probably normal for large gov agencies and prosecutions in general, but it just shows how arbitrary and political this stuff really is.
IMO this is good. The biggest and most elite among us should be held to a higher standard than a random guy on the street or a small business, not a lower one.
Westley Snipes, Donald Trump, Hunter Biden, Amazon, Tesla, ExxonMobile, Amgen. I sorta want everyone and anything in that class of society on their best behavior at all times, lest the reins of government fall to a Party with reasons to make an example out of them. Unlike most, they have the resources to make it a fair fight too.
You don't get to the discovery stage of a lawsuit without a legitimate claim, especially not against a company like Amazon. It's just not realistic for the FTC to decide to investigate and immediately be granted access to everything. A "fishing expedition" wouldn't be likely to make it past a judge. Amazon has excellent counsel.
That said, unfortunately for Amazon, they are also built for an antitrust model that has been a corrupt perversion of the Clayton act. It's one Lena Khan, especially, has been trying to change since before she was in office. As a result, some of what they were doing in the open was in violation of the act - it just wouldn't have been successfully prosecuted 5 years ago.
Yeah huh, that’s exactly where they are. We can debate whether the current antitrust laws are broken, we can debate how much government should regulate big tech, but Lena Khan is testing theories and novel legal tactics after the fact. I put more faith in Amazon’s legal chops than government any day, they’re clear of violating. If anything, they’ve taken the existing laws and ran them to their conclusion, faster and more efficiently than any one else.
It’s easy to say, “imagine if there was no Amazon and we were all still living in Walmart and Sears’ retail landscape”, precisely because Amazon came in and changed the game for the betterment of all. Now, FTC seems to be saying, “imagine the little Amazons and Googles that are being suppressed!” It’s hypothetical and not how regulation should be done IMHO.
We’re in need of good regulation of big tech, this is ultimately going to damage that effort. It’s not in good faith.
The problem, I think, is that Amazon likely violated the law. They did this because normally they could get away with it - that doesn't change the violation, it means that prior enforcement sucked. It's like speeding; you do it, sometimes you get caught, normally you don't. If suddenly everyone got pulled over despite only going 5 over the limit people would be upset, but they would still have broken the law. It wouldn't be in bad faith.
So the FTC is indeed saying 'look at all the companies that are being suppressed,' precisely because that is the law. Section 2 of the Clayton Act, for example, makes it illegal for companies to engage in anti-competitive practices. The FTC is alleging that Amazon engaged in anti-competitive practices.
The funniest part to me on here is, nobody is even arguing that they didn't. The only argument people are making is "I like Amazon, it makes products cheap!"
That's fine, and courts should and do take that into account, but they still broke the law. They didn't break FTC regulations passed by Lena Khan, they broke a law that has been in force since 1914. The problem Amazon has now is that 'we make things cheaper' only works so long as they actually are making things cheaper, and it should only work so long as they aren't in the process of or have not completed monopolization. They are charged with anti-competitive behavior and price-manipulation and they have market power in the e-commerce market.
>We’re in need of good regulation of big tech, this is ultimately going to damage that effort. It’s not in good faith.
I completely disagree. This is what good regulation of big companies looks like. It's just foreign because we haven't seen it since before this era of mass concentration of industry.
When you’re the leader in your category, it’s quite obvious that competitors are aligned on your prices, and that if you raise them they would raise them as well. At a previous company our main competitor fixed most of its prices to 1 cent below ours, so when we raised the prices they followed us as well.
So theoretically if you both raised prices too much arbitrarily, a third player might enter the market at a lower price. How realistic is that? I think any newcomer would be well aware of your ability to lower prices to compete, and a new player probably has costs just to enter the game so it'd be a bit risky.
In this particular situation it was not realistic because 1- the pricing was not arbitrary and 2- it was a highly-competitive market in which the prices were so low that any new player wouldn’t have been able to enter the market because you needed high volume to start earning some margin.
> The company also used Nessie on what employees saw as a promotional spiral, where Amazon would match a discounted price from a competitor, such as Target.com, and other competitors would follow, lowering their prices. When Target ended its sale, Amazon and the other competitors would remain locked at the low price because they were still matching each other...
Soooooo....it used the algorithm to raise prices, but also lower them?
Anyone want to try their hand at an actual headline?
A better headline would be:
Amazon Used Secret ‘Project Nessie’ Algorithm to Steer Prices
Using the word “steer” instead of the word “raise”.
I'd argue that the 'lower prices' just let amazon disperse the cost of markdowns across all of the vendors. Meaning Amazon still benefits from the lower pricing because they get possibly extra sales but only absorb the cost on 'their' products which were still matched to their 'competition' who were stuck matching Amazon.
Half the stores I walk into have price matching.
That is, it makes it sound like Nessie was intended to bust some broken price matching logic that would allow other competitors to stick Amazon at lower prices due to interactions with other parties.
This part in specific only benefits consumers.
1. https://www.ftc.gov/advice-guidance/competition-guidance/gui...
It's no different than Google using ads to subsidize failing ventures in order to gain market share.
Beyond that, I don't think this kind of analysis is meaningful because it fails to account for second order effects. For example, even if retail is breakeven on a net basis, it still subsidizes a gigantic fleet of machines used to power retail from which AWS came from. Negotiating in bulk to build data centers with a significantly larger internal customers leads to better unit economics for the AWS side of the build out even if retail is break even on a first order basis or even has losses. The same argument can be made for ads as well. Amazon is great at monetizing infrastructure /because/ they can sell not just significant volumes of the end product, but and the infrastructure used to deliver it.
I think you could make the same argument for Google, which is that technically, they should be able to use the second order effects of assets they've needed to put together to run search and ads to sell better infrastructure. Theoretically, this should mean that GCP is king, but it doesn't. I'm not sure there's an obvious answer to this question, or even a great clue behind first mover advantage AWS had in cloud.
However, I thing that your last point is not relevant. What-about-ism has no place in the law or it necessarily creates a slippery slope. If Google is also able to do this and purposefully did it in a predatory manner to accomplish a market advantage they both need to be legally pursued - and GCP not succeeding doesn't necessarily mean that Google didn't try underhanded actions to get it to succeed - it either means those actions weren't enough or they were incompetent (but still malicious). Either way each case needs to be judged on its own.
Per-item margin is the metric you need to use to judge whether they're deliberately trying to price out their competitor.
If you sell Widgets and Sprockets, but you have a competitor that only sells Widgets, you can price of your Widgets so low (on 1-2% margins, for example) that the competitor is unable to compete and goes out of business because you can use Sprocket sales to keep your company in business during that time.
Now that the other company is out of business, the price of your Widgets doesn’t matter because you no longer have competition in the market. You’re getting 100% of the potential sales and despite selling on a lower margin, you’re sales volume is now way up making those margins acceptable.
You don’t have to worry about making a better Widget, or improving the Widget making process, because you have no competition. And you’ve priced yours so low, no other company can come in and attempt to enter the market because they can’t compete at your volume and margins.
If there’s a high-demand material needed to make a Widget, you can put pressure on the producer to lower material prices since you are now their primary customer, or purchase the company that produces it and prevent access to the material.
Predatory pricing consolidates market control and can be used to prevent access to the market. Anti-trust laws were designed to prevent this.
Please don't re-define words. This is not what's normally called predatory pricing. Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition. The thing you are describing is nothing more than having a low margin strategy.
Is every dropshipper undermining brand-name (high-margin) apparel?
That is not necessary for the definition of predatory pricing.
I don't like this analogy because you're not comparing items of equal quality. They're not fungible.
Why would you raise prices after? That would just invite competition again. Keep the prices low and competitors away. Maybe raise them to at-cost, but if your Widgets can comfortably cover the cost, then there is no reason to raise prices.
The assumption of predatory pricing is that it's not easy for a competitor to just show up. Supply chains would be destroyed, capital equipment scrapped, etc and replacing them would be time consuming and expensive.
Sometimes that's a reasonable assumption to make, sometimes it's not. Even if the assumptions are unreasonable, many CEOs won't let mere reason stand in their way.
> Maybe raise them to at-cost, but if your Widgets can comfortably cover the cost, then there is no reason to raise prices.
So, the Widget-making capital would just sit there producing 0 ROI? Someone's gonna object to that. A company pursues market dominance to make money.
Nobody can compete with you on the price and it is clear you can unbundle your Widgets from your Sprockets at any time if you ever feel threatened.
I'm OK with a computer making the pricing decision, but like HFT it's the frequency that leads to problems. It's a bit sad that the "free market" has to be regulated like this, but beautiful theories break down when you get to the quantum level.
What problems?
The other party is being tested for cooperation. Amazon raises the price and then reverts if competitors don't follow suit. They didn't revert after seeing sales drop or something, it sounds like they reverted based on a lack of "cooperation" from competitors.
This is tricky stuff to define wrong doing. What if a company wants to see the going rate for a product and just looks to Amazon to get an idea? You know, because a lot of people will shop at Amazon by default unless there is a reason not to, like saving a bit of money. These kind of algorithms become anti-consumer the more they get automated, but they may seem reasonable on the surface or in isolation.
If two algorithms are fine in isolation, but when used together cause overall market prices to rise what should we think of that? In the above example, Amazon would raise their price and the competitor would follow but not quite to the level of Amazon. Then if markets really are competitive (and fast) someone else may step in at a lower price than either, but I don't believe a lot of markets are fast or efficient when it comes to lowering prices.
Now it's possible that there was some separate agreement, for example Amazon and a competitor may have both agreed to raise a price some percentage and then they made small adjustments to look like it was just an automatic response. But the fact that algorithm seems to have accidentally lowered prices on some occasions would seem to suggest it genuinely was acting unilaterally. Or perhaps those failures were a deliberate part of a larger ruse. Ultimately it will be for a jury to decide but the FTC has its work cut out for them.
I'm sorry, huh?
Who exactly do you think is participating in this "market"?
"Amazon Used Secret ‘Project Nessie’ Algorithm To Attempt Market Price Manipulation"
Lowering prices in the short/medium term to throw out of the market the competition is a way of rising prices in the long term.
Diapers.com is just an example.
And once you look global, there's plenty more 100B+ revenue retailers, many of which also sell in the US.
I hardly think there is even close to an "absence of competition." Heck, Amazon is not even the biggest US retailer by a large margin. Each of these posts is full of fear and implications the evidence and statistics show to be unfounded.
[1] https://nrf.com/research-insights/top-retailers/top-100-reta...
I think you misunderstand the reasons prices actually become lower for many goods over time. Or why some producers get replaced over time by more efficient producers. Without this process there's be no lower prices or more efficient production over time.
Do you call this "efficiency"? How many companies in the world can afford it?
[0] https://arstechnica.com/tech-policy/2020/07/emails-detail-am...
The proper way to asses things is not to post select evidence, but to pick every example of price lowering at a given time, and see how many become the situation you now describe. So, care to tell us what percent of price lowering incidents end up as extreme? I'd guess well under 1 in a million, but I may be off an order of magnitude in either direction.
By your reasoning, every time a person enters my house I should inform them they may kill me, since once in a while a person does enter a house, then kill the occupant.
However, I'd be a nut to act this way. Because the vast majority of cases does not end up in murder.
So, just like that, bringing up extreme cases for normal actions is also fear mongering nonsense. Yes, this could end up tis way. They could use this as a leverage point to take over the entire planet, enslave all humans, and turn us into Matrix-human-batteries. But continuing to harp on this as if any of it is likely is statistically unwarranted.
So, please answer - what fraction of price lowering events do you think ends up in the situation you keep implying this might be an example of?
> This is the “consumer welfare” standard, a theory as economically bankrupt as it is historically unsupportable. Let’s be clear here: The plain language of America’s antitrust laws make it very clear that Congress wanted to block monopolies because it worried about the concentration of corporate power, not just the abuse of that power. This is inarguable: Think of John Sherman stalking the floor of the Senate, railing against autocrats of trade, declaiming that “we should not endure a King over the production, transportation, and sale of the necessaries of life.” These are not the statements of a man who liked most monopolies and merely sought to restrain the occasional monopolist who lost sight of his duty to make life better for the public.
When my uncle had a heart attack, he wasn't in a position to shop ambulances, emergency departments, surgeons, cardiologists or anesthesiologists. As with internet providers, emergency healthcare is not a competitive market, and that's reflected in extortionate pricing.
It seems like reducing consumer harm should be the primary objective of regulators.
You're not wrong, but the definition of "consumer harm" used in practice hinges on short-termism and is price-centered right now. "This won't raise prices...for now, at least" is, by itself, an alarmingly strong argument in this arena, irrespective of market health or sustainability of competition.
The Biden administration has made some steps to counter that, we'll see if it's really a thing.
I guess I need to cut back on the heroin.
My reply wasn't asking for help to find an internet service provider. There are actual monopolists extracting monopoly rents right this minute. They're causing genuine consumer harm right now, so stopping this harm should be the priority of regulators.
Where there is no ability to access competitive offerings, these actual monopolists are a different league of economic pathology from markets where consumers can access competition by clicking around in their browsers.
But yours isn't a hard case of monopoly either, the main thing preventing you from creating a competing ISP is your local laws, which are failing antitrust to the point one wonders how they ever came to be ?!?
(We also shouldn't discount the importance of network effects.)
I have the latest dish model, live on a one acre property with a relatively large clearing, and I still struggle with the extremely wide field of view of the clear sky (no trees, hills or other occluding items) which it needs - I simply can’t get 24hrs of uninterrupted service, and performance is extremely variable. This is even after mounting it some 25ft in the air to reduce occlusion issues as much as possible. Starlink needs an unobstructed view right down to surprisingly low on the horizon for 24 hours of solid service, which many, many homes simply won’t be able to provide.
Starlink is incredible for what it is, but it’s not magic and becomes very hard to use reliably in urban areas at least with the current dishes and tech stack they are using. In many urban neighbourhoods it will be close to impossible to get a reliable 24 hrs of service unless you can knock down your neighbours homes and trees too.
Starlink is best used in situations where there are almost no other options, or as a backup connection to another more reliable one, for most people. It is not a great replacement for almost any fixed line service, if you have that option. Perhaps this changes in future, but people should stop just suggesting starlink in its current form as the panacea to all ISP problems.
Occlusion appears to be the single biggest enemy of starlink, and it’s super easily occluded - so much so, the app helps you measure/approximate the occlusion in your intended use space via your phones cameras before you buy.
There are approximately ~1 gazllion wireless internet providers where I live.
2) For many people, wireless and wireline internet providers are not substitutable.
You couldn’t get me to put up with 5G latencies because I play multiplayer video games and you couldn’t get me to put up with 5G bandwidth because I need to ship hundreds-of-gigabytes video files around and I’m not putting up with sub-gigabit upload speeds.
Just be glad you weren't around 15 years ago
Even if I didn't have symmetric gigabit, I also was working with 720p and 1080p video up until about 2013 and not 6K. Requirements shift over time.
any other examples of local monopolies
Maybe that is not legally possible where you are, but there is nothing inherent about emergency services resulting in extortionate pricing.
This feel similar to the myth of shareholder primacy. In both cases, the "agreed on standard" has little to no basis in the law, but happens to enrich the powerful and well connected over the little man.
https://corpgov.law.harvard.edu/2019/08/22/so-long-to-shareh...
FWIW that's just logic.
Whether it's de jure or de facto, the owners of something will own it to their interests.
If you had 100 dollars would you invest it into a company where the CEO could just take the entire company hostage and potentially make you lose your entire investment?
That's a false dichotomy. You can own something (or a share) and the purpose of it need not be "return as much value as possible, via buybacks, in the next quarter".
Everyone shares.
Company actions maximize company value. Employee actions maximize employee value. Customer actions maximize customer value.
It's pretty much like that already, the CEO can run the company into the ground for funsies if they are insane.
But if the investor catches the CEO doing this they have the right to sue to prevent it from happening and the legal system and shareholder primacy are what allow for this. Otherwise, what does the concept of ownership even mean if the owner can't decide what is done with the business?
1. The Dodge brothers - minority shareholders in Ford Motors, wanted to set up their own automotive company. They planned to use the money from Ford's dividends to support their company.
2. Henry Ford would have liked to keep his monopoly on affordable cars. He cancelled the dividend and claimed he's going to spend the money on improving society (by selling the Model T even cheaper) as a thinly veiled excuse.
3. The courts in Michigan saw what's happening and forced Ford to issue dividends.
As you can see in that case case, it was the lack of shareholder primacy that enriched the powerful. In the last 20 centuries of human history the powerful have always crushed the little man with the excuse they are serving the public interest. Beware of anything that empowers powerful individuals (like corporate CEOs and directors) to take arbitrary actions in the name of "social responsibility".
Was this not happening before the estimated birth of Jesus of Nazareth?
Christianity couldn't have been a tool of the rich and powerful in the first century, because it only began acquiring powerful followers around the third century crisis.
Also, why would investors want to invest in a company where they could not remove a ad CEO that isn't delivering returns? They would probably just reinvent shareholder primacy through investment contracts.
Which means most CEOs and boards focus on managing shareholders at least as much as anything else they do.
Thank you for asking for clarification. I realize I responded precipitously and was too cryptic to contribute anything meaningful to the discussion.
And it's a check towards their own interests. Just like the CEO acts in his own interests. I can't for the life of me understand why anyone thinks the CEO is more likely to act in the best interest of employees or society than the shareholders are.
Probably because shareholders can just care about money in the immediate term and don't need to actually care about any one company or its long term success. They may never know or even interact with the employees of that company on any meaningful level, and may have investments in several other companies including direct competitors so that if any one company tanks they'll still have other investments making them money hand over fist.
A CEO, particularly when they're a founder, might actually care about the company doing well and may personally know the people working for the company. They might care a lot more about the employees they work closely with on a daily basis as opposed to a shareholder who just watches numbers go up and down while deciding when best to sell. The CEO's day to day will change drastically if their company fails. A shareholder whose company does poorly just adjusts what they buys/sell the same as any other day.
For more info: https://en.wikipedia.org/wiki/The_Antitrust_Paradox
You are smarter than me.
Thank you for allowing me to be here on HN.
Standard Oil would be labeled "pro consumer" by today's crowd: cheap prices, and highly standardized products that you could rely on wherever you travel (like McDonald's or Starbucks is today). the notion that antitrust can be boiled down to "consumer harm" is new. the history isn't vague, and thereby neither is the "theory". the legislation, i'm not sure about, but since it's rooted in those two things and vagaries are easily cleared up by consulting the former.
Not just that amzn algorithmically finds the optimal market clearing price.
They may be finding an optimal dumping price to reduce competition and then an optimal profit maximizing price to capture monopoly profits.
If true, this would be a clear violation of anti trust law, despite being algorithmically implemented at scale. Unclear if intentionality matters for the law - even if the algorithms learned this behavior implicitly as the solution to a legal objective, it could be illegal.
Can you provide an example of a product where Amazon enjoys a monopoly (or even something close to a monopoly)?
We should not be shepherding a new tech baron era, but enforce competition in markets. Competition should be the highest thing we value in an economy. This experiment of consolidations, mergers, and acquisitions since the 80s has been disastrous. We're reaching the point where we should break up nearly every multinational conglomerate, they've abused too much and suffered too little.
aga98mtl pointed out this isn't actually true in practice.
It sounds like you're describing a different form of potentially anti-competitive behavior, which is not the same as the one yonron accused Amazon of.
Some of the world's most innovative products were designed by subsidized Business Units. The original Mac Lisa wouldn't have been developed if it wasn't propped-up by the success of the wildly-popular Apple II/IIc. Even though it failed, there's not a single nerd on either side of the Apple row that would call that anticompetitive or a mistaken product.
This is a form of automated collusion. I'll raise my price and if my competitors don't follow suit I will lower it again. It only works well for them if the competitors are watching prices too and looking for an opportunity to raise theirs. You know it's anti-consumer because of the conditional reversion after watching competitors prices not following.
I have a feeling there is currently a LOT of this going on across all industries in the US. We've seen it rent pricing software, now Amazon, and I think fast food and restaurants are dojng something similar. Food has gotten obscenely expensive expensive outside a grocery store.
Raising prices then checking if so-called "competitors" follow is the illegal part - that's automated collusion, definitively illegal.
There is grey area around intent/motive, but the OP article is clearly on the bad side.
(Also, "standard practice" doesn't mean legal or moral)
This is completely false.
Collusion, legally, requires an agreement between competitors. Tacit collusion is *not* illegal, see Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp. (1993).
Amazon can raise and lower their prices all day, algorithmically or not, as long as they aren't calling up their competitors and telling them to raise their prices too.
It is not unkown for 'competitors' to stage cost cutting dramas and pantomine competitive pricing in order to create artifical demand and customer loyalty to either or both scrappy underdogs.
... but in this case? Amazon has massive access to otherwise-secret price knowledge that they require sellers provide to participate in the marketplace. More than people realize and more than is shown in the UI (I did some work for a company that specialized in providing that data).
If they used it to feed this algorithm, there's a real solid case that they used their unique market position to make things more expensive for no consumer benefit, and the antitrust case writes itself.
The rest of this is just "Amazon uses pricing algorithm."
Amazon is a huge company, of course they are going to use computers to analyze how to price items.
But I also sympathize because I think the eternal September of people stepping into that world producing so many WTFs at the accepted state of things they harmonize is a potentially good vector to push for some change because no one else is going to do it. The people who don't get eaten alive have no motivation to upset things lest they inadvertently hurt themselves.
- manufacturing
- marketing / advertising
- warehousing
- shipping
So basically they have outsourced the entire value chain, and then they complain that they are losing almost all of their revenue. Well, yeah, the people doing all of the work are getting most of the money. We don't seem to think it's an issue when a manufacturer takes 50% of someone's revenue, but when a platform that handles marketing/sales/logistics takes 30% everyone acts like it's highway robbery.
These sellers remind me of the people who find out I'm a SWE and want me to work on their "brilliant idea" which they somehow think is worth something without putting in any actual work. It's not. And the fact that these sellers are able to even make a living acting as a middle man between Alibaba and Amazon at all is honestly a great deal for them.
As a customer I am not harmed by this, if anything I win because the intermediate sellers between the Chinese factory that actually makes the stuff and me is replaced by Amazon who is willing to accept smaller margins.
Like someone comes all the way to your one store location and you're gouging them on price. Crazy. I didn't buy anything at the store, got the knife at the SW.
They charge even more online which is also fun. This is on $425 knives so you know there's hella headroom.
Not saying it doesn't happen, but if this is indeed the case, what is preventing the same scammer from essentially registering all still-unregistered UPC codes to do something akin to domain squatting?
(I am not familiar with how Target online works so maybe I am missing something)
Not really sure who comes up with these schemes but... doesn't sound well thought out.
Walmart also offer DSV, which is a bit of a nightmare.
Do you have any data on the number of counterfeit items? I've been an Amazon customer for 20 years now. I've never had an incident, and we order pretty much every week for basic home goods.
You're saying that people are selling counterfeit probiotics and lotion on the site now?
I've seen this counterfeit claim repeatedly on this site. While I understand Amazon intermingling inventory from different sources makes it a possibility, I've yet to see any data that it's a significant issue. Not to the extent that it warrants you telling people their lotion, which is lower priced, is counterfeit and not for numerous other reasons.
"According to a recent lawsuit filed by tech giant Apple in October of 2016, roughly 90% of Apple chargers on Amazon, even when labeled as a genuine article, are fake" [1]
"manufacturers determined 20 of 47 items we purchased from third-party sellers on popular sites were counterfeit" [2]
[1] https://larc.cardozo.yu.edu/cgi/viewcontent.cgi?article=1148... [2] https://www.gao.gov/products/gao-18-216
But the selection, reviews, and overall experience of Amazon makes it better anyway.
So, if you see higher prices, it's probably an arbitrage situation. Filter down to just Walmart as the retailer, and you should get the kind of pricing you expect from Walmart, albeit with the selection you would expect from a Walmart.
Isn't it worth paying a bit more in order to stop doing business with Amazon, though?
The article doesn't say when this project started, but given that end date it would have been entirely on Bezos's watch
Artificially deflate prices across the board for some customers while artificially raising prices across the board for others. Some customers could end up paying 4x the Walmart price while others might end up paying 1/2 price - there are customers that don't care or don't pay attention to how much things cost.
Jack up prices for the big spender while slashing prices for cheapskates and offer bulk discounts to customers who will lay out more cash for single large purchases.
https://www.google.com/maps/place/Amazon+-+Nessie/@47.623881...