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Comment by brookst | Hacker News Reader

I'll take the charitable interpretation and assume you just don't understand the mechanics of the policy.

Amazon is saying that sellers cannot offer a fair low price to customers on other platforms if the seller can't also offer it on Amazon. This is 1) anticompetitive, 2) anticonsumer, and 3) insane.

Consider this test:

- Seller buys a crappy LED bulb from China for $0.80

- Seller is happy to list the bulb on Walmart, Target, etc, for $2.00. Net of fees and shipping and stuff they make enough money

- Amazon charges $3 in fees. Obviously the seller can't afford to sell for $2 on Amazon. They sell for $5 instead.

- However, now the seller also can't sell for $2 on competing sites. Amazon, leveraging its market share, has dictated that the seller must price Amazon's fees into pricing on non-Amazon sites, so consumers pay $5 to Target for something the seller would have been happy getting $2 for.

This is insane.

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I disagree.

Let's use your example. The sellers should stop selling that item on Amazon, and sell their light bulb on Walmart, or where-ever. Customers who really need that will go find it at Walmart, or where-ever. This strengthens the competitors to Amazon, which is bad for Amazon and good for the consumer. The consumer also find the lower price that they wanted. Alternatively, they buy the alternate product on Amazon which would be cheaper than the inflated price (per your example). Again, good for the customer. Everyone wins in every scenario except for the seller, which is how Amazon and every wholesaler operates.

Suppose the FTC wins this case and sellers can put whatever price on whatever site. Amazon, like any store wants the lowest price. Not to mention there are only some many items you can show on the first page of results. They will find some other reason to remove these sellers and/or their items.

Now maybe there's another case to stop that behavior too. The result is that companies are not obligated to let sellers on their site. That is insane.

In summary, there will never be a scenario where Amazon allows sellers to sell the exact same item for more than Amazon's competitors, unless the government forces Amazon to let sellers sell whatever on their site.

> Customers who really need that will go find it at Walmart, or where-ever.

So here's a weird externality. As a decently well off tech-worker, I don't care if I'm paying 5$ or 2$ for lightbulbs, even if I'm re-lighting my whole house. The seller will sell on Amazon, because it is the largest market and will set their prices on other markets to match Amazon. I'll buy on Amazon, because it isn't worth my time to check multiple websites to get the best price (especially when SKUs differ and I have multiple other items I'm buying, etc). And now people who do need to save money, can't also find this lightbulb at a cheaper price on competing marketplaces, even if this lightbulb is actually the best quality.

> And now people who do need to save money, can't also find this lightbulb at a cheaper price on competing marketplaces, even if this lightbulb is actually the best quality

It's the opposite of what you're saying. Sellers not selling particular items on Amazon is good for consumers who are price conscious, because if they need that particular item they will search for it and find it cheaper on another store, strengthening that one and hurting Amazon.

And if they don't care they will find cheaper items on Amazon. Everyone wins except for the seller, which is Amazon's MO.

> It's the opposite of what you're saying. Sellers not selling particular items on Amazon is good for consumers who are price conscious,

Sellers don't just 'not sell this item on Amazon', because it is the largest single market. This is like, the whole issue in question.

> because if they need that particular item they will search for it and find it cheaper on another store, strengthening that one and hurting Amazon.

This is the exact thing that isn't happening, because Amazon is abusing its market position.

But, even if this was the case and the seller chose to sell on a different marketplace and take the Amazon ban, then it still wouldn't be as good as having just having the item listed on both marketplaces at two different prices. Because then I wouldn't be able to buy the best lightbulbs in one convenient location.

So you understand your effect in participating in this system, but life's too good for you to do anything differently. Nice.

You’re just wrong, Amazon controls around 35% of all US e-commerce. Not being able to sell on Amazon instantly removes most of your available customers. The second largest is Walmart and it’s closer to 7%. Walmart, target, whatever, don’t add up to Amazons market.

> Amazon controls around 35% of all US e-commerce. Not being able to sell on Amazon instantly removes most of your available customers

Math doesn't check out. Not to mention that if sellers stopped selling on Amazon they wouldn't control so much. How exactly is making everyone sell on Amazon going to solve anythin?

Sellers should stop using Amazon if they don't like their policies, and the issues will correct themselves.

The math absolutely does check out, lets say, for an addressable market of 100k purchasers:

(and I'll be generous and I'll pretend Walmart has zero fees)

Amazon: ($5 selling price - $3 fees - 0.80 COGS) * (100k * 35%) = $42,000

Walmart: ($2 selling price - $0 fees - 0.80 COGS) * (100k * 7%) = $8,400

And even if they price the same on Walmart as they would on Amazon: ($5 selling price - $0 fees - 0.80 COGS) * (100k * 7%) = $29,400

See the issue? The problem is that one seller on Amazon moving to another platform won't change the fact that Amazon has the majority market share. That's how market momentum works and it's why we have antitrust laws.

Even with exorbitant fees, they are still where sellers need to be. And they are using this market share to force sellers into overpricing on other platforms so that they maintain this unfair position.

Walmart is not all-non amazon customers.

If Amazon's market share is 35%, then the non-amazon customers comprise the other 65% (which, being greater than 50%, constitutes "most").

Amazon: ($5 selling price - $3 fees - 0.80 COGS) * (100k * 35%) = $42,000

Not-Amazon: ($2 selling price - $0 fees - 0.80 COGS) * (100k * 65%) = $78,000

If a seller raises prices to match Amazon, they can be undercut elsewhere by those willing to forgo Amazon for the larger overall market share.

Amazon is convenient to small sellers in that they offer more customers on a single site than any other, and with limited bandwidth sellers logically want to minimize how many different sites they need to interact with, but charging for convenience is not inherently anticompetitive behavior. Amazon may have abused it's position in the particulars of its MFN implementation, but MFNs in general are fine.

There are two reasons why that 65% number is wildly unrealistic:

1. We're ignoring fixed costs associated with onboarding with an ecommerce platform. Selling on one website has significantly lower fixed costs than it is to sell on every ecommerce site on the internet minus one. We're talking thousands upon thousands of retailers, not a handful. If what you were thinking is that they could sell across the next 5 to 10 most popular ecommerce marketplaces, you're somewhere between 15% and 20% marketshare.

A more realistic number for that strategy is:

Not-Amazon: ($2 selling price - $0 fees - 0.80 COGS) * (100k * 17%) = $20,400

https://www.statista.com/statistics/274255/market-share-of-t...

2. Not all ecommerce sites represented in that 65% permit third party sellers. You can't just sign up and sell your stuff. You may have to convince their buyers to stock your product. This is not easy or cheap.

> Not to mention that if sellers stopped selling on Amazon they wouldn't control so much.

This is a problem in terms of organisation. If lots of people stop selling on Amazon this would be true. The problem is individually each seller is motivated to deal with Amazon so long as lots of other sellers are. A mass exodus from Amazon would in short order make the Amazon store far less relevant, but nobody wants to leave before everyone else is doing it because until then it costs them

Or, hear me out here, The Federal Trade Commission orders a study done and the study corroborates the general sentiment here that Amazon is abusing their power in the marketplace. So, the FTC then sues Amazon.

Your 'feelings' about how this works only matters to you. The US branch of oversight for trade has declared (with a lawsuit) that this behavior is unconscionable and either is or will be illegal by the time this suit is finished.

You're welcome to dispute the FTC and the crowd here on HN, but you need to provide some sort of data to back up your claim of: Sellers should just stop using Amazon...the issues will correct themselves.

The FTC's suit alleges the exact opposite of what you allege. The FTC states that there is harm to the entire economy if Amazon is allowed to continue this practice.

Please cite the studies, data, or metrics you used to claim '...will correct themselves."

Thanks @endisneigh.

> The Federal Trade Commission orders a study done

> the study corroborates the general sentiment

Seems fishy ... Good thing that even corporations like Amazon get a day in court.

And if lots of items became available on other sites, but not Amazon (as per the theory being propounded), then Amazon would no longer control 35% of all US e-commerce.

This is a classic coordination problem: you need all the sellers to leave together so that individual merchants don't take a loss. And coordination problems like this are one of the main areas government action can help!

Also, I'd imagine that coordination would probably leave them vulnerable to their own set of anticompetitive allegations (i.e., some variant of cartel behavior/price-fixing). To the extent anyone acts, it would probably have to be government.

There are companies that do not sell on Amazon. I seek them out. They will tell you that if their product appears on Amazon, it's counterfeit.

It's probably an impossiblity if your business model is selling cheap imported Chinese garbage at a profit, but that's the businesess you chose. Others have chosen to sell quality items on their own terms. Those are the businesses I want to reward.

And how much of the stuff that these sellers are just cheap Chinese crap that they wouldn’t be able to sell at all if Amazon didn’t exist?

A company makes a product - it costs $10 per unit to make. To list and sell with Amazon, they are charged $12 per unit. To make a profit the company adds and additional $1 per unit. They sell the product on Amazon for $23 per unit.

Online retailer Foo also has a store, and provide the same services that Amazon for their online shop at $5 per unit. The online retailer adds a profit of $2 per unit. Total price $17 per unit. Retailer Foo is more $ efficient for those services as a result customers price compare. Foo is rewarded for their effi with higher volume, manufacturer is rewarded with higher profit and consumer is rewarded with lower prices. Enforcing market competition led to all 3 parties involved being rewarded. Retailer Foo over time grows a larger customer base as people learn to price compare with them and forces Amazon to stop rent seeking.

But the above doesn't happen in the real world. Amazon enforces that the retailer lower their price on Amazon to $17, while still collecting $12 per unit. The company now can sell on foo, but only by selling on Amazon at a loss. They can't afford that amount of loss from Amazon and stay in business. So Amazon avoids competition. They can't pull their product from Amazon because not enough customers vist Foo retailer yet to make up the volume.

So in the end Foo retailer is more dollar efficient, but is prevented from growing and benefiting the marketplace. Amazon leverages its outside market size to avoid competition. Market participants preventing competition is against the benefits of capitalism and harms the consumer. So, it benefits the consumer to ensure Amazon has to actually compete with the more efficient competitor and stop rent selling behavior.

> They will find some other reason to remove these sellers.

That's be much harder work, though, so regulation might well still have the intended effect.

Either their reason will need to be through their seller terms and conditions, or it'll have to be done on an individual seller basis.

Amazon relies on scale, and therefore standard terms and conditions for all sellers that can be scrutinized by regulators.

If it's done on an individual seller basis, I don't think they'll be able to do it while having the same effect in practice.

> They will find some other reason to remove these sellers.

I think this speaks to the nut of the problem. Unless there is an incentive upstream of the misalignment of parties, then any number of lawsuits after the fact will have a "war on drugs" level of futility.

What to do then? In an alternative universe perhaps the FTC was implemented to improve trade by promoting standards, ontologies and authenticity verification that lead to greater freedom of trade and less gatekeeping.

If a monopoly can't help but follow its incentives to abuse its market power, then you break up the monopoly.

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