Much of what Amazon does is what other retailers already do. Amazon just does it more overtly and with smaller businesses. In fact, various aspects of this where pioneered by WalMart and Costco. 1. WalMart determines the expected product and expected price and tells vendors to take it or leave it. The agreement often has a stipulation that the same product can never be cheaper elsewhere which is sometimes easy as WalMart gets specific SKUs. 2. On the other side, Costco makes the majority of its money from memberships. The membership is a significant sunk cost and maintains brand loyalty from a mass affluent customer base (notice the similarity to Amazon Prime). Existing vendors will work closely with Costco to tailor products to this desirable market (see Costco specific SKUs for TVs, routers, etc). Upstart brands will go even further to get their wares in front of an audience with ample disposable income.

The Amazon policy basically says that the vendor must offer free shipping. Coincidentally, nobody can offer shipping for less than what Amazon offers therefore Amazon(FBA) is by default the lowest price. The only other company that can fight this with a logistics network of its own is...WalMart.

Then you have Chinese vendors who sell through networks of dropshippers and resellers at Amazon and other venues. It's why you see many vendors of seemingly the same item.

One thing to note is that it's mostly small and medium vendors of relatively low margin items that are the most hurt by Amazon's policies. Seller's of high margin items just eat into their margins while large vendors push back at Amazon and sometimes win e.g. Toilet Paper that comes directly out of a Georgia Pacific warehouse instead an Amazon warehouse despite being labeled as Prime and sold by Amazon.com, not a third party.