New unsealed records reveal Amazon's price-fixing tactics, California AG claims | Hacker News Reader

New unsealed records reveal Amazon's price-fixing tactics, California AG claims

theguardian.com

274 pointskmfrk75 comments

It's odd that this is a request for a preliminary injunction considering that the case is almost four years old. Both the 2022 and the new filing are heavily censored[1][2], so I can't know for sure, but I didn't notice any revelation in the latest filing. Amazon requires that anyone selling through their platform not offer lower prices elsewhere online. If a seller does so, they'll be relegated to the "New & pre-owned" offers section below the "Add to cart" & "Buy it now" buttons. This has been the case since at least 2019. (This also means that if you're shopping on Amazon and want a better deal, you should check the other offers section for a cheaper price.)

Lots of retailers (both physical & online) have similar requirements, and many manufacturers have similar requirements for minimum advertised prices (such as Apple). I think the California AG's plan is to argue that the pricing rules combined with Amazon's large market share merit a judgement against them, but it's going to be an uphill battle to single out one company for practices that are common to the industry.

1. https://oag.ca.gov/system/files/attachments/press-docs/2022-...

2. https://oag.ca.gov/system/files/attachments/press-docs/REDAC...

> Lots of retailers (both physical & online) have similar requirements

My understanding (IANAL) is that that is illegal, and those retailers should be prosecuted as well. That is essentially price fixing, because the retailer is enforcing their competitors have the same price, using the supplier as an intermediary.

> many manufacturers have similar requirements

That is a different situation, and is AFAICT legal in the US (but not in many other countries, and IMHO probably shouldn't be legal), at least in some situations, but there are limits.

Is that actually bad for consumers? Wouldn't deranking the "not lowest" price make it easier for customers to find the lowest price (whether that is a different product on the same storefront, or the same product on a different storefront), and hence be good for customers?

> Wouldn't deranking the "not lowest" price make it easier for customers to find the lowest price

The original wording was

>Amazon requires that anyone selling through their platform not offer lower prices elsewhere online.

which means if the seller offers to sell something on amazon for $x, but has a shopify site selling it for < $x, then that seller will get deranked. That's not the same thing as the lowest price, because it's possible that other sellers sell for higher prices, and some people might not find whatever obscure shopify site that has the lowest price.

The wording is admittedly ambiguous, but the fact that there are totally overpriced items available on amazon suggests amazon isn't deranking people just because it's not the best price on the internet.

It would expose distributors who are getting better deals than others when they can undercut the competition.

In the long run it is bad for consumers. If you sell widgets on amazon for $10, and amazon charges $2 or whatever, you pocket $8. Maybe you also want to sell your widgets on your own site where your overhead is only $1. The "most favored customer" clause prevents you from passing that savings on to the customer and charging $9 on your site (or any marketplace where you might prefer to sell things compared to amazon). It promotes stasis or growth of large sellers and prevents new ones from offering price competition.

No it prevents businesses from selling directly from their site at a discount, and eliminates any incentive consumers have to purchase a product outside of amazon. It's one of the ways they became a monopoly, in addition to selling at a loss until all the small businesses were forced to close.

If amazon was just ranking by price, that would be fine. But the described behaviour implies that they would derank a listing even if it was the cheapest option because it was made available by the same seller for cheaper elsewhere.

This kind of thing is ultimately bad for customers because it reduces competition between sales outlets, by making it very difficult for smaller players to compete on price.

As described in the OP, sellers didn't respond to this pressure by lowering prices on Amazon, they raised praises at other retailers. So the effect is to raise prices overall.

If you've ever seen those "Click To Reveal Price" or "Price Only Revealed At Checkout" products online, this here is one reason why. They help businesses keep discounted prices hidden from Amazon's crawlers.

Is it effective, like, at all?

I know myself as well as others in my family have talked about this many times and have a hard rule that if someone has to hide the price they are ashamed of it and we refuse to support them. I literally experienced this tonight. I've been wanting to try some SnackCrates the service where you get snacks from around the world delivered monthly or just a single box if you want. Well the Company SnackCrate stopped shipping to Canada so been looking for another company that does. I see an ad on Facebook and check it out. First looked if they deliver to Canada before anything else. Then try find a price and you can't. Looked all over their site with nothing that even hints at the cost. They want you to first do a snack test to determine good snacks you may like then provide information and so on. Then you can see pricing options. I refuse to do that. Instantly left the site and read the comments on Facebook where I then saw several comments state how expensive they were for such little abouts of snack which made me say yep they are ashamed of the price and that's why they hide it.

This can also be true if the manufacturer of the product requires that retailers not offer a price below a certain amount. This is called the minimum advertised price (MAP) and is common for big brands like Apple. Another way to get around the minimum advertised price is to bundle the product with some other product or service, such as is done with cell phone contracts.

Blame the manufacturer for this, not the reseller.

It can be both. I worked for a brand that wanted to have a sale just on their own, new site to be able to drive visits, but Amazon's "most favored nation" policies would have caused a backlash.

Long-time seller/distributor here -- the main reason for this is mandated by brands, who want to make sure their MAP (minimum advertised price) is respected across all channels.

Basically different distribution channels (speciality shops, big box marketplaces, and ecom stores) have very different levels of overhead, so if each channel was allowed to set their own price, you'd end up with brick and mortar stores doing a lot of showrooming and then online stores gaining the bulk of sales because they're cheaper (because their overhead is low).

This pretty much happened in the early 2000s-2010s so over time brands became VERY particular about enforcing MAP.

> you'd end up with brick and mortar stores doing a lot of showrooming and then online stores gaining the bulk of sales because they're cheaper (because their overhead is low)

This is what I see happen in Poland with clothes and electronics stores, but I don't exactly understand what MAP is supposed to be solving here, given that the brick&mortar and on-line stores are literally the same entity/brand, and in case of clothing, they're also the manufacturer brand?

So game-theoretically: if I know the price for an item is the same everywhere, I'll buy it at the place where I see it first (one of the big values of brick and mortar stores).

If I know I can go online and it'll be some % cheaper, I'll wait and order it online, defer my gratification for a few days, and end up with a cheaper product.

Not sure about Poland, but most B&M brick and mortar stores in the US are distributors/resellers of the brand, they buy for $4 and sell for $10, and their rent/labor/etc costs $3 and they profit $3. Another distributor let's say is an e-commerce website, they can setup a warehouse in a rural area with cheap labor so it costs them $1 and they profit $5... so they can afford to discount it to $7 and make $2... which the B&M store can't do because they won't profit at all.

And how does "click-to-reveal-price" help?

I believe that it prevents the price from being indexed (by dumb crawlers).

I remember hearing our marketing folks talking about enforcing MAP, at the company I used to work for. That company didn’t have the clout of Amazon, but we did sell premium kit.

For us, it wasn’t about money, as much as we didn’t want to ever be forced to reduce Quality; which included the shopping experience. We were concerned that outlets selling lower-priced kit, also had a worse shopping (and support) experience, which we believed (probably correctly) would reflect on us, and our most favored retailers.

Premium brands are often driven by factors other than just money. Brand reinforcement is a really big deal.

I literally don't get it.

You're interested in Quality above all else, fine.

You're upset that you have competitors who don't care about Quality, fine.

So you make your website harder to use, so that... what?

Don't ask me. I'm not in Marketing.

I was just sharing my experience.

But it's not the manufacturers that do that. It's the cheap-slingers. It's their Web site that has the "click to reveal price" button.

Oh! I see, that makes much more sense.

From my short experience with this - manufacturers want to ensure this internationally too. So then same product would cost around the same in Germany and in Poland. Otherwise Germans will check fit of shoes in German B&M store, then go buy it online from some Polish store for X% cheaper.

Manufacturer does not want that, because then it will lose most of it's distributors in Germany.

NB: Though I am not debating if it's right, fair or best for consumer. Just mentioning, what I've experienced.

> if each channel was allowed to set their own price, you'd end up with brick and mortar stores doing a lot of showrooming and then online stores gaining the bulk of sales because they're cheaper (because their overhead is low).

Um... and? That's quite literally "the market working as intended" and while I am not a free-market apologist by any stretch, that seems to be a rather benign effect.

What makes MAP especially suspicious in my eyes is that it's the manufacturers that seem to be overly concerned over well-being of one specific kind of their downstream buyers/distributors/resellers, not those distributors/resellers themselves. I understand that if B&M stores would try to impose that, then the FTC would (hopefully) smack it down pretty quickly but apparently when a manufacturer mandates the price to the resellers, it's perfectly fine? Somehow? Isn't there collusion somewhere in there, probably?

The problem with "the market working as intended" is you get unfortunate second-order effects. The brick-and-mortar is providing a valuable service by letting you browse, try things on for fit and style, feel the material, and hypothetically by curating products and trying to engender trust in their curation, only selling things of at least passable quality (some more than others).

Historically, you only paid for that service when you bought something, since most stores can't convince you to pay an entrance fee. When you go to the store to select products and then buy online, you're leeching on that service and putting the entire business model at risk. If everyone did that, brick-and-mortars would go out of business and you wouldn't have access to that service, which sucks for everyone.

+1 to this. I was around for the 90s and early 2000s to see when MAP wasn't tightly controlled by the brands; the B&M stores got destroyed because they simply couldn't price-compete because their footprint was way more expensive.

I do think that by not having physical stores, it directly/indirectly promoted a decline of product quality as well as misrepresentation of product, with Wish and Temu kinda exemplifying that to an extreme. Price differentiation is way greater now which I guess is a net positive to the consumer.

As a brand owner of midtier kitchen products (cheaper versions of designer OXOish products, but more expensive than your baseline Walmart stuff), our products look visually similar enough to both ends of quality, but shines more when a person gets to interact with the items themselves, feel the product texture, press the lever action, etc. So I do value B&M for their place in the economy and want to make sure they can have some margin (even though I'm selling the same thing in my Amazon store and Shopify and can make more money there).

> If you've ever seen those "Click To Reveal Price" or "Price Only Revealed At Checkout" products online, this here is one reason why. They help businesses keep discounted prices hidden from Amazon's crawlers.

That is obviously not a reason why, considering the place where I've seen those listings is Amazon.

Long-time Amazon seller/brand here, so here's the crux of the case:

1. Amazon is a search engine for product

2. It values being the cheapest destination for products (MFN most favored nation clause to sell on their website), and basically will suppress your listings from search if they can find you selling it cheaper elsewhere.

3. Amazon is def one of the more expensive ecom channels to sell, BUT they've got a huge audience as well due to decades of consumer-first policies, so sellers still go there because even if they have loyal customers with strong brand loyalty, you still end up with at least 30% of customers going to Amazon first after seeing your ads elsewhere + the lure of NTB new-to-brand customers you can acquire there.

So the crux of the case is dependent on whether they can do #2 with impunity -- which Amazon considers "consumer friendly" (but obviously it's win-win for them too).

I order from Amazon because of their logistics. For some reason Amazon can ship for free at the same price as the producer's Shopify page that wants to charge me insane shipping because I live in a remote location.

Yes, I understand the price fixing is why they aren't selling for less on their own site, but Amazon's superpower is logistics, not years of goodwill and brand loyalty.

I mean, 1-2 day shipping is a huge part of their consumer-first policy, which is why every seller has got to do FBA -- for the longest time until COVID, the algorithm heavily penalized FBM fulfilled by merchant from ranking in the search results.

Once FBA started failing during COVID due to warehouse restrictions + sellers and 3PL third party logistics centers really stepped up did FBM even become a thing (and Amazon smartly gave access to Prime badges for FBM sellers who could deal with stringent shipping times).

IMHO the other big superpower Amazon has is to force sellers to eat returns and provide retroactive refunds when a product gets recalled.

It can be 1 or 2 day shipping. That's normally what I get at my house in Ohio. But it can also be a lot faster.

I took a trip to Tampa not so long ago for a few days to hang out with an old friend who I don't see very often, and also to help him with a long list of technical stuff around his house. I flew down in cattle class with no luggage, which meant that I didn't get to bring anything in terms of tools or materials. That left me a bit out-of-sorts -- I'm used to having a work truck with me that is full of the tools and stuff that I find useful.

And we got into all kinds of projects. We got a lot actually-finished, and we had a great time doing that stuff together.

But there was a recurring theme: We'd need to buy some widget or other to move forward. So I'd fire up my pocket supercomputer and start looking to see if Home Depot or Best Buy or Wal-Mart or whoever had it locally, and then start to figure out some ideal factor of best price and travel time.

Because that's just what I know how to do. In my life, when I want to get things done today and doing that requires more widgets, then I have to get in the car and drive to the store to get them -- ideally, with a good plan in place first.

And he wasn't having any of that. Over and over again, he'd shut me down and say "No, look. Just order it on Amazon. They'll probably bring it over today."

And over and over again, I'd look on Amazon and: Sure enough. They brought it over today. Sometimes, with 3 different deliveries in a single day as projects progressed and our need for widgets changed shape. Sometimes, late at night.

I don't think we drove anywhere at all while I was down there except to tool around the neighborhood to find some yard sales one morning, and another trip to pick up more liquor and some Chilean sea bass from Costco.

exactly, and as a result you ended up paying 2-3x more for all those tools than if other businesses were allowed to compete normally

Eh?

I didn't address that specifically, but the prices were OK. They were within a sensible range of what local shops were charging for the same/similar widgets.

Sometimes Amazon was a bit more expensive (and they brought it over today). Sometimes, it was even a bit cheaper (and they still brought it over today).

The price was fine. It certainly wasn't 2x or 3x. It was always an OK price.

(Remember: Over and over again, I kept checking local stores. I didn't make that part of the story up. I didn't make any other part up, either.)

correct, amazon's policies made it impossible for local stores to offer a deal, making sure you pay the 2-3x inflated sum no matter where you go, instead of what the real cost would be if fair competition were allowed

I'm not sure if your point is that Amazon's price is too high (as you previously stated), or if your point is that Amazon's price is too low (as you've now stated).

But I am sure that I cannot accept both of these things being true at the same time.

What are you on about?

>IMHO the other big superpower Amazon has is to force sellers to eat returns and provide retroactive refunds when a product gets recalled.

I value free and easy returns above lowest price, especially in this day and age of rampant mis and disinformation. Which basically means I almost always buy from the big box stores (including Amazon).

Along that line: I know that Lowe's, Home Depot, Chewy etc ship to me with speed matching or beating Amazon's (at least above a minimum purchase), so if what I'm buying is sold by those companies, Amazon does not get that sale.

Amazon is hugely anti-competitive, but their moat can be surprisingly shallow in some areas.

What Amazon has shown the rest of the industry is that shipping matters. Others are learning, at their own pace.

[flagged]

Seems like that's just for protesters.

That would be like showing up for the battle of Kursk with an M18 battalion. Might go well at first, you might score some big flashy wins, but....ugh... things are gonna get worse as the party goes on and it's generally an ill advised strategy.

Rico as written and enforced walks right up to the limit of constitutionality in a dozen ways. It's built for speed. It's never really been thrown into a knock down drag out legal action between titans on equal footing (i.e. a bigco legal team, potentially helped by other bigcos). It might survive nominally but it probably won't come out the other end in serviceable condition. You might win a few but eventually an appeal will find its target and end your day.

I say go for it. Heads I win. Tails you get RICO reform.

I’d be ok with civil asset forfeiture for corporate officers

Are you serious? That sort of inequality under the law for people we don't like is literally how we got here, both in terms of civil asset forfeiture as it currently exists and all the precedents that bigco legal teams can leverage to make the law apply differently for them.

"I'd be ok with civil asset forfeiture for drug traffickers/dealers"

-The 1980s equivalent of you

We can’t have a death penalty for corporations (because economy and jobs and too big to fail) so there needs to be something to put the fear of god into them.

And when CAF is found to be too draconian for rich people maybe there will finally be the political will to do away with it totally.

>Under the law, the meaning of racketeering activity is set out at 18 U.S.C. § 1961. As currently amended, it includes:

It lists plenty of crimes, but anti-trust violations isn't one of them.

Also, obligatory https://web.archive.org/web/20170301062028/https://www.popeh...

See specifically sections "Wait. Isn't the defendant the enterprise?" and "So what's "racketeering activity"?"

"It's never RICO"--Popehat

Shouldn't be hard with the obvious circular investing and... oh yeah... the poaching emails between Steve Jobs and Eric at Google back in the day, along with emails revealed during a discovery phase where big tech CEOs were agreeing to act in each other's interests as if they were one big family of companies; it's just physics, afterall

But everyone was making tons of money due to ZIRP trickle down no one cared then

This seems like a grand proclamation rather than a curious conversation-starter about the specific case the article is about. The guidelines have different ways of asking us to avoid this kind of comment.

Please don't fulminate...

Eschew flamebait. Avoid generic tangents. Omit internet tropes.

Please don't use Hacker News for political or ideological battle. It tramples curiosity.

https://news.ycombinator.com/newsguidelines.html

It would make all the difference if the comment included some commentary on why Antitrust law is inadequate in this case and how RICO would be likely to enable a better outcome.

Things I don't like about amazon:

- they take a huge cut, making them more expensive. I've heard some folks give 50% to amazon to sell stuff

- they destroy or drive away brands, so you cannot shop for quality

- "customers" are bombarded by ads. I think sponsored links seem to be close to 100% of results until you scroll down a few pages.

And what's really stupid about this is that done openly there probably wouldn't be an issue. Insurance companies can demand providers charge them the lowest rate they charge anyone. Would there have been any issue if Amazon had simply said that to get those features you must match any deals you give anyone else?

Selling to a reseller at the same price isn't an issue. The problem is disallowing selling direct to customer at a lower price. It means if someone makes another online marketplace, let's call it Ganjes, then if they have lower overheads they can't sell for less than Amazon does. Similar for DTC from the manufacturer.

Amazon isn’t doing this to benefit customers. A seller/store with an item priced at $100 and selling at a discount on their own site would be pushed off the buy box and customers could see the item for sale for $120 from another seller.

The entire use case of dynamic pricing is to raise prices.

Airlines were really the first to do this but there it kinda makes sense. You have a plane. It's going anyway. You want to fill it.

At the other extreme is RealPage, which is explicitly designed to raise rents and it's used by enough people that you can view it as the last frontier of anti-trust, anticompetitive behavior and price-fixing. It's also state-sanctioned violence because your price-fixing scheme has the threat of you being homeless attached to it.

That's another aspect to this: collusion doesn't happen in dark smoke-filled rooms anymore. It can be as simple as all "competitors" simply using the same software, which tells them all to do the same thing.

Another commenter had it right: this is beyond antitrust or competition law. It's a RICO issue.

There's no real structural reason for inflation since the pandemic. The pandemic simply broke the seal on raising prices and now everybody is in on it.

> It's also state-sanctioned violence because your price-fixing scheme has the threat of you being homeless attached to it.

Explain "violence", please.

Unsurprising

Did Amazon think they were too big to convict?

I wonder if they will meet the fate of Standard Oil, back in the day.

No, Antitrust law was effectively neutered by the Chicago School and their agent Robert Bork.

https://www.theamericanconservative.com/robert-borks-america...

(BTW that source is right-wing and can hardly be said to be biased against Bork).

That's fascinating. Bork was denied being on the supreme court but his ideas shaped current antitrust laws. It feels a bit like the old Standard Oil argument: It's ok to have a huge market share so long as pricing for goods gets cheaper even if it hurts competition overall. *edited* for grammar.

Yeah. Heather Cox Richardson was arguing about this today, saying that historically the job of the government was to decide that cheaper but gutting a local economy, or cheaper but taking enough market share to be able to heavily raise prices in the future was bad. But due to Bork that capacity of the government to actually help drive good outcomes for the bulk of the population has been gutted.

local small business should offer local specialty, if it's doing the exact same thing as the big business but with higher overhead, then why not find something much more productive for the folks there?

small local economies that are stagnating already for decades are not great for anyone. people who live there are struggling, no upward mobility, anyone a bit more successful leaves, the usual urban rural polarization intensifies, yadda yadda.

obviously one of the big drivers of this is the completely fucked up housing policy. (which itself is driven by public safety and public transit issues.)

education is a close second. then the return to office mandates. the all the discontinuities and disincentives of the braindead wrong implementation of welfare (and other social support/payments).

the real economy deadweight loss is easily 2-3% of GDP (per year of course)

Remember, Bork was the third guy who supinely did Nixon's bidding when Attornet-General and his deputy resigned rather than fire the special prosecutor investigating Watergate.

MFN clauses are common in retail, what's different about Amazon's is the enforcement. Manufacturer MAP policies threaten "we won't ship you more," which you can recover from (unlike a listing demotion)

Amazon would be smart to settle with no admission of wrongdoing and an agreement to seal documents lest every other state end up following suit.

The documents can be subpoenaed for a new proceeding from the source.

How is this not a complete violation of anti-trust laws? If the federal government won't pursue it (questionable in this environment), surely there's more than enough to go after it state-by-state.

And can't we do a class-action lawsuit against Amazon at this point?

You're replying to an article about an anti trust investigation into Amazon that is currently in pre-trial preliminary stages. Which is why the article is talking about information they discovered during the course of it.

We need all new antitrust laws. The size of these companies is itself a problem. They have so much power that there is no possibility for fair competition. Maybe we can start by taxing companies that are worth more than 1 trillion at an extremely high rate.

I wonder who would prosecute them. What about an AG who, when confronted about doing a bad job, deflects by pointing out that Nasdaq is "smashing records?"

I'd be in favor of giving Lina Khan a lifetime appointment to heading the FTC along with 10x their current budget to tackle exactly this problem.

A major part of the problem isn't even that we don't have laws on the books, it's that funding to the enforcement agencies has been gutted to the point where they can mostly just go after extreme egregious violations or very easy to win cases. The IRS is in exactly the same boat.

That would be great, but I think even her job needs new laws. Otherwise, one of the problems is even hardcore enforcement takes years and huge amounts of taxpayer expense. We need to make it simple, cheap, and quick to improve competition.

I don't disagree. I think she's about the perfect person to be involved in writing those new laws in some fashion.

She's not the AG anymore, though I'm not claiming that Todd Blanche is better.

Luckily, Lina Khan has just announced The Center for Law and the Economy at Columbia University, which is going to be training the next generation of antitrust lawyers for the US. If we are lucky, she will also be working on much bigger things than that at the same time. If we are doubly lucky, she will be training hundreds of new lawyers as good as she is.

If Amazon punishes sellers for having lower prices elsewhere, isn’t it the sellers choice whether to lower their price on Amazon OR raise their price for other sellers?

I didn’t see anything in the article suggesting Amazon ask for the 2nd option, just examples of sellers who did the 2nd one.

You are correct that the merchants have that choice.

Amazon's behavior is still anti-competitive. They are the big boys. The drive lots of volume, and have high fees. This policy makes it impractical for most vendors to support Amazon's competitors or compete with Amazon themselves. And it robs customers of a meaningful choice that would cut out an expensive middleman.

Without this policy, you might see lots of products on Amazon that are $19.99 with Amazon's 30% cut, and maybe $13.99 (30% less) on the vendor's own website. The consumer loses twice with Amazon's policy: once because they couldn't get the item at a cheaper price, and again because they didn't support any innovation or competition in the market, which would also lower prices.

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