how is this different from Walmart deciding at what price it sells its suppliers' product. Almost all the retailers decide the final selling price of suppliers' products, that is the reason they are able to undercut mom&pop retail stores. Only exception on supplier side is Apple and to some extent Bose who have the brand leverage to dictate their prices to retailers.
My guess is that they want to standardise pricing much better than they are able to rely on publishers doing (understandably on both parts). Even Apple's walled garden lets you set the price doesn't it? I guess maybe consumers see less variance in ebooks and Amazon want to simplify things.
Amazon seem to better support my best interests as a consumer - and I plan to buy a Kindle soon fwiw - but I think trying to compare Amazon to anything traditional is going to fail because their model is so different - and at the end is basically a walled garden they need to control as much as possible.