Man Prosecuted for Price Fixing on Amazon Marketplace | Hacker News Reader

Man Prosecuted for Price Fixing on Amazon Marketplace

recode.net

56 pointsprostoalex39 comments

That this is prosecuted in a world where Comcast can say "oh, our service areas just happen to exactly not overlap" and "we'll install 2 gigabit service but only where it's absolutely required to undercut our newest competitor and nowhere else ever", is a travesty.

It's the same world where the government will fine you a hundred million dollars for price fixing, but then prop you up with billions of dollars in subsidies.

Lysine Price Fixing http://en.wikipedia.org/wiki/Lysine_price-fixing_conspiracy

Cato's Study in Corporate Welfare http://www.cato.org/pubs/pas/pa-241.html

Time and time again, it seems that paying fines are simply a small cost of doing business if you're large and influential enough to have friends in government.

Yeah the line:

> “We will not tolerate anticompetitive conduct, whether it occurs in a smoke-filled room or over the Internet using complex pricing algorithms,” Assistant Attorney General Bill Baer of the Justice Department’s antitrust unit said in a statement. “American consumers have the right to a free and fair marketplace online, as well as in brick and mortar businesses.”

Made me ill. No, you will not tolerate small fish but the big fish? Keep turning a blind eye. Great you caught this guy and hit him with $20K... That's NOTHING when you look at all the other instances of price fixing happening with massive corporations...

I question what justice is being served here. This doesn't appear to be monopolistic control of the market or price fixing. Consumers are allowed to use price analysis, communication, and deal finding tools, so why not sellers?

If this is truly the first DoJ action prosecuting e-commerce, it makes me wonder if this is a case of someone being effectively forced into a plea, similar to what gets outlined here: https://news.ycombinator.com/item?id=9323758 This seems like peas compared to some of the recent alleged price-fixing scandals, i.e. Apple & e-books.

Topkins was accused of conspiring with other poster sellers to use algorithms, for which he wrote computer code, to coordinate price changes, and then share information about poster prices and sales.

How is that not price fixing?

That is exactly the kind of machine we must nip in the bud. This guy was organizing a cartel from the ground up.

Keeping consumers safe from the horror of an international poster monopoly?

His mistake wasn't creating a cartel, it was using big league price-fixing tactics while being a minor league player - or for impersonating a giant corporation while being a little person.

That will get you a nasty sentence if you try it and get caught.

Actual price-fixing by corporates is hardly rare, and it doesn't seem to attract much regulator interest. See e.g.

http://www.computerworld.com/article/2485343/technology-law-...

Actually his mistake was sharing the information. Had he only used it himself to automatically undercut the competition where there was still a profit to be made he could have built himself a nice monopoly.

Or his competitors could have lowered their prices to compete with him, which is ideally how these things go. I don't think the higher priced competitors would have just poofed out of business.

What you describe is not price fixing so yes, it would be fine (and is used by a number of sellers).

Regulators quite often take an interest in these things. That doesn't mean the regulatory agency always makes the first move. If you search for 'consumer price fixing litigation' you'll find plenty of examples,; top of my list was Apple being slapped with a $450 million fine for price-fixing of ebooks.

This guy is being hit with a $20,000 fine as part of a plea deal, which presumably means he's giving the state evidence on his co-conspirators. Perhaps they will get hit with fines in the $50-100,000 range; at a guess this vendor is having to disgorge his illicit profits but escaping any statutory penalties by cooperating.

In the absence of monopolistic control of the market/supply, I don't consider it any more meaningful than an attempt to optimize pricing.

It's an important difference, when a new seller can easily enter. Another commenter mentioned the price on a used book going up to $23 million based on algorithmic pricing. This creates an opportunity for another seller to sell the book at a reasonable price, while the two attempting to price collude sell nothing.

This is not the equivalent of a single entity acquiring an entire nations supply and distribution of oil to eliminate competition and raise prices, or five out of five major book publishers colluding on the pricing of new releases.

Price fixing isn't when a single company controls the market and jacks prices up, it's when multiple competitors in a market get together and say "Instead of competing, let's collectively inflate our prices so that we make more money."

As a recent example, LG, Samsung, Toshiba, Hitachi, Sharp, Sanyo Epson, and others all colluded to keep prices on LCD panels artificially high for years.

http://www.fbi.gov/news/stories/2012/november/lcd-price-fixi...

http://www.ctvnews.ca/business/multimillion-dollar-settlemen...

I suppose book selling has a much lower barrier to entry than LCD manufacturing, but it's still tough to argue that coordinating prices with your competitors is an acceptable practice.

I can't find the case file online and the details in the article are sketchy.

There have been cases where used books, worth less than $100, were being sold for over $23 million because two sellers are using the same automated pricing strategy which was to price 10% higher than the lowest price [1]. The software just kept moving the price up since they were the only two sellers.

My guess is that there was evidence of collusion in this case. It's the conspiring to fix prices that's the problem.

Still, the feds coming down on the little guy seems silly.

1 - http://www.pcmag.com/article2/0,2817,2384102,00.asp

It's odd how there's prison time for price-fixing collusion between competing entities, but obtaining a monopoly (and therefore price-fixing) is far worse, but usually doesn't get punished or even questioned until the public starts having problems with it.

But the government does. Often mergers between large companies will be prevented if they'd create monopolies. Is there something in particular you're thinking of? One exception in particular is patents.

Which monopolies are you talking about?

In the OP, some small fish were colluding. The only unregulated monopolies I can think of (Google search, Apple App Store, Monsanto, Boeing) are very large and powerful, and they'll certainly have many national politicians in their pockets.

So I don't find it odd that large monopolies aren't busted very often. It's a predictable outcome of a money-driven political system.

People frequently confuse price-fixing with monopolies. There is nothing illegal about having a monopoly. What is illegal is forming cartels and collusion to create restraint/constraint of trade [0]

Patents are an example of government granted monopolies (on an idea). The government also grants monopolies to certains businesses or organizations [1]. Government is itself a monopoly of sorts (they don't offer or allow you a choice in Law Enforcement provider).

Boeing may be a domestic Monopoly, but only because the size, scope and IP of the organization is hard to replicate. What would have been illegal if they had colluded with Communication Sat providers or NASA to prevent Musk from starting SpaceX. There is no evidence I can see that would prevent a sufficiently motivated entrepreneur from competing with them in the Aerospace Defense sector. Politicians are equal opportunity providers, they accept brides (donations) from anyone with a big wallet ;)

[0] http://en.wikipedia.org/wiki/Restraint_of_trade

[1] http://en.wikipedia.org/wiki/United_States_Postal_Service

> they accept brides ... from anyone with a big wallet ;)

Tee hee.

But, seriously:

> [Government doesn't] offer or allow you a choice in Law Enforcement provider.

The rise in private security firms and private offender-rehabilitation firms [0] kinda act as defacto law enforcement for some of the lower class.

[0] http://www.slate.com/articles/news_and_politics/crime/2015/0...

Well it's more like private security. People don't pay much attention to this mainly because stealing is bad in most people's eyes. People are not so concerned if it's actually legal or not to detain someone and basically blackmail them.

> There is nothing illegal about having a monopoly. What is illegal is forming cartels and collusion to create restraint/constraint of trade.

That sounds like a description of a somewhat sane legal system, but it's not a description of United States "antitrust" law. See, for instance, United Staes v. Alcoa.

http://en.wikipedia.org/wiki/United_States_v._Alcoa

I was mostly thinking of the ISPs, who actively try to destroy competition, and are charging rates that would be absurd in other (competitive) markets. Other monopolies will probably emerge in the near future.

I guess if your point of comparison is "Google search, Apple App Store, Monsanto, Boeing" the poster market on Amazon is "small fish", but this guy was the former director of Art.com (fired because of the price-fixing investigation, I take it?) - almost certainly a multimillion dollar business.

Google search is in no possible way a monopoly. And the apple app store is questionably one.

People can't tell there's a monopoly until they see the alternatives. Most monopolies today are so good people have no idea other things are possible. This seems to be a theme with historical monopolies too, which means simply inspiring people to think out of the box is critical to showing people the possibilities.

I don't think your parenthetical can be taken as is. I agree it is more likely to result, but is it really a given?

How did this even come to their attention. The guy was selling posters of all things. You would think there are bigger fish to fry within this category of crime.

Amazon needs to keep an better eye on third party sellers. The make a big deal about the initial credit check(which is easy to get around), and seem to turn a blind eye to customer complaints?

Yes, I'm glad our current administration goes after Price fixers. Price fixing is wrong, and frustrating. I don't find it cute at all.

can someone ELI5 exactly what he did (from a technical standpoint) and why this is wrong both ethically and legally? not being facetious genuinely asking.

I read the whole article, I get that he changed the prices but why is that wrong? Don't people change prices all the time based on algorithms?

He colluded with other sellers to 'fix' prices. In a fair market, individual sellers set their own prices. This works to limit the ability of one seller to price gouge. If they charge too much, a competitor will undercut them, gradually lowering the price to a fair deal for both buyers and sellers (in theory).

If the sellers all collude however, they can set whatever price they want. This can force buyers to pay more than is 'fair'. In the US, following some major issues with the railroads, antitrust laws were inacted. These laws make getting together with your competitors to set prices illegal in some cases. Some people think this is just a part of doing business. Others believe it's a necessary protection for consumers to maintain a fair market economy.

Collusion on price is the same behaviour that is seen across produce markets(also swap meets et al) across the world. TV teams usually do their yearly investigations but nothing happens.

Let's not talk about price collusion in hard drives, pencils etc etc. https://news.google.com/newspapers?nid=1755&dat=19540206&id=...

In fact it is quite natural for sellers to try to price-fix if you think about it.

The regular sellers at the produce market do not want to piss off each other and realize that selling at the bare minimum profit (or loss) would hurt them all and slowly collusion is reached. Sure a few outcasts would try to lower the prices but they quickly learn if they want to survive and be there for a longer time. It happens because the cost of goods is very similar to all sellers and competing on price alone is not going to make anyone happy(not even buyers).

What always confused me about collusion in marketplaces like Amazon is that it seems that it would be much harder to find everyone to agree on pricing and that rebels and rule breakers would be more prevalent.

Doesn't Amazon itself violate the Robinson–Patman Act with its dynamic pricing? [http://en.wikipedia.org/wiki/Robinson%E2%80%93Patman_Act]

What evidence is there that Amazon sets different prices for different users for the same goods?

This, for example: "We do, however find some price variations for Kindle ebooks on www.amazon.com, depending on if the user is logged in to the site or not." [http://arxiv.org/abs/1307.4531]

Also see Figure 1 for the evidence of prices highly varying over time. It implies that different users pay different prices within small periods of time.

One of the elements is that "the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce". I don't think Amazon's dynamic pricing satisfies that element.

That's up to government commissions to decide whether Amazon "tends to create a monopoly" with dynamic pricing. Amazon discloses nothing about its technologies to the public. What we see is, (1) Different prices for different users; (2) The conflict of interest with the merchants Amazon.com hosts, as Amazon serves both as a host and a reseller; (3) Amazon has an access to other merchants' traffic and prices, and is able to diminish their chances to compete with the service.

> a man has agreed to plead guilty to conspiring to illegally fix the prices of posters he sold online

So correct me if I'm wrong, but we don't actually know whether he was guilty or not, right? He may just have pleaded to avoid the costs and the hassle of longer process?

(I don't want to spin it into a discussion about plea bargains - it's just that I'm not from the US, I just want to know if I understand the phenomenon correctly.)

Well if you plead guilty you are saying you are guilty. You are correct there could have been a deal struck and it was just better in the end to not take the chance in court.

The interesting thing about this is that the collusion made it illegal, but collusion was probably unnecessary. If someone released an open source pricing tool that would modify prices based on the pricing of the other sellers and and sales data/profits for the individual merchant, the effect would be much the same but it wouldn't be illegal.

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