Amazon constantly scans rivals’ prices to see if they’re lower. When it discovers a product is cheaper on, say, Walmart.com, Amazon alerts the company selling the item and then makes the product harder to find and buy on its own marketplace — effectively penalizing the merchant. In many cases, the merchant opts to raise the price on the rival site rather than risk losing sales on Amazon.
Pricing alerts reviewed by Bloomberg show Amazon doesn’t explicitly tell sellers to raise prices on other sites, and the goal may be to push them to lower their prices on Amazon. But in interviews, merchants say they’re so hemmed in by rising costs levied by Amazon and reliant on sales on its marketplace, that they’re more likely to raise their prices elsewhere.
Antitrust experts say the Amazon policy is likely to attract scrutiny from Congress and the Federal Trade Commission, which recently took over jurisdiction of the Seattle-based company. So far, criticism of Amazon’s market power has centered on whether it mines merchants’ sales data to launch competing products and then uses its dominance to make the original product harder to find on its marketplace. Harming consumers by prompting merchants to raise prices on other sites more neatly fits the traditional definition of antitrust behavior in the U.S.
“Monopolization charges are always about business conduct that causes harm in a market,” said Jennifer Rie, an analyst at Bloomberg Intelligence who specializes in antitrust litigation. “It could end up being considered illegal conduct because people who prefer to shop on Walmart end up having to pay a higher price.”
[…]
Online merchants typically sell their products on multiple websites, including Amazon, EBay Inc. and Walmart Inc., which also removes products with “highly uncompetitive” prices compared with those on other sites. But merchants often generate most of their revenue on Amazon, which now accounts for almost 40% of online sales in the U.S., according to EMarketer.
Merchants have long complained that Amazon wields outsize influence over their businesses. Besides paying higher fees, many now have to buy advertising to stand out on the increasingly cluttered site. Some report giving Amazon 40% or more of each transaction, up from 20% a few years ago.
[…]
Amazon began sending the price alerts in 2017, and merchants say they have increased in frequency amid an intensifying price war between Amazon and Walmart. Merchants receive the alerts via a web platform they use to manage their Amazon businesses. The alerts show the product, the price on Amazon and the price found elsewhere on the web. They don’t name the competing site with a lower price; the merchants must find that themselves.
A typical pricing alert reads: “One or more of your offers is currently ineligible for being a featured offer on the product detail page because those items are priced higher on Amazon than at other retailers.”
In plain English, that means merchants lose the prominent “buy now” button that simplifies shopping on Amazon. With that icon missing, shoppers can still buy the products, but it’s a more tedious and unfamiliar process, which can hurt sales
[…]
“Amazon is in control of the price, not the merchant,” said Boyce, who runs Avenue 7 Media.
Molson Hart, who sells toys online through his company Viahart, typifies the challenge. Hart says more than 98% of his $4 million in 2018 sales came from Amazon even though he also sells his products on EBay, Walmart and his own website. He was trying to sell a toy stuffed tiger for $150 on Amazon. Hart designs, manufactures, imports, stores and ships the item to customers; Amazon would get $40 for listing some photographs on its website, handling the payment and charging Hart to advertise the product on the site.
Hart said he could sell the product for about $40 less on his own website, but won’t since that would jeopardize his sales on Amazon due to its pricing enforcement, he said. “If we sell our products for less on channels outside Amazon and Amazon detects this, our products will not appear as prominently in search,” he wrote in a recent article on Medium. Hart has since lowered the price of the tigers on Amazon and is now selling them at a loss.
Amazon used to require that merchants offer their best prices on Amazon as terms for selling on the site, but the agreement attracted the attention of regulators bent on ensuring competition. Amazon removed the requirement for sellers in Europe in 2013 following investigations and quietly removed the requirement without explanation for U.S. sellers in March shortly after Democratic presidential hopeful Senator Elizabeth Warren announced a goal of breaking up Amazon and other big tech companies.
[…]
Michael Kades, a former FTC attorney who now researches antitrust issues at the Washington Center for Equitable Growth, says the price alerts will almost certainly draw the government’s attention. “If regulators can prove that this conduct is causing merchants to raise prices on other platforms,” he said, “Amazon loses the argument that their policies are all about giving everyone lower prices.”
As I say in my talk, Break it Up! monopolistic behaviour is a lot more than just pricing – just this sort of anti-competitive pressure on third parties is one of the more maffia style sort
