Amazon News Roundup, Volume 15 – Amazon Price-Fixing
Does Amazon play fair? Or is Amazon price-fixing a real thing?
Recently, Bloomberg released an article that claims Amazon uses aggressive tactics to ensure that the products in their marketplace have the lowest prices.
Here is what the article said regarding Amazon price-fixing:
“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.”
What was Amazon’s response?
In response to this, Amazon claimed in a statement to The Verge that this tactic is in place to benefit the customer.
“Amazon works hard to keep prices low for both customers and sellers. We have very competitive fees for sellers and we make significant investments on their behalf to continually improve our store and empower their businesses. In our store, we feature the offer that predicts the best shopping experience for the customer based on a number of factors including price and delivery speed. Sellers have full control of their own prices both on and off Amazon, and we help them maximize their sales in our store by providing them insights on how to be the featured offer.”
Of course, this could also be interpreted as Amazon saying, “Sellers, you are free to set your prices to whatever you want them to be. However, if you give a different marketplace a better price, you may not get the usual sales-boosting help from us.”
How do sellers know when they’re in violation?
According to sellers interviewed by Bloomberg, Amazon sends a warning when a product’s price is lower on any marketplace that isn’t Amazon.
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, this is Amazon’s way of telling sellers that, “You don’t get to have the Buy Box on your own product.”
And, as every Amazon seller knows, if you don’t own the Buy Box for your product, getting sales is very difficult.
So sellers are alerted when they’re in violation, but is it price-fixing in the legal sense?
What do sellers think about Amazon price-fixing?
The sellers in our Amazon Competitive Edge Facebook Group have shared their experiences with this so-called price-fixing:
“They do this to me all the time. Every now and then Wayfair will break MAP when running a sale with our products. We will either lose the buy box if I don’t match the Wayfair price, or there will be a bar across the top of our Amazon listing that says “Lower Priced Items to Consider.” After Wayfair fixes the MAP issue, the bar/buy box issue still lingers on Amazon for a couple more weeks.”
– Brett J.
“They do it to me… it’s annoying.” – Mike F.
“Yeah, they grill [one of] my clients for selling his products on COSTCO at wholesale member-only prices… if you are a small business selling on COSTCO, then you know they have certain expectations you have to meet, price-wise. Amazon, despite being a retail channel, refuses to do anything to put us in the buy box unless we match the wholesale price. The system has terrible issues.”
– Garrett T.
What about offering lowering prices on your own website?
No. It appears that Amazon doesn’t like sellers to do that either.
One of our Amazon experts, Michel Bujardet, reports:
“Indeed, if you have a website, you should refrain from adopting lower prices [there]. It would lose you the buy box.”
And while it’s understandable that Amazon wants to offer its customers the lowest product prices around, is it fair to make sellers match company-website prices with prices on Amazon?
Molson Hart, who sells toys online through his company, says that more than 98% of his 2018 sales of $4 million came from Amazon, even though he also sells his products on eBay, Walmart and his own website.
One item Hart sells is a stuffed toy tiger, which his company designs, manufactures, imports, stores and ships.
He also deals with customer service issues, like refunds and returns.
As for Amazon, even though it simply lists the product on its site, handles customer payments, and allows Hart to advertise, they get a whopping $40 from each sale.
So while the lower prices on Amazon seem to be good for consumers, in actuality it’s hurting both the seller and the buyer.
How does it hurt consumers?
Hart said he could sell the tiger for about $40 less on his own website, if it weren’t for Amazon’s pricing enforcement.
In a recent article on Medium, he wrote that he won’t sell at the lower price because it would jeopardize his sales on Amazon.
“If we sell our products for less on channels outside Amazon and Amazon detects this, our products will not appear as prominently in search.”
Hart has since lowered the price of the tigers on Amazon, but is selling them at a loss.
Is Amazon price-fixing legal?
According to Bloomberg, Amazon used to require that merchants offer their best prices on Amazon as terms for selling on the site.
But that agreement attracted the attention of regulators, which means that the government saw those terms as price-fixing.
In 2013, following investigations into the practice, Amazon removed the requirement for sellers in Europe.
In March of this year, shortly after Senator Elizabeth Warren announced her goal of breaking up Amazon and other big tech companies, they quietly removed the requirement (without explanation) for US sellers as well.
Michel Bujardet observed:
“I have seen several antitrust actions in my lifetime. They usually take decades. The problem with the new economy is that it is super nosy. Amazon checks out prices on its sellers’ websites. Facebook sells personal information from its subscribers. All these things are verified, but yet, it seems terribly difficult to do anything about it. Up until now, it seems the authorities prefer to ask the offender to police itself.”
Michael Kades, a former FTC attorney who now researches antitrust issues at the Washington Center for Equitable Growth, said in a PYMNTS article that 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…Amazon loses the argument that their policies are all about giving everyone lower prices.”
In other words, Amazon could be in trouble if they don’t adjust their current policy around pricing.
What will stop Amazon price-fixing?
Fortunately, in this entrepreneurial age, there is one thing that can stop Amazon for sure: competition. And it is coming.
Recently, we reported that Chinese e-commerce giant Alibaba was making the move towards entering the US business-to-business marketplace.
Unlike Amazon though, Alibaba is allowing sellers to keep full access to their customers’ information.
Furthermore, they’re only charging $2,000 per year to sell there.
At first glance, this may seem pricey, but compared to what Amazon charges for its referral fees, $2,000 to sell on Alibaba is reasonable.
For example, Amazon charges its sellers a minimum of 15% of each sale. So, a seller who sells $100,000 worth of merchandise in a single year ends up paying Amazon at least $15,000 in fees.
That’s not even including storage fees, FBA fees, advertising, etc!
So, if Amazon continues implementing policies that damage entrepreneurs and brands (regardless if it takes Alibaba a few years to ramp up) they may soon find themselves without their seller base.
And that will, eventually, lead to losing their shoppers too.
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Amazon FBA seller news this week
Need to know for Amazon FBA Sellers
- Amazon continues to deny seller data use and self-preferencing- Global Competition Review
- eBay is suing Amazon over claims it engaged in illegal ‘conspiracy’ to poach sellers – Gizmodo
- Amazon defends use of third-party seller data – Digital Insurance
Also of interest:
- FedEx ends ground-delivery contract with Amazon – TechCrunch
- Amazon is now selling an expandable tiny house that requires zero DIY work – People
- Amazon drivers allegedly involved in $10 Million theft ring- The Street
Anything we missed?
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