
Amazon Is Accused of Forcing Up Prices in Antitrust Complaint - ikeboy
https://www.bloomberg.com/news/articles/2019-11-08/amazon-merchant-lays-out-antitrust-case-in-letter-to-congress
======
programmertote
A bit tangential. But I have posted what seems to be a shady practice by
Amazon's Prime Video.

A few days ago, I was watching Goodnight Mommy (2014) on Prime video (I'm a
prime subscriber). I stopped before I finished the movie and went to sleep.
But this evening, I decided to resume the movie, but Prime wants to charge me
$3.99 to rent it.

This is not the first time I have noticed this. There were a couple of other
movies that I returned to watch in a matter of a couple of days and Prime
decided to start renting it.

What's worse, a couple of days after seeing them asking for $3.99 to rent that
movie, the video became available again for free for me to watch!

I feel like it could either be coincidental (i.e. Prime taking the movie off
for rental) or by design. Regardless, I lost my faith in Prime a little after
repeated experience like that.

~~~
jitix
I had the same experience watching Mr Robot season 3. I just waited a week and
it came back to watch for free.

Seems like a classic bait and switch and probably shady.

~~~
programmertote
So it's real. Thanks for confirming my experience!

------
joeblau
I have a buddy who sells some custom widget on his own personal website and
when we were snowboarding in whistler in March of this year, he complained
about this. He was saying that if his widget is $5 on Amazon, he can't sell it
for $4 on his site or Amazon will take his product down. He also does 2 day
shipping, but unless he pays Amazon for a prime badge, he can't advertise that
through Amazon.

~~~
themagician
That's both not true and not the issue here.

If he sells some custom widget he can do whatever he wants with it. Amazon
won't even know and/or care about what happens off Amazon. The Amazon.com
Retail team probably won't be interested in buying it and selling it for $5 if
he's selling it for $4 on his own site, but the marketplace/FBA side of things
doesn't care at all… assuming it's actually a custom widget.

You don't explicitly pay for the Prime badge. You need a Professional account
to sign up for Seller Fulfilled Prime, but your eligibility is based on volume
and performance.

~~~
joeblau

       > That's both not true and not the issue here.
    

It was true when he told me, Amazon reversed its decision on this in March[1].

    
    
       > The Amazon.com Retail team probably won't be interested in buying it and selling it for $5 if he's selling it for $4 on his own site, but the marketplace/FBA side of things doesn't care at all… assuming it's actually a custom widget.
    

His widget doesn't actually cost $5, it's more. I'm just using the price as an
example because he was extremely concerned about competitors stealing his
product. He doesn't want Amazon anywhere near it because this profit margins
are really high on his product. If Amazon.com's "Retail team" found out what
it was, they would probably find his supplier or a knock off and try and make
a low quality "Basics" version of it.

    
    
        > You don't explicitly pay for the Prime badge. You need a Professional account to sign up for Seller Fulfilled Prime, but your eligibility is based on volume and performance.
    

He doesn't want to be fulfilled by prime, he manages his own shipping pipeline
just a good as Amazon's. Amazon places rules on its merchants so that there is
no way to compete without fully capitulating to Amazon's shipping policies.

Oh and I used to work at Amazon so these practices are not surprising.

[1] - [https://www.inc.com/guadalupe-gonzalez/amazon-removes-
price-...](https://www.inc.com/guadalupe-gonzalez/amazon-removes-price-parity-
not-fair-price-rule-third-party-sellers-antitrust-violations.html)

~~~
aianus
> He doesn't want to be fulfilled by prime, he manages his own shipping
> pipeline just a good as Amazon's.

As a consumer if I see a prime logo and it's not Fulfilled by Amazon I would
feel scammed. Amazon Logistics is the only courier where I live that is
reliable and on-time and I have little interest in buying anything on Amazon
that is fulfilled a different way.

~~~
lightedman
In that case, enjoy your fraudulent/counterfeit products.

[https://www.engadget.com/2018/05/31/fulfilled-by-amazon-
coun...](https://www.engadget.com/2018/05/31/fulfilled-by-amazon-counterfeit-
fake/)

------
ikeboy
The argument is they're tying usage of FBA to selling on their marketplace,
which unfairly boosts FBA usage even if more expensive or worse service than
competitors such as FedEx or UPS.

In particular, if you use FBA you aren't held responsible by Amazon for late
deliveries but if you use other services you are. Also, their data shows only
15% of Amazon deliveries are actually meeting the 2-day timeline.

~~~
Alupis
I can say firsthand, using FBA for a product absolutely boosts it's search
ranking, and leads to an increase in sales. Sometimes dramatically so.

It's not uncommon to offer both FBA and FBM on the same item, in case you run
out of stock of the FBA item or vice-versa. Same price, same delivery dates...
but the FBA product will outpace your FBM product dramatically.

So those merchants that try to FBM exclusively are put at a double
disadvantage - rank worse in search, and get harshly penalized if a product is
delivered late (even though once it leaves your warehouse, it's up to the
USPS/UPS/FedEx meet their delivery promise).

Also, the article alleges FBA fees are not in-line with market rates for 3PL,
and the close tie between Amazon's Logistics Network and Marketplace has
caused a price increase to consumers, which harms consumers unfairly - thus
the Anti-Trust case.

~~~
privateSFacct
What about purchasers who are tired of crappy FBM shipments? I bought a book
on amazon FBM. It cost like $100. Turns out it was shipping from overseas and
took 3 MONTHS to get to me (I was sure it would not). I had to buy a different
one in the meantime.

I've bought FBM and had stuff come from china in a flimsy envelope crushed.
I've no idea how they can justify shipping this crap internationally.

FBA from a customer standpoint is simply more predictable. I can get extremely
short delivery times (most are next day where I am for some reason instead of
two day).

Did they do any analysis of whether customers are willing to pay more for FBA?
I wouldn't be surprised if they were. You also tend to get fewer boxes if you
do FBA. I did a bunch of third party orders once for an electronics project
(think 30 different small things) most were FBM and all came in separate small
boxes which is ridiculous.

~~~
Alupis
> Turns out it was shipping from overseas

This is by Amazon's design too.

If you use the "Buy Box" (add to cart button on the product page), it's quite
difficult to see who you're buying from and from where the item ships from.

However, if you select "More offers from..." button, hidden on the page pretty
well, you can see exactly where the product ships from, and expected delivery
dates, as well as seller feedback ratings and number of feedbacks (giving you
an idea of size of the seller).

Many of us FBM's have primary websites we sell on that make majority of our
annual revenue, and our own distribution network.

Guess what? The same products we sell on Amazon are cheaper on our website -
and we'll still get the product to you in 2-3 days, often with Free Shipping
too. We don't have to pay Amazon fees that way, and we stand behind our
company name - we're not going to screw you over in some shady way like
pretend to be American but actually ship from China.

It's insane that we've spent all this money, and decades building our own
fulfillment network, warehouses, and processes - but when we sell on Amazon,
we're compelled to use their FBA just so we can sell enough product there to
be worth our time.

~~~
privateSFacct
The problem is I don't know your company when I buy direct from you.

I bought direct from an Instagram ad. Turns out they wanted me to wait for
their next shipment despite saying "in-stock" \- 2-3 months. When I said
refund me they said no wait, we DO have it in stock! That is shady.

All this took lots of back and forth. I couldn't just cancel without talking
to them, I had to figure out their system for submitting requests etc.

Amazon sells predictability in part. Their business accounts let me ad a GL
code to my order and ties into a statement that can be paid by check within 30
days through an AP system on our side (also electronic).

I don't drink coffee but I imagine Starbucks does the same otherwise why would
everyone go there?

Amazon's big risk is their marketplace and the crap in there. They should
clamp down HARD there. That is getting us to consider moving business
purchases elsewhere.

~~~
Alupis
Sorry to hear that, you rightfully should have charged back your payment.
That's a massive stick in your corner as a consumer. It's expensive for the
retailer to deal with, and too many risks having their Processor close their
account. It's also the reason Amazon freezes your account if you chargeback
something.

Sounds like you were buying from an arbitrage seller, our more commonly called
a drop shipper our crossdocker in industry terms. Basically they don't stock
the products they sell. They buy goods when they sell goods, and hope you
won't notice. Sometimes it works out, if their source can ship quickly... But
in your case... It didn't. That's not really an online store... Unfortunately,
only online reviews will be able to help you stay away from that.

I can't speak for all online stores, and certainly if your organization has an
approved vendor list then things are set... But many of us are happy to accept
PO's, setup NET accounts, and more. You'll also get a more personal touch with
a company that cares about your business instead of you just being another
number.

As an aside, take a look at Quill for office supplies. They'll treat you
right.

------
whack
> _The merchant alleges he could offer the same products on Amazon at lower
> prices and with faster, more reliable delivery if he could handle logistics
> himself without being penalized for late deliveries. Merchants using
> Amazon’s logistics services don’t face penalties for delivery mishaps, which
> is why many choose to use it even when better options are available, the
> letter states._

It would be great if someone had numbers on how often Amazon logistics are
late, as compared to third party services. If their logistics are indeed much
more reliable, then I can understand where their policy is coming from. If a
merchant wants to use a 3rd party service that is cheaper/faster but less
reliable, that does seem like something the merchant should be penalized for.
It all depends on their relative rates of reliability though.

Either way, the optics certainly don't seem to favor Amazon here. They may
have to restructure their pricing and penalties, to avoid the perception of
bias.

~~~
duahncjak
In my experience, Amazon drivers will mark packages as delivered when they
haven’t gotten around to delivering yet. When I call Amazon to complain, they
tell me to just wait and the package will show up later.

I suspect the drivers are given an impossible number of packages to deliver,
and there’s a misalignment of incentives where everyone is better off
pretending they delivered the package on time. It’s not hard to imagine how
this situation would arise when the delivery company is also the merchant, and
there’s a command from on high for everyone to get one-day delivery. If the
package is marked as delivered, everyone up the chain makes their numbers.
@bezos, are you paying attention?

~~~
cc439
Not saying where I learned this from, but the Amazon fulfillment services
(fulfillment centers and their 1st party delivery services) have a greater
than 30% month over month turnover in my region. No one taking these jobs has
any intention of making a career out of it and most aren't even planning to
work them for more than a couple months at most. That is exactly the kind of
environment that encourages gaming the system in the way you describe because
the risk of getting fired within the expected time period employment is so low
that it isn't worth doing the job right.

~~~
xmprt
I misread month over month as YoY. That's insane. I don't think even Uber has
a lower turnover rate and drivers are independent contractors in that case.

------
cerradokids
This reminds me of an old joke:

3 businessmen are in prison, and they ask each other why each one is there.

\- I'm here because my prices were lower than the other companies, so I was
charged for dumping the other companies.

\- I'm here because my prices were higher than my competitors, so I was
charged for economic power abuse.

\- Well, I'm here because my prices were equal than everyone else, so I was
charged for cartel formation.

------
zer00eyz
> "It accuses Amazon of “tying” its marketplace and logistics services
> together, an antitrust violation in which a company uses dominance in one
> market to give itself an advantage in another market where it’s less
> established."

Amazon has robust competitors in the shopping space (hello Walmart). And does
not often serve niche markets. Hobby electronics (think old radio shack or
current adafruit), sewing, wood screws in volume are all places where amazon
falls flat and there is plenty of room for others to succeed.

What amazon is doing is brilliant, it isn't monopolistic, it is vertical
integration. Something that doesn't happen as much as it once did.

~~~
nickfromseattle
>Amazon has robust competitors in the shopping space

Amazon owns 49% of US online retail. [0]

If 49% still allows for robust competitors, at what % does that change?

[https://techcrunch.com/2018/07/13/amazons-share-of-the-
us-e-...](https://techcrunch.com/2018/07/13/amazons-share-of-the-us-e-
commerce-market-is-now-49-or-5-of-all-retail-spend/)

~~~
colmvp
Online retail is only around 10-11% of total retail sales in the United
States.

[https://www.census.gov/retail/mrts/www/data/pdf/ec_current.p...](https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf)

Amazon has a leg up on Walmart for online sales, but Walmart is still the
number one retailer in the U.S.

------
ummonk
I have lots of problems with Amazon (counterfeiting / inventory commingling
issues, treatment of employees), but trying to standardize customer
experiences by pushing sellers into their own logistics system is not one of
them.

------
BeetleB
I was looking recently into how commercial real estate works. Typically when
you rent out a space in a plaza, your expenses are very predictable for N
years. The typical contract with the plaza owner lasts many years (could even
be over a decade). This way you know you're not going to get sudden rent
increases, etc. On the flip side the rate of return for the owner is also
lower than normal - the risk is lower (guaranteed income for many years) and
so is the return.

In that sense, one definitely should _not_ make an analogy with a traditional
marketplace. The terms you agree to when selling on the Amazon marketplace is
typically orders of magnitude worse than what you'd get at a plaza - imagine
Amazon committing not to raise costs for the next 5 years.

Amazon isn't a market place - it's a store. When you sell on Amazon, think of
it as selling it at Walmart - you don't get to pick where Walmart will place
it on the shelves, and you have no guarantee that Walmart won't drop your
product altogether.

~~~
themagician
This is how 99% of people think about Amazon. Unfortunately, it's not quite
correct. The Amazon.com Retail team does, in fact, operate a store. The
marketplace is the behind the scenes network for third party sellers that make
their catalog seem so large. Most people don't even know the second part
exists, but it does. When you buy from Amazon you aren't always buying from
Amazon. Sometimes you are buying from some random person that Amazon.com
Retail is actually competing with. And sometimes you buy from some random
person, although Amazon does the fulfillment. It gets quite convoluted.

------
ikeboy
[https://outline.com/2fHaL8](https://outline.com/2fHaL8)

------
buboard
Source without paywall:
[https://www.latimes.com/business/technology/story/2019-11-08...](https://www.latimes.com/business/technology/story/2019-11-08/amazon-
antitrust-complaint)

------
downrightmike
If you guys read 'the everything store', Amazon originally let other merchants
sell on the platform because Amazon could get the metrics of what sells well
and copy it, and get rid of the merchant. They've been anti competitive since
they started allowing merchants to take the risk and then force them out.
Amazon basics is the result. Usually, but Amazon is really screwing themselves
if they jack up prices as keeping prices low for consumers is really the only
thing keeping them from fitting the definition of monopoly and that is what is
keeping the regulators at bay. They undo that, and they make themselves a huge
target.

------
ilaksh
The technology monopolies are popular because people like to have platforms.
But they have a built in conflict of interest.

Decentralization technologies can help use build public platforms without the
conflict of interest.

------
helpPeople
I don't sell my product on Amazon due to their outrageous terms.

I don't buy things on Amazon because it's expensive.

Maybe this matters more to giants who are nearly forced to. But it can be
avoided.

~~~
themagician
As a manufacturer you have no choice. If you make a product that has even
moderate distribution it will end up on Amazon. You either take control of
your products on Amazon or deal with the consequences: counterfeit goods, used
as new, damaged as new, bad customer service, people undercutting all other
retail partners, etc.. The customer doesn't care. They will blame you.

It's kind of funny that Amazon actually has a much worse problem with all the
things that kept people away from eBay.

------
ajhurliman
I think they're going to have a hard time proving they were "forced" into
using FBA.

~~~
femto113
My thought too. "Pushing" someone to use a service is very different from
"requiring" them to use it. Amazon can also make a very strong case that FBA
maximizes consumer value even if it doesn't minimize price.

------
rpmisms
I have a hard time not believing this to some degree. Amazon is incredibly big
and powerful, this would be trivial for them.

------
Apofis
They've been driving prices to rock-bottom for so long, it's pretty ironic
that they get sued for trying to raise prices. Such is life.

~~~
throwaway_tech
Not really ironic, selling products at a loss to drive others out of business
then raising prices on consumers after you have driven your competitors out of
business is the definition of anti-competitive behavior.

~~~
Apofis
That's retail in a nutshell though.

~~~
Alupis
Not in this case. It's FBA fees that are out of line with other 3PL providers
- and Amazon's punishment for sellers that do not use FBA coupled together,
that make for more expensive products as sellers have to increase price to
stay profitable.

That unfairly harms the consumer, which is the basis for this Anti-Trust
argument.

Effectively, Amazon has built the world's largest Marketplace by losing
billions and billions for years and years, turned said Marketplace into an
almost necessity to sell on, decided it will also sell on said Marketplace
often at unfair prices below manufacturing cost of the goods, and now has made
their own Logistics Network an effective requirement for selling on the very
same Marketplace.

~~~
Dylan16807
Yeah, the FBA fees are ridiculous for small items, especially considering that
Prime is supposed to be paying for the two-day shipping.

~~~
BeetleB
I used to sell FBA. I calculated that if the price is below about $8.50, then
I will make no money - it'll all be eaten up by Amazon fees (some fees are
fixed - not a percentage). If I sell at $10, I get about $1.25. Above that
it's somewhat linear (e.g. sell at $20 and you pocket about $10, etc).

In my case, this wasn't a problem. I chose to get into the market specifically
to sell FBA. As such, I knew cheap items were not viable for FBA, so I didn't
sell cheap items on it.

~~~
brianwawok
FYI Amazon has a program called small and light that is designed for this <
$10 items if they are small.

~~~
Alupis
The minimum commission fee of $1 still takes a large byte out of that though.
(Commission fees being in addition to FBA fees)

That minimum commission fee is the reason you don't see anything on Amazon for
below $6 (unless there's some weird accounting going on for the seller). Above
$6, the fee turns into a percentage and is easier to manage.

That fee is also the reason you'll often see packs of 3 or some item when you
only want 1... it's just not profitable to sell the 1 at a reasonable price
anymore.

As an aside, the SNL program doesn't get all the same benefits as FBA. In some
cases you don't get the Prime badge, and in other cases you're an "Add-on
Item" to get free shipping for the buyer.

------
crb002
Paywall.

I don’t see the argument. Walmart and others are sucking while Bezos is
executing.

Unless Bezos crosses the line with onerous contracts not allowing
manufacturers to sell with other online retailers he should be ok. Wise for
Bezos to put antitrust friendly language in all contracts.

~~~
ilamont
That's exactly what Amazon demands for one of its ebook programs, KDP Select
([https://kdp.amazon.com/en_US/select](https://kdp.amazon.com/en_US/select)):

 _When you choose to enroll your book in KDP Select, you 're committing to
make the digital format of that book available exclusively through KDP. During
the period of exclusivity, you cannot distribute your book digitally anywhere
else, including on your website, blogs, etc._

Related: If you include a link in an ePub to any other retailer, the book will
be rejected by Amazon.

~~~
jhall1468
You can choose to not use Select, and just use standard KDP. This is an
exclusivity agreement. You don't get to release your ebook elsewhere in
exchange for higher royalties.

