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Amazon’s New Competitive Advantage: Putting Its Own Products First (propublica.org)
394 points by doener 28 days ago | hide | past | favorite | 224 comments



I don’t see what’s wrong with this.

Many retailers reserve some of their best shelves paces for their private label products, both as a form of differentiation and to extract higher margins.

You could argue that Amazon is unique in that it is large and potentially has a monopoly over eCommerce, but it is hard to say that in the end, consumers are on the loosing end.

Most amazon basic products are commodities, and prices gets lower because of economies of scale. Should amazon jack up the price, consumers will just switch to another whitelabel/run of the mill variant from another seller.

It will be problematic if amazon dumps on the market and drives theirs party sellers out of existence, but I don’t think that is the case here.


I think it's easy to describe why it's problematic without even referring to antitrust.

Amazon's brand (as a store / marketplace) is that it helps you sort through many options to select the product they believe you will like the best. This is different from the service offered by traditional grocery stores which offer many different products, but are not arranging those products in relation to a particular request.

This means that, when Amazon is operating as a store, any re-ordering of the display results disrupts the value they provide to consumers. It also, of course, disrupts the value they provide to the products they sell. Any other product that receives poor reviews would be punished by being displayed later, but Amazon branded products will never suffer that fate. The same is true of any other algorithmic sorting.

Amazon is, with one side of its mouth, suggesting a business model that it claims will benefit both sellers and buyers (that the best products will win and consumers will be shown the product best matched to them) and also explicitly excluding itself from that system.

To return to the supermarket situation, you might imagine a supermarket which stocks all brands, but the first item in every row is the store-brand equivalent of that product which you must remove to get to the branded one.


>This is different from the service offered by traditional grocery stores which offer many different products, but are not arranging those products in relation to a particular request.

Grocery stores (and all other brick-and-mortars) spend tons and tons of money and effort specifically arranging their stores to influence which products you will buy. It's done on the scale of which aisle certain products are on, all the way down to the scale of specifically which shelf (and even exact inches away from eye level) certain products are on.

Every single time you walk into a store, the first product you see (maybe in front of the entryway, maybe it's a big banner hanging from the ceiling, or maybe it's the design of the shelf near the cash register) is all meticulously planned.


>Grocery stores (and all other brick-and-mortars) spend tons and tons of money and effort specifically arranging their stores

And if I don't like Tesco I can go to Asda. If Tesco won't sell my product I can try and sell it to Sainsbury's or Waitrose.

The equivalent with Amazon is "If I don't like Walmart, there is some guy with a market stall selling fish, another with apples, a store 5 miles away that has carrots...". Or even, "Tescos won't buy my carrots so I will just drive them to every person myself".

I have said it a few times, you can't be the marketplace and sell through that marketplace. Imagine finding the NYSE were trading shares, and were giving themselves 30ms advantage over everyone else (if you can't imagine, have a browse of the Cryptocurrency markets). Imagine a commodities market who own 90% of the oil themselves, and price themselves into every order (maybe onions...).


If you don't like Amazon you can try Walmart.com. And hey--if I click on "Household Essentials" on Walmart.com, there's a "Brands We Love" section, with the first brand being Great Value, the Walmart store brand.


Where do you draw the line between "marketplace" and "retail store?" For the NYSE it seems fairly clear, but in retail it seems less so. Nearly every widespread retail store I know of either sells primary a multitude of other company's products but also has some store brand options, or primarily sells their own branded items but also sells other company's products in areas where they don't have a first-party offering.


> you can’t be the marketplace and sell through that marketplace

To be competitive, you can and you should.

Amazon is a platform company. Platforms commoditize the complements. They didn’t have toys, so partner Toys’R’Us, didn’t have shoes, so partner Zappos, etc.

As the platform, platforms observe transactions, such that through time, they can value complements and decide to co-exist, acquire, or compete.

This is by now a well-known strategy.

Rabbit hole: https://www.gwern.net/Complement


Just as long as, being Zappos, if you sell through Amazon, expect Amazon branded shoes a couple months to years down the road.


Financial market is regulated and hence you dont that conflict of interest. They are also there to prevent anything catastrophic from happening. Selling Commodities in Retail isn't the same.


Not sure if you realized how ironic your NYSE comment was given semi recent news...

https://www.cbsnews.com/news/nyse-jeffrey-c-sprecher-kelly-l...


Sure, and it probably helps sell those things, but there are several differences between those to that makes them extremely different in practice.

1. There's limited space at the front of a brick and mortar store. It's not practical to put most of the items at the front, so anyone who's not just there for a bag of chips ends up looking through the aisles anyways.

2. Brick-and-mortar stores usually only sell a few forms of same product. If I want olive oil, there's some store brand, some italian-looking brand, and maybe a brand that advertises some sort of magical health benefits. There might be a few variations for the level of refinement/virginity. It's easy for me to look at all the options and compare them. When I look at a search page on Amazon, there's often 100's of hits, and it's often pretty unclear if there's any difference between them that I'd care about (see https://www.amazon.com/s?k=olive+oil).


>1. There's limited space at the front of a brick and mortar store. It's not practical to put most of the items at the front, so anyone who's not just there for a bag of chips ends up looking through the aisles anyways.

There's limited space on the frontpage of Amazon.com, too. If I go to Amazon looking for chips, I won't see it on the front page so I'm going to end up going to the Chips section of the site. If you're just at the store for a bag of chips, you go the chips aisle, which is also meticulously planned to specifically influence which brand of chips you will buy. I fail to see how this is any different than going to the Chips section of Amazon and seeing a specially arranged selection of chips.

>2. Brick-and-mortar stores usually only sell a few forms of same product. If I want olive oil, there's some store brand, some italian-looking brand, and maybe a brand that advertises some sort of magical health benefits. There might be a few variations for the level of refinement/virginity. It's easy for me to look at all the options and compare them. When I look at a search page on Amazon, there's often 100's of hits, and it's often pretty unclear if there's any difference between them that I'd care about (see https://www.amazon.com/s?k=olive+oil).

I don't really see what this has to do with the topic at hand. Can you clarify your point?


Theoretically Amazon has infinite shelf space, but in reality, no one really scrolls past the first few pages.

So in reality, if your product is on page 5, it is perhaps as good as not being on Amazon anyway for that particular query.

If you look at it this way, the space constraint isn't much different than brick and mortar.


It's more different than you think because there are many permutations of search terms. There are products that rank really well for odd phrasings of a product search term but not well for the most popular variations. There is also virtual shelf space for weird, niche items with additional features that are not that popular. Amazon aggregates hundreds of thousands of small businesses globally and also tailors search results to FBA warehouse availability. So for example if the warehouses near you are well stocked with product A and not product B you will see product A ranked relatively higher than product B would if you are a prime subscriber, but you will get neutral results when logged out or a non-prime subscriber.

Then you throw in Amazon Shopping ads (aka Sponsored Products) and the shelf space metaphor gets muddled further, because it's like as if every store visitor saw unique and different endcap displays and shelving ordering. There is less individual tailoring to search results than you might expect on Amazon (especially compared to information search engines like GoogleBingBingGo) but it is still a factor.

Then there is the factor of endemic counterfeiting in some categories, so the sketchier the listings are the more likely you are to just buy a counterfeit product, which would never happen in a typical brick and mortar retail shop.

IMO Amazon's private labels are so minor and make up such a small portion of store sales that it ranks very low on the scale of things that Amazon does that are morally/legally questionable.


Manufacturers pay chain supermarkets "slotting fees" for prime shelf space so while isle layout may be meticulously planned, the actual product placement per category is often up to how much suppliers are willing to pay. That's one of the reasons why branded products continue to do well against their generic equivalents.


You're agreeing with the comment you responded to. They're saying amazons value is that they don't do that, showing the best products for you instead of the highest margin ones. Not sure I agree with them considering the top products are ads though.


Yes, they do. That's why I said they "are not arranging those products in relation to a particular request." We are all in the same store, and that store must arrange itself in a way that will serve all customers. Amazon's business model is premised on the idea that they provide a better service than that.


> That's why I said they "are not arranging those products in relation to a particular request."

But they are, which is what you're missing. Again, these stores spend millions and millions of dollars collecting these requests and arranging their store in response. They collect feedback and rearrange the shelves nearly every day based on requests (which can be actual verbal/written requests on their website or to store workers, or derived from things like sales numbers).

You can think of it in this way: each time someone goes to the "Chips" aisle, that is a implicit "request" from the customer that they want to buy chips, and the store has arranged their aisle in such a way that influences which chips you buy, just as Amazon arranges their search results page.


I'm with you as far as generic categories go. Going to the cheese and dairy section in a supermarket is very similar to going to the Amazon cheese and dairy (and eggs) section[1].

Stores maximizing the revenue they receive from their average customer, which they do quite aggressively as you note, feels very different from what Amazon is doing.

>the store has arranged their aisle in such a way that influences which chips you buy, just as Amazon arranges their search results page.

To make a somewhat silly comparison that illustrates how this is is not "just" like Amazon - I have never been in a grocery store that places their brand of chips on both ends of the chips aisle. I might find my chips before I see their brand. Amazon, on the other hand, can rearrange their shelves for every customer, and so their ability to manipulate the consumer experience is much greater.

Ultimately the arranging of physical displays, no matter the amount of zeal or data involved, seems categorically different to me than stores which can arranged differently not only for every customer, but every customer request. I think you're saying they're basically the same thing - in which case we'll just have to agree to disagree.

[1] https://www.amazon.com/s/ref=lp_16310101_nr_n_6?fst=as%3Aoff...


You're basically saying that because Amazon has better agility, and can effectively rearrange their "shelves" faster than Target can (Amazon can rearrange them between every customer, whereas Target can only do it maybe once a day), Amazon should be punished for that? I just don't really see why or how that makes a difference.

To extend it again to the grocery store example, if I walk into a Target and ask the customer service person for their recommendation for some crackers, and they walk over to the Cracker aisle and point directly at the Target brand crackers instead of the Nabisco ones, are you saying that's problematic?


Yes, stores that push the products made by them over other alternatives are worse for the customer and harmful to the market.

I don't think there's anything wrong with stores recommending something in general. For instance, I don't think there's anything wrong with the "amazon's choice" label that Amazon uses.

This feels different to me, because as I said originally, this isn't Amazon recommending their brand. Amazon still ranks search results based on some combination of popularity and (probably) profitability.

To return to the in-store scenario: let's say you asked someone in Target to recommend crackers. The employee has a recommendation, but to hear it you first need to be shown the Target brand crackers, and then the employee will give you their recommendation.


Brands pay for placement. Promoting a store brand over another brand that paid for placement, not one that is necessarily better, is not a problem IMO. It is good business. You're gonna lose advertising dollars, but that's a business decision. To survive, some brands will need to find a way to cut out the middleman - Amazon


How often have you been in a pharmacy and seen the generic CVS brand on both ends of the aisle before seeing the pharma brand? There's a lot of people working on making that 100% without violating their contracts with their suppliers


Or signs next to their house-branded products that basically say "Buy $FAMOUS_BRAND $X if you like but if you look at the ingredients you'll see we're the exact same thing and we're cheaper."


I'd like to believe stores were setup in that fashion, but we've known for a long time that isn't true. It benefits the store, not serve customers. A good example from Costco: https://www.businessinsider.com/costco-store-layouts-are-con...


> Amazon's brand (as a store / marketplace) is that it helps you sort through many options to select the product they believe you will like the best

This is an extremely important part of the service that every store provides. The only difference with Amazon is that they offer a wider selection of everything. In brick and mortar stores, only one or a few products of each type are stocked and the rest are simply not offered. You don't think about the store providing the service of sorting the products that they decided not to offer, but they do.


The other difference with Amazon is that they have very low quality enforcement, and offer counterfeit items. So "Amazon Basics" is a strong indicator of quality for commodities and they can charge as much or more than for brand name items.

A Safeway house brand is usually offered at a small discount to the name brand, because the consumer trusts the name brand more.


Yep. If I need a USB cable or some other electronics commodity, I at least know that the Amazon Basics isn't a knock-off and it's at least good enough. That, of course, reflects badly on Amazon in other ways but it is, as you say different from store brands which are mostly about undercutting perceived premium brands with good enough product for people who aren't fussy. (Or for offering a cheaper alternative for things that really are commodities.)


Now that we have ubiquitous Internet access, I think it's important to reinforce the point that you shouldn't use a store - whether a brick&mortar or on-line - as a product discovery and recommendation engine. You won't find the best value for money this way.


Then what do you recommend?


> Amazon's brand (as a store / marketplace) is that it helps you sort through many options to select the product they believe you will like the best. This is different from the service offered by traditional grocery stores which offer many different products, but are not arranging those products in relation to a particular request.

Is that really true? Maybe once upon a time, but Amazon is the last place I turn to when trying to find a product that's suitable for purpose. As their marketplace has become a wasteland of cheap knock-offs and fake reviews, I find the only way to successfully use the site is to first find a product on an external review site (i.e. NYT's "Wirecutter") or search specifically only for brands I already know and limit the results to those sold directly from Amazon.


"The same is true of any other algorithmic sorting."

This is the same problem that Google creates.

Imagine if the Yellow Pages advertisements, listed categorically and alphabetically, were re-sorted according to an algorithm according to whomever was accessing them.

To use a popular term, sorting has been "weaponised".

It is a form of filtering, curation, gatekeeping. Businesses compete to pass through the filters, past the gate.

For example, when a user selects an app for her phone, she selects from a "top 10" or some such. As with being on "page one" of Google search results, manipulating the algorithm becomes a goal. Another popular term online, "winner take all" or "network effect", is in part enabled through sorting. All those hundreds of thousands of other apps are sorted out to create a "top 10" for which all must compete.

Instead of letting users sort results on their own initiative, e.g., according to popularity or rating, listings are sorted by default.

Alphabetical listings do not create the competition that drives up the value of the "top 10" or "page one". Alphabeticisation is a transparent algorithm everyone can understand, not a trade secret.

Even on HN, we see comments re-arranged in their order in a thread, in order to manipulate reader response.

There is certainly an element of utility and convenience but, in effect and perhaps by intent, there is more to the sorting than simply what may benefit the user.


Amazon started out being the retailer, and moved into the space of being a platform. I remember way back when they only sold products from themselves. coincidentally the more amazon moved to being a platform for 3rd party sellers, the less I used them l.

I rarely use amazon for anything today because the volume of garbage easily outweighs the good products, mad it's like rolling craps dice if you get a good seller. I opt to purchase directly from the manufacturer or a known retailer that know owns the product they are selling now, if I use amazon, it is exclusively for amazon brand products only.

if this type of behavior pushes 3rd party sellers off the platform and returns amazon to their glory days of being the actual retailer, I think it's a good move


> Amazon's brand (as a store / marketplace) is that it helps you sort through many options to select the product they believe you will like the best.

Is that their brand though? I've never been convinced of that due to all the sponsored results (which are very similar to how brick-and-mortar stores arrange their products) and most egregiously, not providing consistent per unit pricing. I've never felt like Amazon is helping me make the right choice at all, but rather duping me into a choice that benefits them.


> you might imagine a supermarket which stocks all brands, but the first item in every row is the store-brand equivalent of that product which you must remove to get to the branded one.

I think this is going a bit too far. "removing to get to the branded one" would be appropriate if you had to go to 2nd page of search results to see branded products, but most results on Amazon show competing products above the fold.

A better comparison would be reserving the best shelf space for Amazon Basics.


This is the same scaling problem that all market places have had. eBay used to have quality stuff on it, now it’s pretty much just a drop shipping front, same thing happened to Etsy. The Amazon marketplace is increasingly filled with low quality products, completely fake reviews, illegal knockoffs, and it’s search has been getting worse over time.

The key advantage that Amazon has over other retailers (for consumers at least) is that its logistics are so damn good. I’ll usually go to Amazon first to look for what I want, because I know they’ll probably ship it faster. But more often than not I usually end up buying from a more specialized retailer for one reason or another.


For me, Amazon helps me sort through many options to select the product that _I_ believe I will like best. I am not stupid. If I see an Amazon branded item I will obviously meet its placement with some kind of suspicion. In fact, I will dig a bit harder into the reviews. Do the batteries really last as long as some of the brand name ones? Let me see if it's worth the cheaper price. That sort of thing.

Amazon can be the e-commerce site and sell commodity things. It would be different if it lacked transparency or was trying to hide it's involvement in the private labels.


To your last point, to me, it feels that they try to hide their private labels. Some are named “Amazon XXX” but most are not: Solimo, Presto and countless clothing brands.

I mostly realise that they are Amazon brands when I notice they are strongly pushed by Amazon’s algorithm.


That's interesting. Could the solution just be a requirement to disclose this more plainly?


How is this different than using Target? Or Walmart online?


> different from the service offered by traditional grocery stores which offer many different products, but are not arranging those products in relation to a particular request

That is incorrect. You may be surprised to learn that grocery stores sell prime shelf space to distributors/brands.[0]. In this case, it's the distributer's request - not yours.

[0]https://cspinet.org/news/supermarkets-%E2%80%9Crigged%E2%80%...


Amazon had the absolute worst product search engine since the beginning of time. This is probably on purpose to set this up since inception.


Under Anti-trust law Company A and Company B can do the same exact thing, but 1 Company may violate Anti-trust laws while the other doesn't.

>You could argue that Amazon is unique in that it is large and potentially has a monopoly over eCommerce, but it is hard to say that in the end, consumers are on the loosing end.

It is not about a "monopoly", under Anti-trust you can't unfairly leverage your market position to force others out of competition. That is clearly being done, and the entire body of Anti-trust law would disagree with you and say Amazon unfairly using its market position to kill competition (even if Amazon has a lower cost) is a detriment to consumers. In the eyes of Anti-trust law unfairly forcing competitors out of the market limits consumer choice which is always a detriment to consumers.


Why don't grocery stores get in trouble then? Do you need to be effective at forcing competitors out of the market or does simply the attempt make one guilty? Don't all businesses want to force their competitors out of the market?

As an aside it does not surprise me at all when I learn that a law is not worded in a way that's congruent with the popular conception of the law.


> Why don't grocery stores get in trouble then?

It would be argued that Amazon's specific point of abuse and power is related to its ecommerce market share. If a monopoly argument is going to be made against Amazon in retail, it will be about their online store (as opposed to eg in-store Wholefoods).

I think it's a fair point of separation. Amazon can simultaneously have an abusive monopoly online and a weak position in physical stores. Walmart could cultivate a monopoly in physical store retailing (hypothetically), and have a weak position online.

Other grocery stores don't attract anti-trust attention, typically, because they have no overwhelmingly dominant position.

If Kroger had 40% or 60% of the US grocery store business, they'd be a target of anti-trust focus persistently (as it is, Kroger is the #2 grocer and only has 10% of the grocery business; it's a very fragmented market, Costco is #3 with a mere 5% share). If Amazon.com only had 10% of the US online retail business, there wouldn't be so much concern about their potential monopoly positioning.


> As an aside it does not surprise me at all when I learn that a law is not worded in a way that's congruent with the popular conception of the law.

Anti-trust law only applies to businesses which have market dominance. Grocery stores generally aren't in this position except for Wal-Mart which has similar concerns.


>Why don't grocery stores get in trouble then?

Because a grocery store selling white-label products isn't an unfair use of market position to force competitors out of the market.

How many times has a grocery white-label cereal bankrupted a Cherrios or forced them out of the market? Alternatively, how many stores do you hear about vendors that launched a successful product (even a #1 selling product) only to have to close after Amazon launched a copycat product.

>Don't all businesses want to force their competitors out of the market?

No, complimentary and substitute products are healthy for the market place. Again go back to the grocery store, they don't want General Mills/Post going out of business, they want to fill their shelves with those products.

>As an aside it does not surprise me at all when I learn that a law is not worded in a way that's congruent with the popular conception of the law.

This is true especially with 1st amendment and 2nd amendment law...I am not sure what the popular conception of Anti-trust law may be, but when it comes to Amazon I always see the white-label grocery store product analogy. What is great about the law is legal opinions often include factual analogies and distinctions like this, what would shock most people is how logically sound and exhaustive the courts are.


> No, complimentary and substitute products are healthy for the market place. Again go back to the grocery store, they don't want General Mills/Post going out of business, they want to fill their shelves with those products.

I don't think the grocery store and the cereal company are competitors in that case.


but some industries clearly needs economies of scale in order to provide the consumer with cheaper and better products.

Can you truly argue just because a firm is large they are no longer allowed to offer the same product for cheaper simply because they have a strong foothold in distribution?


It's not about being scaled. It's about using your scale in one place to force scaling in another. If Amazon provides a marketplace, where people pay them to list and sell products, then using the strong position of that marketplace product to then leverage and scale up their own products is potentially troublesome.


I mean, Walmart is also mega huge, and also allows 3rd party sellers on their website. is it troublesome that Walmart also promotes their own items or the items where they make the most profit first?


I think the bigger problem that people have in general with moves like this is the _change_. If Walmart previously didn't promote their brands, and now did so aggressively, you'd hear complaints as well.

The other complaint seems to be "fairness." If you operate a platform, people expect it to be fair. But what is "fair" probably has more to do with historical cultural norms than actual abstract fairness, again it is the change the causes the issue. If Walmart started putting "see our generic option for cheaper over here" on end-caps that manufacture were paying top billing to place, they'd complain. But Walgreens has already been doing this in their OTC sections for years, just not with paid-to-place products.

As a consumer, I personally like the Amazon brands, because I can at least trust them to be real products with a reasonable quality expectation, not a switchout from some crappy seller or comingled inventory with fakes.


>As a consumer, I personally like the Amazon brands, because I can at least trust them to be real products with a reasonable quality expectation, not a switchout from some crappy seller or comingled inventory with fakes.

What irony. Amazon's co-mingling is actually benefitting them in ways other than lowering costs — It's actively driving people to their house brand(s).

Amazon is pure (evil?) genius.


I'm not sure. How can it not be the case that being the global platform for the "everything store," and having people search on amazon for purchases even before google is a bigger business than selling your own white-label goods? The extra margin gained with cost-reduction from co-mingling products surely can't replace that strategic advantage, can it?

I suspect Amazon just overreached. And not because of an intentional decision going sideways, but because of having many independent teams, with smart people, each optimizing for their own area. Frankly, it is actually amazing how much cohesiveness in action and strategy actually exists, as opposed to the mistakes we see (I'm looking at you AWS console).


I don't know if Walmart promotes their own brands over others on their website. If they do, then yes I would consider that under the same hazard.

Do note that this is all speculative anyway... There's been no ruling. Just some people pointing out problematic behaviour.


Walmart eCommerce is relatively small, so not really comparable in terms of anti-trust concerns.


In the physical space, Walmart is still king though, so the same concerns that apply to Amazon's ecommerce would also apply to Walmart's in store product placement.

The anti-trust concerns would also apply to Walmart's own ecommerce. They're effectively leveraging their brick and mortar presence to establish their ecommerce business (which is presently the 2nd largest in the US). The 3rd largest is eBay, which leaves one to wonder how much of the hole left by Amazon would be absorbed by Walmart.


> some industries clearly needs economies of scale in order to provide the consumer with cheaper and better products

This isn't an economy of scale.

The component that has scale is distribution. A third-party seller selling through Amazon gets those advantages the same as Amazon. What's different is the sourcing and manufacturing of the product.

Amazon has an edge. But it's not one of economies of scale.


They have a data advantage- Amazon basics are just white labeled goods from some Chinese factory, warehoused and dispatched from an Amazon warehouse just like everything else on Amazon Market. The only difference is Amazon but the stock (and bet on it selling).

Amazon has much better visibility on sales, margins, user behaviour than their market sellers. Where risk is high they allow sellers to take the risk, where it is low they enter directly and take more margin.

It's a great business model, like a hedge fund running an exchange with no separation of information. It would be illegal the financial sector.


> It's a great business model, like a hedge fund running an exchange with no separation of information. It would be illegal the financial sector.

Maybe I'm misunderstanding, but wasn't Glass–Steagall repealed?

A lot of people don't realize, but hedge funds are the small fry. I mean sure a few hundred million or even a billion or two dollars sounds like a lot of money, but once you realize how much the Fed is pumping through the primary dealers it's literally pocket change. It's outfits like Goldman or BlackRock that are playing heads I win tails you lose.


> wasn't Glass–Steagall repealed?

Glass-Steagall banned federally-insured banks from competing with investment banks. Information walls, which have to do with insider trading, are a separate beast.


I hadn't thought of it like that. But is it any different than if they paid for analysts to provide them that info?


With commoditized products the brand/manufacturer has no pricing power, so in order to go down the cost curve the firm would need to deploy more capital. This means making things in bigger batches, more efficient shipping, more advertisement investment taking ads out on Amazon to get initial reviews etc...

In each of these components Amazon Basics has an advantage over third parties whom are often mom and pop and are undercapitailized.

The points of contention are

1) If amazon competes fairly in Ad bidding so Basics products shows up first on the paid search results, is this anti-competitive?

I don't think so. They just have more capital. Any other well capitalized firm can do the same.

2) Is it fair for amazon to display their products more prominently?

I don't think so. How is this any different than Walmart refusing to carry a product? Or putting their private labels more prominently?


> Amazon Basics has an advantage over third parties

Totally agree. But this isn’t an economy of scale advantage.

SoftBank-backed companies had a capital advantage over their competitors. That isn’t per se an economy of scale. Amazon’s products have a distribution advantage over smaller competitors. Again, not an economy of scale.


On the sourcing side, they have a scale advantage of placing larger orders which can get them better OEM pricing. Depending upon the product category their probably are manufacturing efficiencies of scale that enable better pricing. And in particular, their purchasing departments have more efficient analytics numbers to make product entry decisions that benefit from the scale Amazon has reached. So the efficiency in which they are likely to operate in making JIT purchases, or predictive purchases, and avoiding costly inventory mistakes and markdowns is only possible with the large market reach and ability to hire a technical depth of analysts (or tools makers for analysts) enabled by their size.


>Can you truly argue just because a firm is large ...

1. I am not arguing anything, I did not develop Anti-trust law nor did I argue for or against it.

2. I never mentioned the the size of the Firm, because that isn't the legal standard. As I said what matters is unfairly forcing competition out of the market.

What Amazon does is has other businesses develop products and markets for those products on the Amazon marketplace. Then Amazon uses its data to determine which products are selling and what Amazon shoppers are looking for, then Amazon copies the product and uses all kinds unfair practices to force out the market incumbents...and in many case once the Amazon has forced out the market incumbent (again to the detriment of consumers), then Amazon has a history of raising their product price (again to detriment of consumers).

But we get it, to you Amazon hasn't done anything wrong and the consumers are better off and should be thanking Amazon. I'm not argue otherwise, just simply saying that is inconsistent under Anti-Trust laws.


So suppose Amazon shared sales/behavior data with other sellers/companies, such that everyone is competing on a even footing with regards to product research. Do you still think what Amazon is doing is anti-competative?

In other words, if other well capitalized players had the same data, same ability to manufacture at the same scale, advertise etc... and Amazon's sole advantage is product placement, is it still problematic?


>and Amazon's sole advantage is product placement, is it still problematic?

Potentially, but stop focusing on the act and focus on the result.

You brought up retailers and their shelf space. First no grocery store puts "Grocery Store O's" in a better placement than Cherrios...but fine lets assume they did. Does putting "Grocery Store O's" force Cherrios out of the market? No. However, seems to be no shortage of examples of a successful vendor on Amazon being forced out of the market altogether after Amazon copies their successful product.


I agree that the results are important, but in the amazon vs third party vendor the difference between the two parties are large.

One is much better capitalized than the other and enjoy many cost advantages. On product and price alone, many consumers would choose Amazon, all else being equal, including product placement. In short, since we haven't seen Amazon crushing equally well capitalized and competent white-label players like Anker, Amazon is only out competing inefficient firms.

Similarly, Walmart's "Grocery Store O's" are competing against P&G, which is a equally well capitalized firm. That is, the Cereal market is efficient and competitive, and winners win through distribution and market positioning. This is why P&G O's aren't getting destroyed.

The results you are witnessing - smaller firms getting taken out, is just a phenomenon of competition. I suspect as consolidation takes place, many large firms like Anker will be able to offer competitive product at competitive prices vs. Amazon Basics.


The difference between Amazon and traditional retailers with shelf space a la grocery stores is that grocery stores pay wholesale for the 3rd party products they put on their shelves. So when you see generic fexofenadine sitting next to name-brand Allegra in CVS, Sanofi already received payment for the name-brand bottles (or at least a commitment to pay, depending on net terms). The risk of selling them to consumers now falls on the store.

Amazon does not pay wholesale for items in its marketplace. In fact the marketplace was explicitly set up to be a logistics-only service and level playing field for anyone who joined. Now it's not, of course. Basically they pulled a bait-and-switch on their marketplace customers.

(Ironically, they also pulled a bait-and-switch on their first retail partners by signing exclusivity agreements, and then breaking them when they launched marketplace.)

This is also why Amazon struggles to fight counterfeit products. For most of the products you can buy on amazon.com, Amazon the company does not have buyers who can verify product quality and supply chain before placing a wholesale order. It's a logistical struggle made worse by a cultural struggle, i.e. they don't want to sell counterfeits but they also don't want to do any of the normal work that retailers do to prevent counterfeits.


I've found the "basics" products to be a little hit and miss, at least as far as electronics— USB cables, network hubs, and the like. However, one thing I really do like about them is the minimal packaging. So much other e-commerce stuff still arrives in retail-style blister packages, which is absurd.


An Amazon Basics power strip I bought failed and took some of the hardware hooked up to it with it.


My girlfriend had nail varnish delivered in ana Amazon box 30x30cm it was ridiculous! So I wouldn't be singing too many praises on their packaging stance


Funny how people buy a single small item have it shipped to them then have the gall to complain about shipping waste.


What is wrong with buying a single small item online? If done correctly it should have almost zero environmental impact. The marginal environmental cost for a shipped item is the extra fuel burned by the delivery truck due to the weight of the item (in this case the weight is insignificant) plus the fuel burned while the truck is idling when the package is delivered. I would be willing to bet that the environmental cost for those items is pretty tiny compared to shipping waste, so it's pretty reasonable to complain about the shipping waste.


There's the fuel cost of adding length to the delivery route.


Small items are almost entirely delivered by the post office instead of UPS, and the post office is stopping by your house pretty much every day no matter what.

Contrast with you personally making a detour in your car to a physical store to buy a single small item -- that actually DOES have a fuel cost.

Unless your purchases are always along a route your travel anyways (like your commute), delivery is vastly more fuel-efficient as a general rule.


Plenty of small things get mailed in small packages or envelopes; ever ordered a cable off eBay? Amazon prioritizes shipping speed and low labor cost more than packaging waste.


Funny how people lean so far out to criticize others only to find their own butt flapping in the breeze.

Amazon does this a lot, no matter what your order looks like. The most pathological I've ever seen was at an old workplace, they shipped 20 boxes of pens (12 packs or whatever size of disposable pens) each in a separate large box. The delivery person took several trips up the elevator to deliver them.

But, of course you have an answer to this problem, right?


I think in some of these cases the items are pre-packaged for shipment. There's some inflection point where 90% of customers who order item X order only that item, and it makes sense to have them ready to just slap a label on and go. I'd imagine that the packing stage could become a bottleneck for a busy time at a DC, and pre-packing single items would not only lighten the load during a rush, it would also allow those packing stations to remain occupied during a lull.

Obviously, Prime also pushes people toward single-item orders, which helps justify this strategy, and also increases people's dependence on a service level that is hard for competitors to match who aren't at a scale where these kinds of approaches work out.

Kind of a fail that the system wouldn't flag a 20-parcel order as something that needed a human to ok it, but who knows, perhaps it was reviewed after the fact and something got tweaked.


The pickers are collecting entire lists of items 1 item for n people is basically the same as n items for 1 person and any given distribution of items. Trucks are dispersed with entire loads full of goods generally going in the same direction. No additional resources are logically wasted until we discuss the last mile where it goes out for delivery and even that is aggregated with many packages to be delivered in the same general area.

In order to discover how much waste there is in ordering 1 thing one day and one the next you have to determine exactly how the route would have differed in each case. Given the delivery truck would probably still have been in your town anyway lets imagine for the sake of argument that it drives an additional half mile each way. If we try to imagine the net effect of lots of extra packages lets say all the extra packages in the truck caused a net of 100 miles of travel divided 100 ways. So lets imagine a net cost of 2 miles of travel. So the person probably wasted the equivalent of 1/5 of a gallon of gas.

More efficient delivery trucks which fedex and ups are rolling out will make a difference. This relies on a few parties that will directly benefit from doing so. Totally going to happen.

Less packaging by actually putting more than one thing in the same exterior packing would make a difference. This relies on a few parties who would benefit slightly. This might in theory happen.

Batching orders instead of ordering item A when you actually need it and item B when you need it doesn't matter much and would be difficult to do. It requires millions of people to think ahead and always order things before they need them. This will NEVER happen.

The people complaining about shipping waste are addressing a legitimate problem that actually could be solved. Your statement is akin to the people that say why do we need to work on problem foo while their are still children starving in Africa. It's true their are and we ought to do something but in the meanwhile we can still do other things to.



even if you buy a bunch of things at once they'll often ship them in nonsensical ways, presumably it reduces their shipping costs


Who said it was the only thing bought?

There was multiple items amazon decided not to bundle.


Are you consistent about your stance on shipping small items and don't receive any paper mail at your address, either?


Recycleable cardboard boxes are fine, plastic is the big no no.


>I don’t see what’s wrong with this.

I'm with you from an ideological perspective, but from a practical perspective living in the current world the way it is, they will get in trouble from either the American or European[1] regulatory bodies. And I'm surprised they don't get it. It's only a matter of time. It will take only one of their platform users or competitors to get fed-up and make a big stink (and there's already griping), that will start a chain reaction where they will have to do something to firewall their divisions, or they will be broken-up while paying multi-billion dollar fines and taking a huge PR hit.

I'm not a genius, but it doesn't take a genius to see that this WILL happen. And they are so stupid for doing what they are doing just to sell some Amazon-branded toilet-paper. They should have just stayed an open platform and not competed with their users. They screwed this up and it's too late to do anything about it now.

>Many retailers reserve some of their best shelves paces for their private label products,

Sure. And Apple can get away with heavily restricting the type of apps that can be distributed on iOS (so much so that you can't even ship your own HTML rendering engine!!!), but if Microsoft tries something like that with Windows, they would get in tons of trouble. Do you think Amazon in this example is more like Apple or more like Microsoft?

[1] Nothing makes European regulators as happy as going after American tech companies.


I’m assuming they’ve done some sort of calculus.

If you were cynical, you could say they’re pushing the bounds because they know they’ll get whacked for something eventually, even if just for owning a huge chunk of e-commerce (already the case). And if they are going to, why don’t they choose what that’ll be, and the thing that makes them hardly any money? I’m sure they’d be happy to pay basically nothing (what, use their lawyers already on retainer and wind-down contracting of white-label crap? — and maybe pay damages, which seems unlikely they’d let it go that far).


You must be correct. They are a trillion-dollar company and they can certainly afford lobbyists and lawyers and accountants and consultants to tell them where the regulatory limits are.

And yet, I cannot see how regulators will just let them take over consumer goods given their size and clout, and the fact that they are using data from their users to drive their business decisions on which products to launch and compete with those same users. I just cannot see them not getting into major regulatory trouble for that.


The EU competition law fine is capped at 10% of annual turnover of company. So I guess Amazon can hypothetically stand to loose 17 billion.


It's not hard at all to say consumers are on the losing end when a monopolistic company controls product discovery.

Amazon getting the sales reduces income to anyone else selling, and when Amazon is almost the only place to sell, smaller companies will go under and new ones will have a harder time starting.


I believe the difference between Amazon and a grocery store is that a storefront has to pay for its stock up front and then sell it. This means that if a store stocks a competitor, the company that created the competing product has already been paid. Stores often have agreements with distributers to return and get partial refunds for unsold stock, but not usually the full amount.

Whereas Amazon is not a storefront, it's a digital marketplace. They don't have to buy the stock of the product that is being sold, they just put up the listing and take their percentage if the listing sells, and then it's fulfilled by whatever company created the listing. This means that Amazon doesn't lose any money if a competing product doesn't sell.

Obviously amazon _does_ buy and fulfill orders themselves for many items, but not all.

I think there's a planet money on this specific topic


The difference between Amazon and a grocery store is that Amazon has access to global supply chains, Amazon also does logistics, Amazon also does web services, Amazon does its own customer analytics, Amazon uses some very sophisticated algorithms to personalise search results, Amazon sells books and videos and other digital content which it produces and sometimes publishes, Amazon makes special user-friendly control and access hardware, Amazon is also a digital storefront and backend warehouse system, which sellers pay for, at prices that Amazon sets, often with most or all of the risk loaded on the sellers.

Among others. Including aggressive tax avoidance in most jurisdictions in which it operates.

Amazon is nothing like a grocery store. Nor is it like a department store. Nor is it an online store.

It's more like a B-movie monster which is trying to devour retail, manufacturing, supply chain management, logistics, consumer analytics, advertising, content creation, web services, publishing, consumer AI - and a significant proportion of the cardboard box industry.


Add to this the fact that a lot of these brands don’t even manufacture their items in the first place: they source manufacturers and slap their logo and marketing on, then markup the item price. Does that really add value?

In some cases the private label even uses the same manufacturers, the people producing the product still get paid in the end.


> Does that really add value?

The value add is that you can have decent confidence the product isn't so crappy that the brand is unwilling to put their name on it. Presumably Walmart, Harbor Freight, Amazon, whoever at least got a test batch of the product and made sure it actually worked before ordering millions of them. The consumer can just buy the widget at a slight markup for $1.99 and know it will work instead of going on Ebay or Alibaba and buying direct from exporters and wondering whether they should get varieties A, B or C for $1.59, $1.69 or $1.79.


Sooooooo many no-name brands that just buy something on Aliexpress and put their logo on it. I'm happy to wait the long shipping times just to get the unbranded version.


I would really LOVE if Amazon required all sellers to disclose the company and country of original origin. Including for Amazon products.

If it's an electronics part, I would also like the FCC submission numbers, UL submission numbers, etc. For every regulatory agency in which a filing was made, I would like to be able to see those filings.

Those filings should also count as the advertised product specification. If they change chips or designs outside of the specified list I should be able to return the product for it being different than the listed item.


I think what Amazon is saying here is if it is just about slapping a logo on something Amazon can do it better and cheaper than all of these 3rd parties.

In some of these categories it is basically heaps of 3rd parties slapping logos on the same stuff and the winner is whoever best games the reviews for search rankings. They are now annoyed that in some cases Amazon decides that there is no winner.


The value in those private label items is sometimes the aesthetic is more appealing. One example: the pattern on a textile such as a curtain or blanket, or the colors/patterns on casing for an electronics item.

There are considerations people have that are above and beyond the purely utilitarian.


Yea in those cases I agree that they do have more involvement than slapping a logo on. That's the case of sunglasses and luxottica: companies are selling a design/logo which is the distinguishing factor, and the manufacturer is simply building it. On the opposite end is where a manufacturer of pasta/salt/milk puts the exact same product in boxes with different labels.


It certainly feels intuitively wrong, especially when you find out that they use their own sales data and inventory to determine what white labeled products to release.

That’s not to say that it’s new or illegal, it just feels scummy.


At least Amazon isn't hiding that an item is a store brand unlike most if not all grocery chains who go out of their way to disassociate a brand with the store name.

Now that is not to say there isn't a brand being sold on Amazon that isn't labeled as such. While I have bought many Amazon branded items there have been a few I skipped because of reviews.


If you see amazon as a brick-and-mortar store, maybe it is ok.

If you see it as a platform, like the windows 95 desktop with the IE icon, it might be different.

Personally as a customer, it's annoying the liberties amazon takes with my shopping experience and sponsored results and toolbar like extras and prime interstitial ads and so on...


> but it is hard to say that in the end, consumers are on the loosing end.

Consumers are actual humans with complex lives that often also include producing things. Every seller that Amazon drives out of business is a consumer (or consumers) that no longer has an income. That's how this harms consumers.


Every Amazon shareholder is also a consumer.


Amazon also knows my previous buying shopping history, it can target princely the white labeled product of its, which I have been buying regularly.

It is more than best shelves.

Tyranny and data moat when marketplace also becomes your competitor.


For physical retailers, I never needed to worry web scale, store brand Tasty-Os impacting the availability of my Cheerios.


> but it is hard to say that in the end, consumers are on the loosing end

It's quite easy. Amazon is abusing its position to drive others out of business. They collect a lot of data and when someone finds a great selling product they move in and take over a big chunk of the market. That can and will hurt the customer. It should be illegal, as it actually is in some markets.


> Amazon is abusing its position to drive others out of business.

I don't think even the ProPublica article is accusing them of this.

What evidence is there that Amazon has purposefully driven sellers out of business, as opposed to just unfairly privileging its own brands? Why would they do this, when they created the marketplace and make a lot of money from it?


"abusing" is not the right word, but they definitely can make it impossible to compete in many areas. Let's say you made a laptop tray and sold on Amazon, it did well!

Then Amazon sees it, makes their own laptop tray, subsidized by economies-of-scale and their shipping network. They feature it higher than yours, bury yours down further, and sell it at much cheaper. It's not like you can compete on Amazon. And let's face it, you're not going to compete making your own store or selling it on brick-and-mortar.

Eventually you starve out, you get out of the market, and then they cheapen the product even more to the point of lower product quality. Then at that point, the consumer loses.

Seen so many products that used to be high quality, then the product quality got worse over time with cheaper materials, while keeping the same 5-star old reviews


This is what happens in regular B&M stores as well.

They will always push their private brand products to their customers.


When a product suddenly sells a lot (a fidget spinner for example) Amazon starts selling it too. If you cannot buy a better ad placement than Amazon's competing product you will sell less. The sellers that wasn't selling a lot of products already will be dead. If that isn't driving out the competition I don't know what it is.

>unfairly privileging its own brands

will lead to

> drive others out of business


Amazon's share of the US retail market is too small to call them a monopoly there, and they hold around half of online retailing, again too small to be a monopoly, since there are ample places to get goods elsewhere.

Until they're a legal monopoly in some suitable category, they are welcome to do this. One effect may drive amazon competitors to cater to all the sellers. And at any rate, to be the top spot Amazon has to be offering good enough prices to get consumer dollars.

For now it benefits the consumer, because they are getting good prices and possibly avoiding lots of junk sellers selling bad goods. Amazon brand good are trustworthy compared to a lot of sellers.


it's a mistake to only consider (perceived) market share (100%, 51%, or otherwise) as the primary metric of monopoly. it is, in fact, only one metric of many by which monopoly is judged.

being a platform business that competes directly with its business customers can be a significant (but not necessarily sufficient) indicator as well.


>it's a mistake to only consider (perceived) market share (100%, 51%, or otherwise) as the primary metric of monopoly.

It is according to US law. Without a larger percentage, no court will consider anti-trust charges, due to Circuit and Supreme Court cases on what percentage of market control is required. Here's relevant portions from DoJ:

"In determining whether a competitor possesses monopoly power in a relevant market, courts typically begin by looking at the firm's market share.(18) "

So the typical case starts with percent control....

"Although the courts "have not yet identified a precise level at which monopoly power will be inferred,"(19) they have demanded a dominant market share"

So the courts require a threshold.....

"the Tenth Circuit noted that to establish "monopoly power, lower courts generally require a minimum market share of between 70% and 80%.""

There's ample more court citations on the DoJ page.

Amazon doesn't reach these levels in probably any relevant category they are in. Certainly not for retail sales (Amazon is a tiny portion there), or online sales (less than half), or web services (Amazon ~ 40B out of 350B market).

For any company, if you shrink the categories far enough, you can always find a monopoly - Apply has a (near) monopoly on Apple watches, for example. But this is not a monopoly.

https://www.justice.gov/atr/competition-and-monopoly-single-...


I don't know exactly what US anti-trust law says, but German anti-trust law also considers what kind of power you have over competitors and suppliers to decide whether you're behaving anti-competitively. We call it (roughly translated) "Law against constraint of competition". Amazon might qualify as abusing their position under our laws. Unfortunately, it can be difficult to get a case started if the relevant authority isn't paying attention because of how the justice system is structured here and there's a question of how badly companies are actually being impacted in Germany by Amazon's behavior. Our wholesale/retail market seems to be a bit different and far more diverse than in the US.


yes, we have similar kinds of rules, but i imagine the ones in germany have a little more tooth. we in the US just can't seem to punish corporations adequately for any antisocial behavior.


Lots of things that are "normal" become highly anti-human when done with Amazon's scale and lack of human review/input.


> Lots of things that are "normal" become highly anti-human when done with Amazon's scale and lack of human review/input.

This would make more sense if the consumers benefiting were not human.


Sure, there is a short term consumer benefit in that someone gets to save 9 cents on AA batteries. It’s not at all clear that consumers benefit in the long term from Amazon becoming ever more powerful.


It matters how many humans are benefiting, versus how many humans exist.


I agree. As far as I can see, this is good for the consumer.


"Many retailers reserve some of their best shelves paces for their private label products"

A key difference is that in those situations (a grocery store, for example), the marketplace owners have already purchased all the products on the shelves. It's the grocery store's decision to choose what and how the products that they have paid for are presented to customers.

This is not a hundred-percent comparison, of course, but it came to mind in the last number of weeks as this Amazon topic has come up.


> A key difference is that in those situations (a grocery store, for example), the marketplace owners have already purchased all the products on the shelves. It's the grocery store's decision to choose what and how the products that they have paid for are presented to customers.

Is this actually true these days? I was under the impression that this varied by product.


It might work like that in a mom-and-pop corner store, but for most retailers it is much more complicated than that. Larger stories like Target don't just buy a truckload of Playstations and then put them on the shelf. Instead, one of the ways it happens is that Target works out a specific deal with Sony where Sony essentially 'rents' the shelf space, and Sony then gets to design where on the shelf their products go and is responsible for filling the shelves.

Other agreements might be to for Target to purchase a certain amount of Playstations but only as long as Target places them on the top shelf. These are just two of the many different ways that the shelves get filled. In these examples, it's much much harder to draw a comparison to Amazon without knowing how Amazon makes similar agreements with its sellers.

(Target and Sony are just examples, I don't know if Target actually does contract specifically with Sony in this way)


I agree, and should have expanded my "not a direct comparison" more clearly to expand on the more nuanced situation. But, I mean my point kind of at the more general level that the topic concerning Amazon often starts at: everyone's (and mine as well) first thought is to mentally compare to a grocery store with own-brand products competing with name-brand versions. In many cases, tho absolutely not all as you correctly point out, the jars of mayonnaise from Kraft and from Safeway are both bought and paid for by Safeway.

So, while that is not an absolutely example (as lots of stuff in the store is still owned by the separate vending companies), it is a good caveat to our first "grocery stores do it" thought that comes to mind when thinking about this Amazon topic.


So if a store decides to sell things on consignment they no longer have power over how the products are displayed?


Working at an agency that mostly did CPG work for P+G, I remember how so much of the design work was about catching someone's eye on shelf: how to stand out in a sea of packaging. Millions (and millions) of dollars were spent trying to crack the code.

But it's no longer a flat canvas where you can see everything all at once. The shelf is not flat, it's deep. You have to move through products one by one. In the article they say that the first spot is 'valuable.' More like 'life or death.'


I think the depth is inversely proportional to the utility of search - the better I can search for the combination of features, price, etc that I need the less deep the shelf gets. The endless generic white-labeled junk plus poor metadata really makes the problem bad though.


Okay, that sounds conspiratorial, but: is that why Amazon's search is atrociously terrible, so that they can sell the top spots for more? If you could search by attributes reliably, the top spots lose relative value.


Well I doubt they actively try to make it worse.

But I would believe it if because of the lack of incentive, they din't make active efforts to improve it.


The main problem is that current antitrust law doesn't clearly prohibit anti-competitive behavior like this. Modern antitrust law has largely been created by judges (often without any economic training) interpreting early 20th century laws. This is a great summary of how regulations could be adapted to stop this sort of activity: https://www.yalelawjournal.org/pdf/e.710.Khan.805_zuvfyyeh.p...

In short, competition needs to be increased (i.e. more platforms). For example, Amazon wouldn't be able to pull so many shenanigans if users could export all shopping data to jet.com and easily shop on multiple platforms.

The other solution is updated regulations that follow in the footsteps of historical frameworks of antitrust in industries like utilities where it's accepted that monopolies are efficient, but strict measures are put in place to limit abusing market power.


I don't believe the bottleneck here is the law or judicial interpretations.

The problem (IMO) is that there is no political pressure for the Justice Department to seek corrective action against these near-monopolies.

The lack of action (IMO) comes from two motivations...

1. The desire for US politicians to see US companies attain global near-monopoly status as a mechanism to help propagate US policy & surveillance.

2. The campaign finance influence these corporations buy through lobbying in Congress and their local/state officials.

1 & 2 aren't even all that independent. Amazon didn't setup HQ2 in DC for nothing. Bezos even literally bought the largest mansion in DC explicitly to host congressional networking events.

The solution is simple, in principle. Nurture, fund, and support alternatives to these companies. Realistically, globalization means there is little hope for regulatory breakups in America's future.


Sure, there could be some corruption going on, but theres a much more mundane legal reason the DOJ won't bring cases. They often won't prosecute because the costs of losing anti-trust cases are so high, largely because of the way antitrust law is written. When the DOJ brings a case and loses, the agency loses all future power to bring a similar case because precedent is binding, so they only prosecute the most obvious anti-trust violations. As all these conflicting comments in this thread and related articles suggest - an antitrust case against Amazon is quite complex and not your straightforward monopoly or price fixing case.


There's nothing stopping an increase in competition is the problem. Sellers want the visibility of Amazon's platform with the benefits of rolling their own. There's nothing physically preventing a merchant alliance from forming its own platform, merchants (that aren't Walmart) simply don't do this because they know they're still getting more value by being on Amazon instead. Online retail isn't new or novel at this point, merchants have had all the time in the world to figure out a more favorable system.


Theoretical competition =/= actual competition. Yes, that could technically happen, but Amazon's market power makes it extremely difficult. Here, there's a two-sided marketplace (consumers and sellers) where Amazon has both sides. It's not enough for one side of the market to decide they want out. For example, see what merchants have done with Shopify and the Shop app (merchants are all on board, but consumers don't care).


What you're describing is the competitive advantage of shoppers preferring Amazon though, at least from how I'm reading your post. If a seller alliance or rival omnicorp can't entice consumers then they need either better marketing or better deals, competing in short. If they can't succeed at either of those in a manner significant enough to challenge Amazon then how is targeting Amazon with legislation actually helping consumers? It seems like most policy proposals boil down to making Amazon less competitive rather than cultivating an environment that results in more platforms capable of reaching Amazon's combination of scale and popularity. If Google was worse at Search there'd be more competition in the space but it'd hardly be a win for consumers unless you change the definition of a win.


Yup, that's exactly what the linked article describes, but you have to take into account barriers to entry. Consumers prefer short term, lower prices on Amazon, others are pushed out, Amazon raises prices in the long run (already seeing this in prices and other ways - like higher search results) and strong network effects make barriers to entry too high for firms to re-enter.


Honestly, I’m so sick of all the fly-by-night ALLCAPS no-name brand names on Amazon setup by armies of passive income-seeking YouTube-advertising dropshippers. Amazons shopping experience these days is trash.

If Amazon starts giving their own brand preferential treatment over this crap it will be an improvement to the service. The few Amazon brand products Ive purchased, like USB and Lightning cables, are among the best available, for good prices.

As is, I try to shop elsewhere these days, even if the shipping takes longer.


Couldn't agree more. There is so much crap advertised and sold there, with fake or paid for reviews that I buy only "sold by Amazon" 99% of the time I shop there. If only I could permanently enable such a filter site-wide...


Amazon's own-brand goods are generally servicible from what I've seen. It puts them at a competitive advantage that their own items are quite unlikely to be counterfeit, while all other brands are subject to suspicion.


That's some pretty serious doublespeak. A huge portion of the problem of counterfeits is a result of Amazon's decision to comingle inventory.


Do they co-mingle their own products? Seems unlikely a 3P could FBA some Amazon Basics products.


I think that's what GP is saying. Presumably they don't resell, and don't allow resellers, so no counterfeits of their store brand products.


Why do you believe that Amazon comingles inventory? Multiple sellers can sell under the same listing, but that is not the same thing as comingling inventory. Everything I've seen about Amazon fullfillment indicates that the product you are getting is the one provided by the seller you purchased from.


I never thought of that, and honestly, in my opinion that's up there as being the most insidious facet. The fact that sort of intuitively, the machinery and incentive to counterfeit amazon branded products on amazon seems way more difficult than any other brand, if only because one might think some entity in amazon would know "hey, wait, you aren't us?"


I just did the “ground coffee” and melatonin searches.

Entire first row was an ad for bulletproof coffee and sugarbearhair vitamins. Second row had the amazon brand on the left with prominent amazon logos on the coffee bag and the pill bottle and a tag that says “featured from our brands” and the first word in he title for both items was Amazon. The next three items were sponsored ads.

I don’t see amazon being deceptive here. They are making it very clear you are buying the “Amazon Brand.”


FWIW, I just did a similar thing. The first 5 or so Amazon brands were clearly labeled as such. Then I searched some of their lesser known brands and found many weren't clearly labeled.

Try it yourself. The hard part is finding out what Amazon's brands are since they (surprise!) don't publish a list. This is the best list I could find in my short time searching

https://www.businessinsider.com/amazon-owns-these-brands-lis...


Amazon is is doing with sponsored listings the same thing that Google did with its organic search results. "Oh your site is not the top 3 in search results for this keyword? You have a chance to stand out if you buy these ads." The shady difference here between the two is that Google did not try to show results from their own company, Amazon is.


When I search “email”, “maps”, “video”, and “cloud” through google on iOS safari, I get as the first non-ad result; Gmail, google maps, YouTube, and google cloud respectively.


Other than Apple, who pretty much only support apple products (Which are not used by a statistical majority of the global population), what real alternatives are there? I think most people are looking for google maps, not HERE maps, when they search "maps"


There probably need to be laws that you can't be both a platform and compete against those on your platform with your own products/content. And make sure to close the "we'll just ban our competition from the platform then!" loophole.

It seems inevitable that once a platform, whether it's an ISP, a media platform, or an ecommerce platform, starts making its own products for that platform, then they will also start abusing their power against their own platform partners.

It's just irresistible for them not to, because there's so much to gain from it. So only (pro-active) laws could stop this. You can't leave it "to the market" to solve this, because by the time that happens (if ever), the platform company would have already extracted tens and hundreds of billions of dollars from the strategy and killed an untold number of smaller companies.


> You can't leave it "to the market" to solve this, because by the time that happens (if ever), the platform company would have already extracted tens and hundreds of billions of dollars from the strategy and killed an untold number of smaller companies.

... and by the time most users would jump to another platform, that other platform would start pulling the same thing, because why not? Ad infinitum.


I don't know that I love Amazon putting their stuff first, but this criticism of Amazon's actions was interesting:

> The new approach violates Amazon’s mantra that every decision must put the customer first, said Tim Hughes, a consultant who used to work in product management at Amazon. “Why would their brand be a better option for consumers?” said Hughes, chief operating officer of a firm that helps brands manage Amazon accounts. “It doesn’t necessarily have to be cheaper, or better, or anything. So then what’s their justification to say, ‘We’re just going to put this up in front of everybody else’? This is just another example of Amazon being able to manipulate the platform for its own good use.”

I don't disagree with this, but at the same time, if you're arguing for advertising determining what gets the top slots, why would a manufacturer that can pay more be a better option for consumers?


> The new approach violates Amazon’s mantra that every decision must put the customer first, said Tim Hughes, a consultant who used to work in product management at Amazon. “Why would their brand be a better option for consumers?” said Hughes, chief operating officer of a firm that helps brands manage Amazon accounts. “It doesn’t necessarily have to be cheaper, or better, or anything. So then what’s their justification to say, ‘We’re just going to put this up in front of everybody else’? This is just another example of Amazon being able to manipulate the platform for its own good use.”

Tim Hughes should probably figure out that the previous system had exactly the same properties


He's lobbying for the 3rd party firms, what else can he say? "My job is to complain when amazon consolidates power away from my 3rd part clients" wouldn't go over as well.


Amazon has been criticized before for selling some third-party products of very low quality. Something they can solve by using the top-spot for their own brands, without completely marginalizing the third-party providers.

And it's not like you can't make your own online shop or at least a nice web page explaining your product better than at Amazon. I wish more sellers would go to the trouble of doing that.


Haters gonna hate.

Every retailer has a store brand. Why is it a public good that I have to pay a premium price for a cable from a pre-approved seller? Why should anyone selling on Amazon think that they have an exclusive relationship with their customers? Sellers can, and always have, cannibalized one another's products. Yes, in school it's cheating, but in retail it's called competition.

Every retailer can compete with Amazon on any axis they want to, whether it's selection, price or service. Walmart does, IKEA does, and Ebay and Etsy and FreshDirect and Target and Powells. I buy online from all of these companies.

Amazon never seems to get credit for things that it does that are good for society. There are the obvious things, like trustworthy ecommerce, huge selection, fast shipping and low prices. But then there are things like raising the minimum hourly wage to $15/hr, supplying PPE and food during a pandemic and providing tax revenue through salaries. Add to that creating new economic sectors and leading the world in distributed s/w development. None of these things is inevitable, none of these things are easy to do.


This has been discussed in threads below, but the jist of the issue is that Amazon is pretty much a monopoly as an online product discovery service. If they put their own products at the top, people will end up with no way of discovering other companies. It would be using its monopoly position as a product discovery service to profit its own manufacturing subsidy.

> Every retailer can compete with Amazon on any axis they want to, whether it's selection, price or service. Walmart does, IKEA does, and Ebay and Etsy and FreshDirect and Target and Powells. I buy online from all of these companies.

That's the crux of the debate IMO - whether or not Amazon is a monopoly. You say that other retailers can compete effectively as a product discovery service. I am not sure. I think the vast majority just searches on Amazon at this point, so it is sort of a monopoly.


It's absolutely laughable when people say that Amazon operates as "a monopoly as an online product discovery service".

There are so so so many options out there. I use plenty of online retailers all the time. Complaining about them being a monopoly in this way is like going to the same brick and mortar retailer and complaining they are a monopoly because you're too lazy to see what other retailers are available. If anything it's even more absurd because the closest brick and mortar competition might be miles away while online the competition is mere keystrokes away.

Every single search engine is also a product discovery service too: Google, Bing, DuckDuckGo.


I suspect you are an outlier. Amazon takes ~50% of online shopping market share [1]. Admittedly it is lower than I thought. I expected it to be closer to 70%. Google for search is actually at 71% [2]. Either way, I think 50% is enough market power to be treated as a monopoly, not sure about the legal definition.

That said, I am not particularly worried about Amazon basics as these are commodity products, as long as they are being transparent about it. Monopoly is a problem only if they use tactics that prevent competitors from emerging - example could be incentivizing vendors to sell only on Amazon.

[1] https://www.statista.com/statistics/788109/amazon-retail-mar... [2] https://www.netmarketshare.com/search-engine-market-share.as...


Taking 50% of online shopping share because your product is that much better than the competition is totally different than there are no other options.

Imagine you have 1000 stores all on the same street and one is so much better than the other stores that 50% of sales happen in that one store and there are no shenanigans where that one store is disadvantaging the other 999 stores. How can you argue that that is a monopoly?


Basically, Amazon's going to push and push until the courts push back. Business is dog-eat-dog coopetition, it's not some sort of place where people play nicely together. The irony here is by directing users to their private label and simply away from SKUs contaminated with fakes they may already be providing a better customer experience. Same goes for directing users away from items with fake reviews.


Since Amazon.com is a free product, they need to make money in other ways such as inserting ads or adding their own brands to the top of product searches.

Now if only they were able to charge money for their services then maybe they would need to do this, or maybe they could even come up with a monthly subscription program for anybody visiting their website...


Large corporations use their market power to gain competitive advantages - fully understandable from Amazon's point of view. However, it is completely incomprehensible why the authorities do not intervene in the market in a regulating way in these cases more often.


Is Amazon an open market? I can't buy Google Home products on Amazon so it appears that it's not an open market. If not an open market, then isn't it the same as a dealership promoting their own brand of cars first?


>" can't buy Google home products on Amazon"

Yes you can

https://www.amazon.com/s?k=google+home&rh=p_89%3AGoogle&dc&q...


I only see Google routers and cameras in that link. Can you provide a link to an actual Google Home or Google Nest Mini (Alexa competitor)?


Shrug, I see what you're saying but we can't be sure they are trying to list those items and are being told "no".

https://smile.amazon.com/stores/Google+Inc./page/080B7645-82...


Being told "no" by who? Google? It doesn't make sense that Google would allow Amazon to sell all their products except for things like Google Homes and Google Nest Cameras which Amazon has direct competing products (ie Amazon Alexa, Amazon Ring Doorbell). If people can buy Google Homes and sell them on eBay but not on Amazon then Amazon is not an open market because Amazon is restricting selling specific products that compete with their product line.


Live by the sword die by the sword.

A lot of small businesses got their start by leveraging the ubiquity of Amazon. Far cheaper than trying to roll your own services and also got a large set of eyes on their product.

Which is great until Amazon collects enough data to decide that it would be 'useful' to them to enter that same market.

So basically, you leverage Amazon to bootstrap your business, and Amazon uses your marketing experience and success to decide which markets to develop and enter.


It makes me think of the small companies that completely outsource their hardware design and construction to Shenzhen, that are later shocked, shocked I tell you, to find the product on Alibaba for pennies on the dollar. Under about twelve different brand names.


I wonder if it's cheaper in the long run to create their own products over shouldering the ongoing costs (both operational and reputation) of policing all the fake product listings.


This becomes really problematic when you're searching for something, and Amazon place their brand item high in the listing despite not being what you're searching for. I've made a couple of mistaken purchases because I assumed the product had a feature it didn't have because it ranked near the top for a search for that exact feature. (Think "Disposable X," all of the non-amazon items are disposable, and Amazon's, despite being the first or second result).


Amazon are just using their competitive advantage. The world has changed, potentially through the introduction of Amazon, whereby consumers now want cheap products, now! Amazon can do that. People who are shopping for the first product they see don't have any brand affiliation and therefore it makes sense. If I loved a particular brand of coffee I would seek them out on Amazon.

Amazon are using their platform to cover off those customers who are neutral in their brand preference.


> Although customers don’t necessarily realize it, brands have for years been able to bid on search terms to secure the most visible listing positions at the top of Amazon’s product search results pages, where their products carry a “sponsored” tag above the description.

And where they're blocked by an adblocker, as they should be.


It's interesting to see how "vertical integration" has gone from being an unacceptable form of monopoly to widely expected. The government broke up film companies for controlling production, distribution and exhibition in the 40s but it's been pretty par for the course in retail for the past 40 years.


If FooCorp chose to list competing products on their own website (and to help facilitate payments, returns, etc.), and it became popular because it allowed consumers to comparison shop more easily, would that also be an antitrust issue?

Is their a legal distinction that establishes Amazon as a platform first, and a seller second?


Antitrust is kind of a nebulous smell test (I'll know shit when I smell it kinda thing), and from before the internet era, so I don't think the distinction exists. It's more about how consumers end up interacting with the market due to the actions of the companies being prosecuted/regulated.

The issue in this case would be that Amazon is manipulating the markets involved by effectively being the market. If FooCorp was a minor player in the market, didn't buy up competing marketplaces, and was clear about it's brand as a seller of Foo products that would be fine (think Costco and Kirkland Signature branded products). The issue with Amazon is that it is half of all eCommerce, buys up competing marketplaces to shutter them, it is hellishly difficult to determine what is an Amazon sold product and a marketplace sold product on their site, and their brand is as a marketplace.


Has anyone created a free and open source Amazon marketplace?

It seems like something the world desperately needs.


huh... In my experience Amazon marketplace is like 10% "cool, that was a good product" and 90% "this is why I no longer trust Amazon"


Reading this, one gets the feeling that Amazon advertise their products on some sort of public place, and that this is perhaps not right.

But in reality they simply own the whole thing and it is perfectly reasonable to do however they want.


I refer you to the Microsoft antitrust case. Microsoft owned the desktop OS, and was using that to give preference to IE. That... didn't fly. Using a monopoly in one area to gain market share in another area is in fact an antitrust violation.


The antitrust case was about Microsoft giving away a free browser. Every operating system comes with a free browser. My phone comes with a free browser. My kindle comes with a free browser.


No. The antitrust case was about Microsoft using their control of the OS to push users to use Microsoft's browser.

The issue wasn't that Microsoft gave away IE for free. Netscape gave away Navigator for free, too. The issue was that Microsoft tried to "leverage" Windows to increase IE's market share.


Specifically, Microsoft told PC builders (to which MS was a supplier) that they would not sell Windows to them if they intended to pre-install Netscape as well.

Microsoft tried to use their monopoly as the supplier of one piece of software (the OS) to distort the market for another piece of software (the browser).

Netscape did not give Navigator away to PC builders for free originally; selling volume licenses was their business model, and Microsoft illegally destroyed it. Hence the prosecution.


I quit using Netscape because it crashed far more often than Explorer. Nobody tried to stop me from using Netscape. I had no trouble pushing a button and installing it.

Netscape in those days was a borderline unusable product, and trying to blame Microsoft is misplaced.

Have you ever tried to install another browser on your kindle?

Also, much of the drama in the trial was about Microsoft removing Explorer from the distribution, not about barriers to the installation of Netscape.


Sure, that may be true. And Microsoft also engaged in anticompetitive behavior. The behavior is still illegal, whether or not Netscape crashed.

If Microsoft had competed and won on technical merit and/or marketing, that would have been fine. But they didn't.


My point is that Netscape was uncompetitive due to it being nearly useless from constantly crashing. Blaming Microsoft is misplaced.

Today I still have IE on my machine, but I never use it, because Chrome causes fewer problems. Having it sit on the machine does no harm, and doesn't bother me.

That anti-trust battle was the first in history where it was a dispute between one free product and another free product. Nobody ever demonstrated any harm to consumers at all. That was never even an issue at trial. Nobody ever demonstrated that Netscape couldn't be installed.


None of that makes Microsoft's behavior more legal. So what are you arguing endlessly about?


Their predatory conduct is being investigated in the EU [1] and US [2] which suggests it is far from "perfectly reasonable" and may not even be legal.

[1] https://www.cnbc.com/2019/07/17/eu-to-investigate-amazon-ove...

[2] https://www.theguardian.com/technology/2020/may/01/amazon-je...


Oh definitely, if you ignore the whole monopoly aspect.


I see this argument a lot for Amazon.

monopoly: the exclusive possession or control of the supply of or trade in a commodity or service.

Aren't suppliers free to start their own store, drive traffic to it and make money? Aren't suppliers free to list their products on Amazon, Ebay, Craigslist, Etsy, Shopify etc.?

How is this considered a monopoly? I'm actually interested in an answer. I might be missing something.


I think the strongest case I could make is that the advantage of stores like Amazon (and Target) is customer acquisition. They're where customers go to discover products and comparison shop. The limited resource they control is the supply of customers who are there to buy a specific type of good. And buy favoring certain products they can choose the winners/losers in this game and edge their own products in.


Doesn't Amazon have like less than 40% of US online retail, and less than 10% of US retail total?

I guess rephrasing, what's the definition of monopoly here?


Monopoly is the wrong word but I think Elizabeth Warren made a good case for why similar regulation is needed for very large, powerful platforms today (regardless if you agree with her proposed solution).

https://www.theverge.com/2019/3/9/18257965/elizabeth-warren-...


I am surprised that they are doing it. They are going to attract the attention regulatory bodies in North America and Europe - especially once competitors or users of their platform start complaining.


So an interesting question is whether or not Amazon will allow independent resellers to list Amazon branded products with commingled inventory or if the Amazon brands can only be sold by Amazon.


It's almost impossible to find something with unusual features on Amazon. Every search page is flooded with "recommended" products that don't match your search terms.


No different than when you go to the store and the store's brand products are at eye level and the name brands are lower on the shelf.


Me: nervously clutches the vast quantities of Kirkland house brand stuff at my place


One of the few exemptions. Costco takes the Kirkland brand very seriously because the most of their revenue comes from memberships.


No, this is like if the name brand is on every shelf but the store brand is in the front of every shelf so that the name brand can't be seen until you move past the store brand.


Very different, because Amazon is mot one market, but THE market online in the Western World.


Particularly true in US. But less so in Europe. And worldwide, Amazon is not number one at all. 1. Taobao.com: 16% of worldwide e-commerce 2. Tmall.com: 13% 3. Amazon: 10% 4. JD.com: 8% (source: https://www.statista.com/statistics/664814/global-e-commerce...)

The lack of competition in US (Walmart and Target took e-commerce seriously only recently) let Amazon take almost 50% of e-commerce. But hopefully Ebay, Walmart, Target and Costco would add more competition.

Painting Amazon like this only online market that we cannot escape is a bit misleading. Amazon has a long way to go to beat the asian e-commerce, and now has domestically more competition with Walmart, Target and Costco.


And Walmart is the grocery store in a lot of small towns. Amazon doesn't have that much lock-in outside of customer's preference to shop there. Their power is in that customers go there to discover products, but that's Target's advantage too and it would be weird to try and tell them how they're allowed to stock their shelves.


I think OP's point is still valid; doesn't matter if you go to one store or another (e.g., Walmart or Safeway), if that store has a house brand, chances are their equivalent house brand is at the same level or higher than the name brand.


Source?

Amazon is barely holding on ~44% of the US eCommerce market.


Isn't this functionally saying that Amazon is outbidding other products for ads on its own platform?


This is why I’m long on Shopify

There’s less and less incentive for you to put up your commodities on Amazon for a vendor


Anyone in this thread that is saying there is nothing wrong with this practice likely has an agenda.


I think this has been an advantage for a long time, but yes it keeps expanding.


Seriously, what is wrong with this? It's a for-profit private org. Does this really deserve the top spot on HN? What's next? "Toyota showroom wants you buy a Corolla instead of a used VW"?


They've been doing this for a few years now.


Mods, please can you change the title to what it really is in the link. Thanks

>> Amazon's New Competitive Advantage: Abusing its Monopoly Position


that is not new, unless that article is old


Amazon delenda est (Amazon must be destroyed)

Amazon ALWAYS acts illegally.


Worked for Google with AMP.


It was cool when I was looking at the product page for a battery and there was a recommendation for an incompatible AmazonBasics-brand battery.


I wanted a shredder. Wirecutter recommended the AmazonBasics one. I bought it. It’s great. Wanted another one. No longer made! Bummer.

Need some light bulbs. AmazonBasics ones look good. Oh, doesn’t ship to California.


That is so strange. Why wouldn't they ship light bulbs to California?


I am not sure, but my guess is that the packaging is not compliant with proposition 65. California has a variety of regulations which force small changes to packaging and manuals.


It's probably because they don't meet some California environmental regulation (like energy efficiency or toxic chemicals) or aren't certified to meet those regulations. California tends to have the strictest environmental regulations.

Some models of cars are unable to be sold here for the same reason, although most are designed to conform to California regulations due to the manufacturers not wanting to miss out on the California market.


There is another unfair competitive advantage that Amazon had for many years, which lead directly to this situation: no profit expectations from its shareholders.

Amazon chose not to earn the normal profits that most businesses need to survive and grow in order to offer unrealistically low prices on all sorts of products specifically in order to gain this advantage. They didn't just happen to gain the market dominance that allows for this sort of anti-competitive abuse, they bought it by convincing shareholders not to punish them for choosing not to earn a profit.




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