The pricing system was more archaic and manually driven than I expected. Vendor Managers were asked to review pending major price drops and raises. Later, a team in India/Pakistan would be the first line of defense, then the VM would be asked to review in edge cases.
We could easily manually lower the price, however raising it was very difficult and required managerial approval.
One thing I felt was anti-competitive was price matching Costco at the "each." This would result in absurd 2-day shipping prices that could not possibly be profitable. e.g Costco sells a 24 pack of soap for $1 per soap bar. We would price match the individual soap bar such that it was a $1 delivered to the customer's door.
France caught on to this "pro" customer behaviour and is implementing laws requiring minimum shipping charges so that E-commerce platforms can't use "free" shipping in a predatory pricing manner.
If it makes you happy we can add in ".. except for soaps" in the ruling... /s
For a real life example, the major grocery chain in Australia (Woolworths) did this with milk, selling their brand for $1 a litre, where everyone else had to do $2+ just to break even.
Effectively selling it at a loss so that they get market dominance. They make up the loss on other products in their big chain.
I think there needs to be a break-up between "the retailer" and their home brand being sold there, because it means the profits made on selling the competition works to the home brand advantage.
Really? Because the reporting I found says that the competition authority cleared the market participants of any wrongdoing in the "milk wars".
>[Chairman of the Australian Competition and Consumer Commission] Samuel said the major impact of discounted milk prices appears to have been a reduction in the supermarkets’ profit margins on house brand milk, rather than a gain.
>The consumer protection body got involved as well as a lot of negative media attention.
>They had to raise their prices so they don't become a monopoly.
You seemed to be suggesting that what was happening with milk was anticompetitive and the consumer protection body got involved to stop it. I pointed out that what actually happened is that the body determined that there wasn't anything anticompetitive going on and that the companies ceased the "milk wars" on their own because they were losing money (which is exactly what I was alluding would happen with soap if one company tried to drive competitors out of the market).
> The Act also bars "loss leader" sales, defined as sales (1) below cost, (2) to induce, promote or encourage the purchase of other merchandise, and (3) with the intent to injure competitors or destroy competition. Business and Professions Code 17044.
If that were not the case, cell carriers couldn’t sell phones below cost to sell service plans and the entire “razor vs razor blades” model would be illegal.
That also means that game console sales would be illegal.
how would you prove intent to injure a competitor? wouldn't all attempts to outcompete a competitor be considered an attempt to injure them?
there is no way Costco isn't losing money on their $4.99 chickens or $1.50 hot dog and drink. and I assume the point is to get you in the door so you will buy other stuff from them and not Amazon or Walmart.
By selling soap for a loss for longer than the competitors can stomach. If you have 10 businesses making $100M/yr, you can lose $1B/yr on soap (by selling a $2 bar for $1) and get a ton of customers who buy your cheaper soap. Eventually, other basic soap sellers will either need to match your prices and take their own losses to match, or hold steady hoping you'll fold.
Eventually, they are either sold to Amazon or fold, and Amazon can increase the price to $2.20/bar and mint another $100M/year for the next industry to attack with $1.1B. Rinse & repeat and eventually the customer is charged some percentage more for the same product once the competition is kowtowed.
That is surely a vast simplification. By sheer operating scale Amazon can ship items at a cost far lower than any brand new “soap company” could. There’s no way you could be competitive on such a low priced item.
And still countless competitors do exist. They must find some other ways to compete, because your point is valid. It's almost like the human ingenuity knows no bounds...
I believe the general strategy for this kind of product is to drive CX conversion. Amazon usually offers auto repurchase too, so if you are going to buy once and Amazon is cheaper, the second time too..., by the third you might actually decide to setup a auto purchase from time to time. if they discount 5 cents from the best competitor initially and in the long run they start to price 10 above, they use this to finance similar strategy to convert more CX and then they keep a more strong market position. In the end you don't push your competitors out of the market, but consolidate a very strong consumer base.
(Confusingly, most of the search results I found point at "customer experience" which doesn't fit as well here. I've definitely seen support write about "the CX has an issue with ..." so I'm pretty sure this is a standard term.)
Yes, because Amazon is going to drive out every single competitor including those who physically sell commodity goods in stores out of business - including the much larger Walmart.
Is everyone forgetting just how small Amazon is when you consider all of retail?
Not sure why you're comparing to physical retail considering the antitrust practices alleged are in the ecommerce space. And even if we were to compare all retail in the US, Amazon is likely to overtake Walmart across all retail come next year. https://www.ascentialedge.com/press/ecommerce-shakes-top-5-r...
https://www.law.cornell.edu/wex/monopoly "For instance, the term monopoly may be referring to instances where: [...] There are many buyers or sellers, but one actor has enough market share to dictate prices (near monopolies)"
> And it was also predicted by analysts that Windows Phone would overtake the iPhone by 2017
The FTC doesn't get to determine the relevant antitrust market. Part of Amazon's defense will be pointing out that consumers buy soap on Amazon and in physical stores alike. It will be up to a judge to decide.
The “good for consumers” test is not encoded in law in the US, it’s just a framework that has been recently used to evaluate whether an action is sufficiently anti-competitive to warrant intervention.
It's probably worth noting that France has recently allowed again to sell fuel below cost (at least temporarily)... which I guess isn't particularly surprising, since it has had been led for 6 years now by one of these far-right neoliberals.
Which I guess is a great example of the unidimensional labeling being ridiculous in politics : the anti-government, pro-monopoly, anti-free-market top right being radically different from the pro-free-market, anti-monopoly bottom right.
(IIRC Marx said that the bottom right were useful idiots for the top right ? But this is probably his failure at seeing history as something cyclical, I very much doubt that both the current situation can continue for long and that it spells doom for capitalism in general.)
From the book “The Winner Sells All” on Project Nessie:
>The focus on matching Walmart on price also created some issues, like when Amazon's pricing tool would repeatedly lower the price on an item to match its competitor, leading to what insiders dubbed a death spiral. Amazon created a specialized team to try to determine how and when to decide that its pricing tool should pull back and no longer match Walmart's lowest price on a given item, but instead match the next-lowest price from a competitor. The initiative was called Project Nessie. In the end, the program was scrapped when it was determined that the tool did not lead to more profitable outcomes.
This sounds like a trends/spike monitoring algorithm that Amazon used to figure out when to give up trying to price match the very lowest competing offer.
"The focus on matching Walmart on price also created some issues, like when Amazon's pricing tool would repeatedly lower the price on an item to match its competitor, leading to what insiders dubbed a death spiral. Amazon created a specialized team to try to determine how and when to decide that its pricing tool should pull back and no longer match Walmarts lowest price on a given item, but instead match the next-lowest price from a competitor. The initiative was called Project Nessie. In the end, the program was scrapped when it was determined that the tool did not lead to more profitable outcomes, according to Amazon spokesperson Jordan Deagle."
It's pretty crazy to me that the FTC targeted Amazon in particular because they had a bone to pick, have done massive discovery, and just gone fishing with that discovery to find anything that sounds vaguely bad.
I think this is probably normal for large gov agencies and prosecutions in general, but it just shows how arbitrary and political this stuff really is.
Well, fortunately that's not what happened and not how this works.
You don't get to the discovery stage of a lawsuit without a legitimate claim, especially not against a company like Amazon. It's just not realistic for the FTC to decide to investigate and immediately be granted access to everything. A "fishing expedition" wouldn't be likely to make it past a judge. Amazon has excellent counsel.
That said, unfortunately for Amazon, they are also built for an antitrust model that has been a corrupt perversion of the Clayton act. It's one Lena Khan, especially, has been trying to change since before she was in office. As a result, some of what they were doing in the open was in violation of the act - it just wouldn't have been successfully prosecuted 5 years ago.
Yeah huh, that’s exactly where they are. We can debate whether the current antitrust laws are broken, we can debate how much government should regulate big tech, but Lena Khan is testing theories and novel legal tactics after the fact. I put more faith in Amazon’s legal chops than government any day, they’re clear of violating. If anything, they’ve taken the existing laws and ran them to their conclusion, faster and more efficiently than any one else.
It’s easy to say, “imagine if there was no Amazon and we were all still living in Walmart and Sears’ retail landscape”, precisely because Amazon came in and changed the game for the betterment of all. Now, FTC seems to be saying, “imagine the little Amazons and Googles that are being suppressed!” It’s hypothetical and not how regulation should be done IMHO.
We’re in need of good regulation of big tech, this is ultimately going to damage that effort. It’s not in good faith.
I don't really understand what you mean by "testing theories and novel legal tactics after the fact." In this case, there are no novel legal tactics as far as I can see, and the only theory tested is the one continuously tested by the FTC and DOJ since 1914. If there wasn't a plausible claim here, a judge would have dismissed it prior to discovery.
The problem, I think, is that Amazon likely violated the law. They did this because normally they could get away with it - that doesn't change the violation, it means that prior enforcement sucked. It's like speeding; you do it, sometimes you get caught, normally you don't. If suddenly everyone got pulled over despite only going 5 over the limit people would be upset, but they would still have broken the law. It wouldn't be in bad faith.
So the FTC is indeed saying 'look at all the companies that are being suppressed,' precisely because that is the law. Section 2 of the Clayton Act, for example, makes it illegal for companies to engage in anti-competitive practices. The FTC is alleging that Amazon engaged in anti-competitive practices.
The funniest part to me on here is, nobody is even arguing that they didn't. The only argument people are making is "I like Amazon, it makes products cheap!"
That's fine, and courts should and do take that into account, but they still broke the law. They didn't break FTC regulations passed by Lena Khan, they broke a law that has been in force since 1914. The problem Amazon has now is that 'we make things cheaper' only works so long as they actually are making things cheaper, and it should only work so long as they aren't in the process of or have not completed monopolization. They are charged with anti-competitive behavior and price-manipulation and they have market power in the e-commerce market.
>We’re in need of good regulation of big tech, this is ultimately going to damage that effort. It’s not in good faith.
I completely disagree. This is what good regulation of big companies looks like. It's just foreign because we haven't seen it since before this era of mass concentration of industry.
Widely rationalized as the government has finite resources, so there's a better deterrence effect of going after prominent entities and persons vs. randomly selecting bad actors.
IMO this is good. The biggest and most elite among us should be held to a higher standard than a random guy on the street or a small business, not a lower one.
Westley Snipes, Donald Trump, Hunter Biden, Amazon, Tesla, ExxonMobile, Amgen. I sorta want everyone and anything in that class of society on their best behavior at all times, lest the reins of government fall to a Party with reasons to make an example out of them. Unlike most, they have the resources to make it a fair fight too.
So they used a super-secret algorithm to… raise prices? That’s all?
When you’re the leader in your category, it’s quite obvious that competitors are aligned on your prices, and that if you raise them they would raise them as well. At a previous company our main competitor fixed most of its prices to 1 cent below ours, so when we raised the prices they followed us as well.
>> At a previous company our main competitor fixed most of its prices to 1 cent below ours, so when we raised the prices they followed us as well.
So theoretically if you both raised prices too much arbitrarily, a third player might enter the market at a lower price. How realistic is that? I think any newcomer would be well aware of your ability to lower prices to compete, and a new player probably has costs just to enter the game so it'd be a bit risky.
> So theoretically if you both raised prices too much arbitrarily, a third player might enter the market at a lower price. How realistic is that? I think any newcomer would be well aware of your ability to lower prices to compete, and a new player probably has costs just to enter the game so it'd be a bit risky.
In this particular situation it was not realistic because 1- the pricing was not arbitrary and 2- it was a highly-competitive market in which the prices were so low that any new player wouldn’t have been able to enter the market because you needed high volume to start earning some margin.
> The algorithm helped Amazon improve its profits on items across shopping categories, and because of the power the company has in e-commerce, led competitors to raise their prices and charge customers more...In instances where competitors didn’t raise their prices to Amazon’s level, the algorithm—which is no longer in use—automatically returned the item to its normal price point.
> The company also used Nessie on what employees saw as a promotional spiral, where Amazon would match a discounted price from a competitor, such as Target.com, and other competitors would follow, lowering their prices. When Target ended its sale, Amazon and the other competitors would remain locked at the low price because they were still matching each other...
Soooooo....it used the algorithm to raise prices, but also lower them?
Anyone want to try their hand at an actual headline?
Cory Doctorow disagrees (1) that the consumer welfare theory of monopolies is valid and (2) that monopolies which dominate industries are economically desirable [0]. I found it interesting to realize that most modern antitrust theory - that consumer harm is the only reasonable basis for government intervention in monopolies - appears to lack historical basis in the law. For instance, the consumer welfare standard severely downplays the importance of free and fair competition among businesses as a means for class advancement.
> This is the “consumer welfare” standard, a theory as economically bankrupt as it is historically unsupportable. Let’s be clear here: The plain language of America’s antitrust laws make it very clear that Congress wanted to block monopolies because it worried about the concentration of corporate power, not just the abuse of that power. This is inarguable: Think of John Sherman stalking the floor of the Senate, railing against autocrats of trade, declaiming that “we should not endure a King over the production, transportation, and sale of the necessaries of life.” These are not the statements of a man who liked most monopolies and merely sought to restrain the occasional monopolist who lost sight of his duty to make life better for the public.
> I found it interesting to realize that most modern antitrust theory - that consumer harm is the only reasonable basis for government intervention in monopolies - appears to lack historical basis in the law. For instance, the consumer welfare standard severely downplays the importance of free and fair competition among businesses as a means for class advancement.
This feel similar to the myth of shareholder primacy. In both cases, the "agreed on standard" has little to no basis in the law, but happens to enrich the powerful and well connected over the little man.
If you look into the actual historical basis of shareholder primacy, you'll find everything is a bit more complicated than you think it is.
Shareholder primacy has an old idea, coming from a the 1919 court case Dodge v. Ford Motor Co. The facts of the case were as follows:
1. The Dodge brothers - minority shareholders in Ford Motors, wanted to set up their own automotive company. They planned to use the money from Ford's dividends to support their company.
2. Henry Ford would have liked to keep his monopoly on affordable cars. He cancelled the dividend and claimed he's going to spend the money on improving society (by selling the Model T even cheaper) as a thinly veiled excuse.
3. The courts in Michigan saw what's happening and forced Ford to issue dividends.
As you can see in that case case, it was the lack of shareholder primacy that enriched the powerful. In the last 20 centuries of human history the powerful have always crushed the little man with the excuse they are serving the public interest. Beware of anything that empowers powerful individuals (like corporate CEOs and directors) to take arbitrary actions in the name of "social responsibility".
I was thinking more of the "people's" party of the Roman republic which replaced electoral government with divine monarchy in 27 BC. It's a rather fragrant example of what I'm describing as well as the first one I know of, but I doubt it's the first time it actually happened.
Christianity couldn't have been a tool of the rich and powerful in the first century, because it only began acquiring powerful followers around the third century crisis.
What is the reasonable alternative to shareholder primacy? Removing shareholders as a check on the executives would create an all powerful CEO similar to the structure of tech companies with dual class shares but at all companies. I don't think that's a good thing.
Also, why would investors want to invest in a company where they could not remove a ad CEO that isn't delivering returns? They would probably just reinvent shareholder primacy through investment contracts.
Do shareholders actually act as a substantial check on companies though? And it's this a check towards positive behavior, or negative behavior (for the company, society, etc.)?
If they didn't why would anybody be complaining about "shareholder primacy?"
And it's a check towards their own interests. Just like the CEO acts in his own interests. I can't for the life of me understand why anyone thinks the CEO is more likely to act in the best interest of employees or society than the shareholders are.
> I can't for the life of me understand why anyone thinks the CEO is more likely to act in the best interest of employees or society than the shareholders are.
Probably because shareholders can just care about money in the immediate term and don't need to actually care about any one company or its long term success. They may never know or even interact with the employees of that company on any meaningful level, and may have investments in several other companies including direct competitors so that if any one company tanks they'll still have other investments making them money hand over fist.
A CEO, particularly when they're a founder, might actually care about the company doing well and may personally know the people working for the company. They might care a lot more about the employees they work closely with on a daily basis as opposed to a shareholder who just watches numbers go up and down while deciding when best to sell. The CEO's day to day will change drastically if their company fails. A shareholder whose company does poorly just adjusts what they buys/sell the same as any other day.
A CEOs compensation is mostly stock so that doesn't make any sense. But even if that weren't true, the idea that shareholders don't care about long term prospects or don't mind when the company tanks because they have other investments is one of the most outlandish financial takes I have ever heard.
When shareholders can trade in nanoseconds to exploit random anomalies in stock prices it's harder to imagine them deeply caring about their investments in the long term. Because CEOs don't have the option to jump ship at nearing the speed of light, it's reasonable to conclude that they might just care a bit more.
HFTs and day traders inventory accounts for negligible percentage of shares. The vast majority of shares in all publicly traded companies are held by long term investors. Short term holders have no impact on corporate decision making.
A CEO or board of directors that angers the majority of shareholders (or an outspoken minority) doesn’t last long. That correlation is absolutely clear.
Which means most CEOs and boards focus on managing shareholders at least as much as anything else they do.
I'm assuming the person I replied to was insinuating that the people with an influential amount of voting stock are adequate representatives of the interests of small fry investors building up for retirement. My response is that if the former has the option to increase their share of wealth at the expense of the latter (like rearranging the leadership in a way that promotes short term gain at the expense of long term gain), they will take it. They're interested in their numbers, not any particular company, or the health of the market, or retirees.
Thank you for asking for clarification. I realize I responded precipitously and was too cryptic to contribute anything meaningful to the discussion.
Yep, why would anyone own anything that negatively impacts them.
If you had 100 dollars would you invest it into a company where the CEO could just take the entire company hostage and potentially make you lose your entire investment?
So often it's "buyer beware" when it comes to consumers, it seems like it should likewise be the job of the investor to be smart about what companies they invest in if they want to avoid a CEO who would run a business into the ground just for funsies. The risk of potentially losing your entire investment is something every investor has to accept as being possible with carefully considered and wise investments making it less likely to occur.
> So often it's "buyer beware" when it comes to consumers, it seems like it should likewise be the job of the investor to be smart about what companies they invest in if they want to avoid a CEO who would run a business into the ground just for funsies
It's pretty much like that already, the CEO can run the company into the ground for funsies if they are insane.
But if the investor catches the CEO doing this they have the right to sue to prevent it from happening and the legal system and shareholder primacy are what allow for this. Otherwise, what does the concept of ownership even mean if the owner can't decide what is done with the business?
Ownership guarantees some legal rights, but it doesn't mean that all value is yours to consume. Employees, partners and customers are all going to fight for the value that is created and will use whatever leverage they have to get it.
> Yep, why would anyone own anything that negatively impacts them.
That's a false dichotomy. You can own something (or a share) and the purpose of it need not be "return as much value as possible, via buybacks, in the next quarter".
To earn a return on your investment. Maximizing that return in the next quarter by threatening to take a controlling stake in the company falls into this category of course, but it's silly to think it is the exclusive mode.
The point the other poster is trying to make is that it's absurd to pretend the options are 'unilateral control of the company is determined by shares' and 'shareholders are being negatively impacted by their investment'.
The internet provider for my home is a true monopoly. I have no other choice. I can't click around in my browser, or futz with the cables in the walls and choose a competitive internet provider. I live in an area with moderate population density, so there could be more competition, but the local municipality negotiated exclusive rights for one provider. My provider knows it, they probably paid handsomely for the exclusive rights, and that's why they charge $95 a month for unreliable and slow service.
When my uncle had a heart attack, he wasn't in a position to shop ambulances, emergency departments, surgeons, cardiologists or anesthesiologists. As with internet providers, emergency healthcare is not a competitive market, and that's reflected in extortionate pricing.
It seems like reducing consumer harm should be the primary objective of regulators.
> It seems like reducing consumer harm should be the primary objective of regulators.
You're not wrong, but the definition of "consumer harm" used in practice hinges on short-termism and is price-centered right now. "This won't raise prices...for now, at least" is, by itself, an alarmingly strong argument in this arena, irrespective of market health or sustainability of competition.
The Biden administration has made some steps to counter that, we'll see if it's really a thing.
Personally I’d love it if companies like Comcast, AT&T, Wells Fargo, BofA, et. al would need to compete enough that they stop being extractive and manipulative assholes at a minimum. Or at least stop being periodic criminal enterprises. Perhaps even fair and honest market participants?
Has anyone who ever suggests Starlink as the solution to any given fixed-line ISP problem ever actually used the service in a range of typical homes for a meaningful amount of time?
I have the latest dish model, live on a one acre property with a relatively large clearing, and I still struggle with the extremely wide field of view of the clear sky (no trees, hills or other occluding items) which it needs - I simply can’t get 24hrs of uninterrupted service, and performance is extremely variable. This is even after mounting it some 25ft in the air to reduce occlusion issues as much as possible. Starlink needs an unobstructed view right down to surprisingly low on the horizon for 24 hours of solid service, which many, many homes simply won’t be able to provide.
Starlink is incredible for what it is, but it’s not magic and becomes very hard to use reliably in urban areas at least with the current dishes and tech stack they are using. In many urban neighbourhoods it will be close to impossible to get a reliable 24 hrs of service unless you can knock down your neighbours homes and trees too.
Starlink is best used in situations where there are almost no other options, or as a backup connection to another more reliable one, for most people. It is not a great replacement for almost any fixed line service, if you have that option. Perhaps this changes in future, but people should stop just suggesting starlink in its current form as the panacea to all ISP problems.
Occlusion appears to be the single biggest enemy of starlink, and it’s super easily occluded - so much so, the app helps you measure/approximate the occlusion in your intended use space via your phones cameras before you buy.
In my testing about four months ago, Starlink had between one and seven outages per day lasting more than 10 minutes each. It was not reliable, and it's even more costly than the local monopoly.
My reply wasn't asking for help to find an internet service provider. There are actual monopolists extracting monopoly rents right this minute. They're causing genuine consumer harm right now, so stopping this harm should be the priority of regulators.
Where there is no ability to access competitive offerings, these actual monopolists are a different league of economic pathology from markets where consumers can access competition by clicking around in their browsers.
Yes, Doctorow's article talks in the end about the exceptional nature of universal computing which means that competition is always an option.
But yours isn't a hard case of monopoly either, the main thing preventing you from creating a competing ISP is your local laws, which are failing antitrust to the point one wonders how they ever came to be ?!?
(We also shouldn't discount the importance of network effects.)
It’s unreliable with cloud coverage, adds latency, and may not match bandwidth with good offerings (for example my uncapped 1GBPS symmetric fiber for $60/mo thru Sonic). It also is run by Musk which can be a turnoff for many.
I'm using Starlink in Nebraska. It is reliable with cloud coverage. I have only lost connectivity for 5-10 minutes during the fiercest part of the worst thunderstorms.
Latency. Bandwidth. The critical components of a network connection.
You couldn’t get me to put up with 5G latencies because I play multiplayer video games and you couldn’t get me to put up with 5G bandwidth because I need to ship hundreds-of-gigabytes video files around and I’m not putting up with sub-gigabit upload speeds.
While discussion is specifically about the USA, it's worth noting that for each of these two problems, there exist plenty of places in the world that don't have one or even both of them.
Was really glad the article you linked mentioned Robert Bork, because it's important to realize (a) this shift to the consumer-welfare standard is relatively new in US jurisprudence, like since the late 70s, and (b) if you consider, like I do, that Robert Bork was a Grade-A Turd for numerous reasons (can start by looking into the Saturday Night Massacre), you can see how this reading of the law is well in-tune with lots of other shitty ideas from Bork.
The theory that consumer harm is the only reasonable basis for government intervention in monopolies seems pretty silly on its face, since many cases of customer harm would be impossible to predict because the counterfactual is by definition unknowable. The whole point (according to Textbook Free Market Econ 101) is that competitors would try to find new ways of producing existing things for cheaper and producing new things that are better than existing things.
It's well known that the consumer welfare focus only started in the late 70s, thanks in big part to Robert Bork's (the one whose SCOTUS nomination famously failed) "The Antitrust Paradox".
this is silly. antitrust came from the Standard Oil days. the name itself is in reference to Standard's novel approach of using a trust as the root of its organizational hierarchy. notoriously, Standard Oil dominated the market by vertically integrating for efficiency, and then telling any competitor in the geographical area they were about to expand into "either merge with us on really shitty terms, or we'll sell at-cost until we kill your business (because at-cost for us is in-the-red for you)."
Standard Oil would be labeled "pro consumer" by today's crowd: cheap prices, and highly standardized products that you could rely on wherever you travel (like McDonald's or Starbucks is today). the notion that antitrust can be boiled down to "consumer harm" is new. the history isn't vague, and thereby neither is the "theory". the legislation, i'm not sure about, but since it's rooted in those two things and vagaries are easily cleared up by consulting the former.
If this were an HFT algo, there would absolutely be an investigation by the SEC. You cannot place orders with the intent to artificially manipulate the price. This is obviously not a regulated exchange, but the end result is similar, so I understand why it is an issue.
This isn't HFT, and Amazon isn't placing any orders. Going "I'm gonna lower my prices so competitors have to do it too to remain competitive" is not illegal iirc, and I don't think it should it be.
Loss leader pricing when used to force other businesses to close is quite illegal in the US[1] - when used for other reasons the legality varies on a state by state basis in the US... it is illegal in quite a few places. I'm not particularly familiar with international laws here.
Because Amazon is using AWS to literally carry every division they have. I don't think retail has ever been profitable for them, happy to be proven wrong; but some of their newer ventures in hardware: Alexa, Kindle, Fire TV, Ring, and Echo have all been losers. If each were normal companies they would all likely be going out of business, bankrupted, or chopped up for parts for PE.
It's no different than Google using ads to subsidize failing ventures in order to gain market share.
I think "literally carry every division they have" is incorrect; on a margins basis, Ads are significantly more performant than AWS, although AWS wins on volume of profits and still has great margins.
Beyond that, I don't think this kind of analysis is meaningful because it fails to account for second order effects. For example, even if retail is breakeven on a net basis, it still subsidizes a gigantic fleet of machines used to power retail from which AWS came from. Negotiating in bulk to build data centers with a significantly larger internal customers leads to better unit economics for the AWS side of the build out even if retail is break even on a first order basis or even has losses. The same argument can be made for ads as well. Amazon is great at monetizing infrastructure /because/ they can sell not just significant volumes of the end product, but and the infrastructure used to deliver it.
I think you could make the same argument for Google, which is that technically, they should be able to use the second order effects of assets they've needed to put together to run search and ads to sell better infrastructure. Theoretically, this should mean that GCP is king, but it doesn't. I'm not sure there's an obvious answer to this question, or even a great clue behind first mover advantage AWS had in cloud.
It is certainly my gut feeling that Amazon is evil as hell but I think that I'd really like to see an actual investigation by folks who study this stuff to know whether Amazon was using their pricing predatorily or not. People, especially executives, are dumb - there's bound to be an email somewhere about John congratulating Fred about managing to shut down Plug's Stuff Hut a small family business if that was the intent and these actions were being made to accomplish this goal.
However, I thing that your last point is not relevant. What-about-ism has no place in the law or it necessarily creates a slippery slope. If Google is also able to do this and purposefully did it in a predatory manner to accomplish a market advantage they both need to be legally pursued - and GCP not succeeding doesn't necessarily mean that Google didn't try underhanded actions to get it to succeed - it either means those actions weren't enough or they were incompetent (but still malicious). Either way each case needs to be judged on its own.
It’s called predatory pricing. Pricing products to eliminate competition is illegal.
If you sell Widgets and Sprockets, but you have a competitor that only sells Widgets, you can price of your Widgets so low (on 1-2% margins, for example) that the competitor is unable to compete and goes out of business because you can use Sprocket sales to keep your company in business during that time.
Now that the other company is out of business, the price of your Widgets doesn’t matter because you no longer have competition in the market. You’re getting 100% of the potential sales and despite selling on a lower margin, you’re sales volume is now way up making those margins acceptable.
You don’t have to worry about making a better Widget, or improving the Widget making process, because you have no competition. And you’ve priced yours so low, no other company can come in and attempt to enter the market because they can’t compete at your volume and margins.
If there’s a high-demand material needed to make a Widget, you can put pressure on the producer to lower material prices since you are now their primary customer, or purchase the company that produces it and prevent access to the material.
Predatory pricing consolidates market control and can be used to prevent access to the market. Anti-trust laws were designed to prevent this.
> Now that the other company is out of business, the price of your Widgets doesn’t matter because you no longer have competition in the market. You’re getting 100% of the potential sales and despite selling on a lower margin, you’re sales volume is now way up making those margins acceptable.
Please don't re-define words. This is not what's normally called predatory pricing. Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition. The thing you are describing is nothing more than having a low margin strategy.
Is every dropshipper undermining brand-name (high-margin) apparel?
> Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition.
Why would you raise prices after? That would just invite competition again. Keep the prices low and competitors away. Maybe raise them to at-cost, but if your Widgets can comfortably cover the cost, then there is no reason to raise prices.
> Why would you raise prices after? That would just invite competition again. Keep the prices low and competitors away.
The assumption of predatory pricing is that it's not easy for a competitor to just show up. Supply chains would be destroyed, capital equipment scrapped, etc and replacing them would be time consuming and expensive.
Sometimes that's a reasonable assumption to make, sometimes it's not. Even if the assumptions are unreasonable, many CEOs won't let mere reason stand in their way.
> Maybe raise them to at-cost, but if your Widgets can comfortably cover the cost, then there is no reason to raise prices.
So, the Widget-making capital would just sit there producing 0 ROI? Someone's gonna object to that. A company pursues market dominance to make money.
Haha. That’s a short-sighted strategy if I ever heard it. Why would you play a long-game like this to play a dumb short-game at the end? No, what you do is make it so you can no longer buy “just Widgets” you can still get your cheap Widgets through us, but you can only get them buy buying a Sprocket & Widget bundle. We are so sure you’ll love our Sprockets too!
Nobody can compete with you on the price and it is clear you can unbundle your Widgets from your Sprockets at any time if you ever feel threatened.
Price collusion, however, is. The goal of price discovery is to find the price that the market will bear; it is not to find the price that your so-called competitors will agree to match.
>> Collusion requires the other party to be in on it.
The other party is being tested for cooperation. Amazon raises the price and then reverts if competitors don't follow suit. They didn't revert after seeing sales drop or something, it sounds like they reverted based on a lack of "cooperation" from competitors.
This is tricky stuff to define wrong doing. What if a company wants to see the going rate for a product and just looks to Amazon to get an idea? You know, because a lot of people will shop at Amazon by default unless there is a reason not to, like saving a bit of money. These kind of algorithms become anti-consumer the more they get automated, but they may seem reasonable on the surface or in isolation.
If two algorithms are fine in isolation, but when used together cause overall market prices to rise what should we think of that? In the above example, Amazon would raise their price and the competitor would follow but not quite to the level of Amazon. Then if markets really are competitive (and fast) someone else may step in at a lower price than either, but I don't believe a lot of markets are fast or efficient when it comes to lowering prices.
That's not collusion. Collusion requires a secret agreement between two parties to defraud a third party. One party unilaterally deciding to copy another party, regardless of the end affect, is not collusion. Causing market prices to rise is not illegal, so long as you don't do something illegal to cause them to rise.
Now it's possible that there was some separate agreement, for example Amazon and a competitor may have both agreed to raise a price some percentage and then they made small adjustments to look like it was just an automatic response. But the fact that algorithm seems to have accidentally lowered prices on some occasions would seem to suggest it genuinely was acting unilaterally. Or perhaps those failures were a deliberate part of a larger ruse. Ultimately it will be for a jury to decide but the FTC has its work cut out for them.
Sending a signal and waiting for a reply is communication. An agreement doesn't have to be written, or even spoken. Amazon colluded by effectively using the price as a carrier signal.
But it isn't secret communication, which is the necessary requirement for collusion. An agreement doesn't have to be written or even spoken, but the FTC does have to prove that a secret agreement exists, which is really hard to do without a written or spoken record.
> The goal of price discovery is to find the price that the market will bear; it is not to find the price that your so-called competitors will agree to match.
I'm sorry, huh?
Who exactly do you think is participating in this "market"?
Under what conditions should a business be allowed to change their prices?
I'm OK with a computer making the pricing decision, but like HFT it's the frequency that leads to problems. It's a bit sad that the "free market" has to be regulated like this, but beautiful theories break down when you get to the quantum level.
If I place a ton of buy orders just off the top of the book, without the intent to actually buy, other market makers and algos WILL react to the new weighted midprice and raise their offers. This is basic market microstructure supply and demand; if I signal I want to buy A LOT of something, others will raise their prices. When the price gets high enough, I cancel the buy orders and sell at a higher price. This is illegal.
>> In instances where competitors didn’t raise their prices to Amazon’s level, the algorithm—which is no longer in use—automatically returned the item to its normal price point.
This is a form of automated collusion. I'll raise my price and if my competitors don't follow suit I will lower it again. It only works well for them if the competitors are watching prices too and looking for an opportunity to raise theirs. You know it's anti-consumer because of the conditional reversion after watching competitors prices not following.
I have a feeling there is currently a LOT of this going on across all industries in the US. We've seen it rent pricing software, now Amazon, and I think fast food and restaurants are dojng something similar. Food has gotten obscenely expensive expensive outside a grocery store.
>Raising prices then checking if so-called "competitors" follow is the illegal part - that's automated collusion, definitively illegal.
This is completely false.
Collusion, legally, requires an agreement between competitors. Tacit collusion is *not* illegal, see Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp. (1993).
Amazon can raise and lower their prices all day, algorithmically or not, as long as they aren't calling up their competitors and telling them to raise their prices too.
Do you think two neighborhood convenience stores are also automatically colluding when they look across the street from one another and raise and low gas prices to match?
That entirely depends on the stores and their ownership.
It is not unkown for 'competitors' to stage cost cutting dramas and pantomine competitive pricing in order to create artifical demand and customer loyalty to either or both scrappy underdogs.
By that reasoning no one could lower prices, which is ludicrous. How about showing the lowering was followed by the harm, instead of dreaming of a world where the prices are already raised?
Every producer lowers prices trying to kill competition. It's a major reason to lower prices, and lowering prices to kill competition is how goods over time become cheaper.
I think you misunderstand the reasons prices actually become lower for many goods over time. Or why some producers get replaced over time by more efficient producers. Without this process there's be no lower prices or more efficient production over time.
Yes, making the fallacy of picking extreme cases and applying it to every case will get you the result you want.
The proper way to asses things is not to post select evidence, but to pick every example of price lowering at a given time, and see how many become the situation you now describe. So, care to tell us what percent of price lowering incidents end up as extreme? I'd guess well under 1 in a million, but I may be off an order of magnitude in either direction.
By your reasoning, every time a person enters my house I should inform them they may kill me, since once in a while a person does enter a house, then kill the occupant.
However, I'd be a nut to act this way. Because the vast majority of cases does not end up in murder.
So, just like that, bringing up extreme cases for normal actions is also fear mongering nonsense. Yes, this could end up tis way. They could use this as a leverage point to take over the entire planet, enslave all humans, and turn us into Matrix-human-batteries. But continuing to harp on this as if any of it is likely is statistically unwarranted.
So, please answer - what fraction of price lowering events do you think ends up
in the situation you keep implying this might be an example of?
Amazon 2022 revenue ~343B, of which ~100B is AWS. Walmart revenue ~600B. And that's just one Amazon competitor. Looking at the top 10, Amazon has less than 20% of US retail sales. And there's a long list of retailers past that....
And once you look global, there's plenty more 100B+ revenue retailers, many of which also sell in the US.
I hardly think there is even close to an "absence of competition." Heck, Amazon is not even the biggest US retailer by a large margin. Each of these posts is full of fear and implications the evidence and statistics show to be unfounded.
I read that differently. Ie "project Nessie raised prices. One place where this was especially impactful was when a competitor temporarily lowered prices forcing Amazon to match, Nessie got them back up quickly"
And amusingly, I read it as "assume 3 parties, Amazon, Target, Y. Target has a sale, so Amazon price matches sale. Y was price matching Amazon. Target ends sale, but Amazon and Y have stuck each other on the lower price."
That is, it makes it sound like Nessie was intended to bust some broken price matching logic that would allow other competitors to stick Amazon at lower prices due to interactions with other parties.
Amazon's price-matching algorithm does nefarious things.
I'd argue that the 'lower prices' just let amazon disperse the cost of markdowns across all of the vendors. Meaning Amazon still benefits from the lower pricing because they get possibly extra sales but only absorb the cost on 'their' products which were still matched to their 'competition' who were stuck matching Amazon.
This is straight out of FTC Chairwoman Lina Khan’s original article Amazon’s Antitrust Paradox https://www.yalelawjournal.org/note/amazons-antitrust-parado.... Amazon is willing to match any competitor’s price in order to build market share while not triggering predatory pricing antitrust review (which did not consider network effects). But the price is low only as long as the competitor is there. When small competitors finally give up (since they cannot offer the same free shipping variety as Amazon) and drop out of the market, Amazon will raise the price in the long run and capture monopolistic profits. Repeat for each new market that they compete in.
Well what is your definition of monopoly? Amazon, like other big tech, like to use their highly profitable BUs (Amazon AWS, Google ads, Meta ads) to prop up other failing BUs. This is extremely anti competitive.
We should not be shepherding a new tech baron era, but enforce competition in markets. Competition should be the highest thing we value in an economy. This experiment of consolidations, mergers, and acquisitions since the 80s has been disastrous. We're reaching the point where we should break up nearly every multinational conglomerate, they've abused too much and suffered too little.
Amazon is certainly leveraging anti-competitive power here, but I think your justification is wildly off-track. Our goal shouldn't be to force FAANG into a frenzy where they constantly depose one-another, but to stimulate the market for competitive growth. Making companies less-certain about new or novel releases would be the worst way to do that.
Some of the world's most innovative products were designed by subsidized Business Units. The original Mac Lisa wouldn't have been developed if it wasn't propped-up by the success of the wildly-popular Apple II/IIc. Even though it failed, there's not a single nerd on either side of the Apple row that would call that anticompetitive or a mistaken product.
Not just that amzn algorithmically finds the optimal market clearing price.
They may be finding an optimal dumping price to reduce competition and then an optimal profit maximizing price to capture monopoly profits.
If true, this would be a clear violation of anti trust law, despite being algorithmically implemented at scale. Unclear if intentionality matters for the law - even if the algorithms learned this behavior implicitly as the solution to a legal objective, it could be illegal.
Normally I'm the first one out the gate to remind people that the legal standard in the US for monopoly isn't size or impact on competition but consumer harm... Amazon could strangle all alternative product channels, but if they do so by legitimately finding a breakthrough that delivers product to people with 10x efficiency, that's (a) not actionable in the US and (b) great news, system works as intended, A++ would let winner win again.
... but in this case? Amazon has massive access to otherwise-secret price knowledge that they require sellers provide to participate in the marketplace. More than people realize and more than is shown in the UI (I did some work for a company that specialized in providing that data).
If they used it to feed this algorithm, there's a real solid case that they used their unique market position to make things more expensive for no consumer benefit, and the antitrust case writes itself.
"Led competitors to raise their prices and charge customers more" is serious, yet it's glossed over. If Amazon is truly telling competitors to raise prices, that's collusion in of itself.
The rest of this is just "Amazon uses pricing algorithm."
This is common practice with 3rd party/used sellers of books. It has been going on since the early 2000's and started as an excel spreadsheet that would go out and look up a price for you, match or go a penny lower, or raise prices when there was no competition. It doesn't surprise me that Amazon did the same. Why wouldn't they do it?
My mum used todo this for Kmart back in the 90s. Each day should would goto competitors and write down their prices, report back, and the prices in kmart were adjusted.
I continue to not see the difference in this vs physical stores measuring customer behavior and adjusting their pricing. Considering also store brands, which fluctuate pricing based on those behaviors and the pricing of their competitors.
You and me both, this and the "AmazonBasics is creating cheaper copies of best selling items". That's literally what Walmart (GreatValue) or Costco (Kirkland), and basically any brick and mortar store has been doing to improve their margins in the last 50 years.
As a customer I am not harmed by this, if anything I win because the intermediate sellers between the Chinese factory that actually makes the stuff and me is replaced by Amazon who is willing to accept smaller margins.
Every time issue comes up it's abundantly clear that the complaints are due to Amazon doing a thing that's like kinda shitty but not abnormal in business mixed with a massive pool of sellers that have zero exposure to traditional retail. You don't see business like Nike making a fuss because to them Amazon is just another retail channel that has their own teams managing the relationship and the weirdness isn't that different than the other people they sell to.
But I also sympathize because I think the eternal September of people stepping into that world producing so many WTFs at the accepted state of things they harmonize is a potentially good vector to push for some change because no one else is going to do it. The people who don't get eaten alive have no motivation to upset things lest they inadvertently hurt themselves.
I guess I don't get what change is needed. Most of these Amazon sellers don't do any of the following:
- manufacturing
- marketing / advertising
- warehousing
- shipping
So basically they have outsourced the entire value chain, and then they complain that they are losing almost all of their revenue. Well, yeah, the people doing all of the work are getting most of the money. We don't seem to think it's an issue when a manufacturer takes 50% of someone's revenue, but when a platform that handles marketing/sales/logistics takes 30% everyone acts like it's highway robbery.
These sellers remind me of the people who find out I'm a SWE and want me to work on their "brilliant idea" which they somehow think is worth something without putting in any actual work. It's not. And the fact that these sellers are able to even make a living acting as a middle man between Alibaba and Amazon at all is honestly a great deal for them.
I try not to shop at Amazon, but every time I try to just go to Target or Walmart, the prices are higher. I was looking for some probiotics and lotion just yesterday, felt that was simple enough, so I could just go to one of the two...it was $5 more (each) than on Amazon.
The Amazon products are (possibly) counterfeit. I think this is less likely at Target or WalMart (as long as you avoid the third-party sellers on WalMart's site -- not sure if Target has those).
Walmart and Target are actually much worse. Target is perhaps the worst of all, believe it or not. If a scammer creates a listing for a particular UPC, they own it within the Target system basically forever. Even if you approach Target as the legitimate brand and try to take control of the listing they refuse and then try to essentially extort you. They tell you that you can essentially “stop the bleeding” by signing up with a certain third party vendor that charges thousands a month so you can list on Target. And even if you do, that product listing still remains controlled by someone else. They wanted it to be a kind of “gold rush” where brands would run to sign up for fear of losing the ability to sell their products to third parties.
Wouldn't you just order one as the legitimate manufacturer, check if it's fake, and the sue the shit out of target and the seller for willfully selling counterfeit product after having been warned about it? I don't know about the US but in some places knowingly selling fakes is illegal.
Not saying it doesn't happen, but if this is indeed the case, what is preventing the same scammer from essentially registering all still-unregistered UPC codes to do something akin to domain squatting?
(I am not familiar with how Target online works so maybe I am missing something)
Nothing, really. But you have to actually sell the product. On Target only one person can sell an item. Only one listing for that item can exist. It goes to whoever lists first.
There is a CertAin large SaaS company that partners with retailers and sells them on this kind of bullshit. They don’t CAre. They ChArge the retailer and the seller thousands per month for their platform and technology.
> The Amazon products are (possibly) counterfeit. I think this is less likely at Target or WalMart (as long as you avoid the third-party sellers on WalMart's site -- not sure if Target has those).
Do you have any data on the number of counterfeit items? I've been an Amazon customer for 20 years now. I've never had an incident, and we order pretty much every week for basic home goods.
You're saying that people are selling counterfeit probiotics and lotion on the site now?
I've seen this counterfeit claim repeatedly on this site. While I understand Amazon intermingling inventory from different sources makes it a possibility, I've yet to see any data that it's a significant issue. Not to the extent that it warrants you telling people their lotion, which is lower priced, is counterfeit and not for numerous other reasons.
Not a ton of research on this, but there are some worrying examples:
"According to a recent lawsuit filed by tech giant Apple in October of 2016, roughly 90% of Apple chargers on Amazon, even when labeled as a genuine article, are fake" [1]
"manufacturers determined 20 of 47 items we purchased from third-party sellers on popular sites were counterfeit" [2]
Sometimes I'll pick up a cheap SD card or two if what I actually want is just under the free shipping limit. Several and possibly even most are flaky enough that I doubt they're genuine.
It's kind of crazy to me that the manuf is consistently the most expensive place to buy things. Went to the benchmade factory store a few weeks back, there's only one. Their prices were 20% over what sportsmans warehouse a few blocks away had for the same knife.
Like someone comes all the way to your one store location and you're gouging them on price. Crazy. I didn't buy anything at the store, got the knife at the SW.
They charge even more online which is also fun. This is on $425 knives so you know there's hella headroom.
Probably they are less efficient at retail operations than a retailer, so have higher overhead. Also wouldn't want to undercut the retailers, who are providing valuable shelf space and marketing.
Which cost a lot, so they need to get the product for a lower price before reselling. Also, because they are buying wholesale, they usually have the upper hand in the negotiations. It's quite common for their contracts to be contingent to the manufacturer not selling the product at the same price point
It's not cheap to pay for inventory storage, warehouse workers, logistics, etc. When something like Amazon/Walmart/other can take on those liabilities for you, the costs come down.
Yeah, but on Amazon you can buy directly from that vendor (Nivea or Bayer for example) instead of the 3rd party sellers. Those are going to be legit, it's when you start messing with 3rd party sellers that you run into issues. I've gotten counterfeit items before but haven't had any come straight from the main vendors.
But do they commingle inventory? That's the real problem with Amazon, not that fakes are listed on the marketplace, but that you can't even trust Amazon as the seller.
According to a quick google search Walmart does not commingle inventory. However, I think they will eventually once their tech can support it. Target started commingling inventory so it is only a matter of time before Walmart does. From a logistics standpoint it makes 2-day shipping much easier since you can spread inventory out across the country.
Only buy things on Amazon that you would buy off the back of someone's truck. You have the same odds of those items being meaningfully subject to the US regulatory, consumer safety, and trademark ecosystem.
Walmart's online store is actually a marketplace, with Walmart being one of the many sellers (they also do fulfillment by Walmart).
So, if you see higher prices, it's probably an arbitrage situation. Filter down to just Walmart as the retailer, and you should get the kind of pricing you expect from Walmart, albeit with the selection you would expect from a Walmart.
That's probably exactly the phenomenon that the FTC is talking about in their complaint. Since Amazon punishes sellers who offer lower prices off of Amazon, sellers are forced to use their Amazon price as their price floor. And since Amazon has huge market share and insanely high seller fees (upwards of 40%), then prices across the entire economy go up.
Most stuff you can buy at AliExpress (or similiar), but it more conventient to have same/next day delivery and excellent customer favoring support. A lot of trash items on Amazon though, I try to not buy a lot there, it still happens.
I wonder if things like this happen because Bezos is doing other things or because Bezos has changed his mind on "Its All About the Long Term". I suspect the former and that some executive is optimizing for his personal metrics instead of the long term success of the company.
He said that in 2003 though. Amazon lived that business model for over 15-years of its life. It is now the largest online business in the world, at some point they were going to cash-in on their monopolistic position.
It seems like Amazon could take a cue from the tactics employed by very small shops and start dynamically adjusting prices per item per customer. Strategically lowering prices for some customers and raising prices for others could quickly become more profitable than worrying about the average customer. Amazon's already got their system setup like a shell game with multiple pages selling the same item via multiple sub-vendors so placing blame on Amazon would be incredibly difficult if not impossible for anyone outside of Amazon.
Artificially deflate prices across the board for some customers while artificially raising prices across the board for others. Some customers could end up paying 4x the Walmart price while others might end up paying 1/2 price - there are customers that don't care or don't pay attention to how much things cost.
Jack up prices for the big spender while slashing prices for cheapskates and offer bulk discounts to customers who will lay out more cash for single large purchases.
This would be basically impossible for Amazon to implement without painting a giant target on their back. The FTC would easily consider this deceptive/unfair pricing unless Amazon clearly discloses to the customer how the quoted prices are determined.
With black boxes being what they are, prices in a constant state of flux and the deal where amazon has several 'pages' for the exact same item with each page having maybe a dozen different prices - how would it ever be possible to determine anything about how amazon does its pricing?
Amazon binds its sellers over to something called Most Favored Nation status. That means that sellers can't offer their goods more cheaply than they do on Amazon – even if it costs them (lots) less to sell in Target or direct from their websites. This means that every time a seller adds a dollar to their Amazon sale price, they have to add a dollar to the price of their goods everywhere else, too: https://pluralistic.net/2023/04/25/greedflation/
I'm in a (paid) Discord server that notifies people when Amazon / etc. prices hit a certain discount from the mean. I got a 65' 4K HDR TV for $300, when the list price was $3000. I always assumed these were marketplace sellers fudging a number when updating a listing, but we experienced some of these "death spirals" another comment was talking about in real time. Walmart was notorious for price matching other sites and you'd be able to get some electronics for a steal for a weekend before an employee caught it. The typical fulfillment rate was around 50%, with most orders being refunded within 24 hours.
Yes, camelx3 will only scan as fast as an hour. The bots they use scan at a minute resolution. Most prices will get fixed (on amazon anyways) within 20 minutes.
