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Tue May 25 2021 16:33:40

Does DC Antitrust Lawsuit against Amazon Help or Harm Sellers?

By: Ina Steiner

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Washington DC's Attorney General (AG) Karl A. Racine filed an antitrust lawsuit against Amazon, accusing the retailer of engaging in "anticompetitive practices" that he alleged "have raised prices for consumers and stifled innovation and choice across the entire online retail market."

While accusations of anti-competitive practices lobbed against Amazon aren't exactly surprising, the lawsuit is a pretty remarkable development nevertheless - although, as the Washington Post pointed out, the lawsuit was not filed in federal court. We don't know whether other state AGs will hop on DC's bandwagon.

In a tweet, the DC AG alleged that Amazon maximizes its profits at the expense of third-party sellers and consumers.

An Amazon spokesperson provided EcommerceBytes with the following statement:

"The DC Attorney General has it exactly backwards - sellers set their own prices for the products they offer in our store. Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively.  The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law." 

Below, we cover some of the allegations from Attorney General Racine's announcement and complaint (PDF format), which is worth reading if you sell on online marketplaces.

Amazon Seller Fees
The lawsuit states that Amazon's basic fee (its "referral fee") is 15% on most products, but says when adding up all fees, including the (optional) FBA (fulfillment) fees, "sellers on Amazon.com pay a 45% commission."

Amazon Polices: "Most Favored Nation"
The Attorney General alleges that Amazon's provisions and policies, which it referred to as "most favored nation" (MFN) agreements, prevent third-party sellers that offer products on Amazon.com from offering their products at lower prices or on better terms on any other online platform, including their own websites.

The AG said Amazon removed its price parity policy (PPP) in 2019 after facing "intense scrutiny from Congress and US government regulatory officials," but alleged it "quickly replaced the PPP with an effectively-identical substitute, its Fair Pricing Policy ("FPP").

"TPSs are required in the modified BSA to agree to all Amazon policies, including the FPP, which permits Amazon to impose sanctions on a TPS that offers a product for a lower price or on better terms on a competing online retail sales platform." 

(BSA stands for Business Solutions Agreement that Third Party Sellers (TPSs) sign - the Attorney General really let the acronyms (initialisms) fly in his announcement.)

Amazon Buy Box Algorithms
The lawsuit delves into how third-party sellers get exposure on Amazon through the Buy Box:

"Being awarded Amazon's Buy Box is critical for TPSs: 82% of all TPSs' sales on Amazon's platform occur through the Buy Box, and the percentage is even higher for mobile purchases. Most people searching for a product on Amazon's platform will not even see a TPS's product unless it appears in the Buy Box, putting those non-Buy-Box TPSs at a significant competitive disadvantage."

It goes on to say:

"Amazon's selection of a product for the Buy Box occurs through operation of a complex algorithm that considers a variety of factors. Notably, the Buy Box is not reserved for the best-priced product. Instead, Amazon's selection methods for the Buy Box winner consider factors that further reinforce Amazon's online retail sales market dominance. 

"For example, the Buy Box selection algorithm favors those sellers who pay Amazon for FBA over those who do not. This is true even though a seller who is not using FBA has the lower price. The Buy Box algorithm also considers whether a seller is "Prime eligible," meaning eligible for free 2-day delivery under the "Amazon Prime" program."

Amazon "Price Controls"
In his announcement of the lawsuit on Tuesday, Attorney General Racine wrote, "We filed this antitrust lawsuit to put an end to Amazon's illegal control of prices across the online retail market. We need a fair online marketplace that expands options available to District residents and promotes competition, innovation, and choice."  

And, he said, the lawsuit specifically alleges that Amazon raises prices for consumers; stifles competition in the online retail market; and deprives consumers of choice.

"With this lawsuit, OAG is seeking to end Amazon's use of illegal price agreements to foreclose competition and maintain its monopoly in online retail sales. Additionally, the lawsuit seeks to recover damages and impose penalties to deter similar conduct by Amazon and other companies."

Amazon's dominance is what has attracted scrutiny from lawmakers and regulators here and abroad. According to Racine, "Amazon is the world's largest online retailer, controlling 50-70% of the online market sales."

Does the Attorney General get it right about selling on Amazon? And will the lawsuit help or hurt online sellers?



Comments (14) | Permalink

Readers Comments

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by: COVID-19 This user has validated their user name.

Tue May 25 18:28:05 2021

Investigate eBay too, please! eBay's sh*t algorithm does many similar things to the Amazon pratices alleged by the AG.

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This user has validated their user name. by: The End

Wed May 26 07:59:05 2021

Shackle Amazon, it's time.
Then Gag it. No lobbying.
That's not a Smile on the box.
Get Hip.

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by: postbuster This user has validated their user name.

Wed May 26 08:03:36 2021

I really like to see the AG crack down on the excessive commissions that are taken from the sellers profits.

15% is far too high for starters, and all of the extra fees are a bait and switch just to sell an item.
These companies have proven constantly that they don't deserve the amounts received  just for creating a page that shows items.
After all they are merely advertisers at BEST.
There is no real service other than that.
Their broken sites and removal of features has been evidence of what sellers are to expect from management.  
So why, again, are the fees increasing?  

Like someone else has stated, 3% is the fair take for listing.
There are people out there who could make a much better site for a 3% commission and wouldn't have to pay for the high salaries that these pretentious do nothings demand.
Profits would skyrocket if they would just cut out the fat.
After all, why should sellers minimize their profits just so the management can take more?

With all of the issues from abuses and cheating money from everyone, we forget that this crap has been going on for over ten years.  TEN YEARS!!

Big commerce sites should minimize their profits first.  There is absolutely no reason that they need all of this money.  We see how they spend it, and they actually use it against the consumer. In one case, (maybe even more) they used it to harass and terrorize the Steiners.

TRUE restitution would be if these fake executives would have to pay back all of the stolen monies from the sellers.

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This user has validated their user name. by: The End

Wed May 26 08:06:28 2021

eCrater.com
It's Fat Free  :o)
Stampede on over there and set up shop in Your New Home !

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by: postbuster This user has validated their user name.

Wed May 26 08:12:08 2021

Dear The End,

"That's not a Smile on the box."

WOW!  Thanks for the laugh!
It's very true.  So sad that this is the way people are trained to think that this how business is operated.

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This user has validated their user name. by: The End

Wed May 26 08:20:24 2021

Well, we'll all be Retraining them what we won't tolerate.
Leave 'em an empty hall.

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by: postbuster This user has validated their user name.

Wed May 26 08:31:32 2021

Let this be known to the economic world, and I will repeat this to all of the corporate posers out there.

STEALING MONEY IS NOT THE SAME AS MAKING MONEY!!

You're doing nothing out there for anyone but collapsing the economy.

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This user has validated their user name. by: iheartjacksparrow

Wed May 26 11:33:29 2021

What The End stated. Go to eCrater and watch your profits rise.

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by: Chicago48 This user has validated their user name.

Thu May 27 04:54:14 2021

AMZ needs to be broken up.  I'm a Prime member and enjoy the perks, but everytime I see Bezos smirking in a photo, I cringe.  Now it's buying a movie studio.  It's just TOOOOO big.  Break it up.

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by: shut1968 This user has validated their user name.

Thu May 27 07:13:05 2021

The AG hit it on the head 100%, things he failed to mention are the constant gating of categories they've been blocking sellers from  for the past several years, removing thousands upon thousands of sellers to cut down on the competition from them.  If you allow the sales of used products on your site you should not be allowed to force sellers to provide invoices from distributors for "new" products.. they are not trying to selling new and wholesale distributors don't sell used products wholesale!!  They have blocked and removed roughly 80% of the competition against them (Amazon) by doing so.

Forcing sellers to take refunds for any reason and then forcing them to pay the return shipping fee's on top of that..   It should be the sellers choice to take returns for any reason and the buyer needs to start taking responsibility for his or her own actions...   If someone is up at 3am drunk shopping and orders a bunch of stuff that ships out the next day the BUYER should have to pay for it to be returned and pay a restocking fee that covers the funds the seller spent on packaging materials and postage to send it out.

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by: Snapped This user has validated their user name.

Thu May 27 07:36:25 2021

There needs to be a reckoning for those entities that would act to economically disadvantage their own foundation for profit.  ‘The End’ put it best - “[retrain] them what we won’t tolerate.”

This isn’t about best price.  It’s about choice.  Equal opportunity regardless of bankroll.  And it’s about free market, vice manipulated supply and demand.  And it’s about time.

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by: careerseller This user has validated their user name.

Thu May 27 09:43:38 2021

Go after them, about time, nothing more than a modern day mafia as is ebay. Amazon rose to the top on the backs of all the small sellers stupid enough to do all the work for them. Write descriptions, upload specs, unknowingly give them your product photos, then let them sit back and watch the sales data only to then use it to take the buy box and steal all the sellers work. Reminds me of the Tom Sawyer story about painting the white picket fence. He tricked all of his friends into doing his work by making it sound wonderful and even charged them for the privilege of doing the work for him and then takes all the credit. Suckers!

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by: Mark4 This user has validated their user name.

Thu May 27 13:00:15 2021

We are experiencing this. Amazon is constantly pulling down our listings stating our pricing is not "in the best interest of the buyer"  Our prices are not the highest or the lowest, right in the middle. The other game is to pull down listings citing "intellectual property rights violations", Amazon is even doing this on preowned items. Amazon tells the seller they need a letter from the original manufacturer stating one is allowed to sell their item 2nd hand. Totally illegal.  We filed a complaint with out attorney general in our state, we gave them access to our selling account so they can see first hand what is going on. Attorney General is following our account with alot of interest. Did this 6 months ago and they are not impressed. Trust me when I say more lawsuits are coming. Amazon is creating monopolies.  

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by: TomH This user has validated their user name.

Sat May 29 23:05:44 2021

I've been a Amazon 3rd party seller from near the very beginning.  Amazon's marketplace was built, with maybe books being the exception, off the backs of 3rd party sellers. I agree with just about everything written in the above entries and so will not again go through the long list of Amazon abuses the last several years.

They have become evil.  



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