FTC complaint about Amazon
Sep. 28th, 2023 02:55 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
walkitoutLinkage!
https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-sues-amazon-illegally-maintaining-monopoly-power
“Conditioning sellers’ ability to obtain “Prime” eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon’s costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon.”
SFP. It’s been around for years. [ETA: Altho to be fair, it was paused to new enrollments starting in September 2020, and is only reopening October 1, 2023. On the other hand, the _reason_ it was paused to new enrollments is because the existing enrollees were not meeting standards.] [ETA: Filing gets into the details on SFP, altho a bunch of stuff is redacted, and they say it closed to new enrollees in 2019, not 2020.][ETA: FTC asserts that Amazon isn’t letting people using SFP use independent fulfillment providers, but I don’t know what the FTC means by that. It certainly _looks_ like you could hire somebody to 3PL or 4PL your stuff for SFP, and there definitely are 3Pls and 4PLs looking to do that for people. It really does look like the lack of current access to SFP is a huge chunk of the complaint.]
“Degrading the customer experience by replacing relevant, organic search results with paid advertisements—and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their advertising purchase.”
Well, that’s a tough one to argue with. I don’t like the sponsored results either. I don’t seriously expect this thing to make it all the way through trial, but if it does, I will be very interested in hearing arguments on search result advertising on retailers. If they come up with something, can we use it to get rid of ads anywhere else, too, will be my next question. Because I would love that so much.
“Charging costly fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business. These fees range from a monthly fee sellers must pay for each item sold, to advertising fees that have become virtually necessary for sellers to do business. Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon. These fees harm not only sellers but also shoppers, who pay increased prices for thousands of products sold on or off Amazon.”
This is a really interesting one, in that it reaches pretty deep into the business itself. There is a model of retail in which the retailer buys product and then sells it, cash both ends. That’s probably the purest form of capitalism, currently probably only expressed in entirely illegal markets. But even there, a lot of times the customer facing end of the deal did not buy it from their supplier and will have to turn over quite a lot of what they get from the customer to their supplier. But in every other form of retail an ordinary customer in the United States engages with, there is some weird, complex web of who pays what how and when. Reaching into that mess via the courts is Fraught.
On balance, it looks like the story the FTC is going for is that Amazon is preventing an Amazon level competitor from forming, because the web of agreements with participants in Amazon’s marketplace limits their ability to outgrow Amazon and/or effectively sign up with a competitor and/or for a new competitor to enter.
From the complaint: “Amazon violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging. By stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance.”
To which I would respond: Jet was bought by Walmart.
Anyway. Most Favor Nation stuff is really interesting, but it isn’t a per se violation for sure. Amazon seems big enough and demonstrates enough of an inclination to engage in enforcement that it _ought_ to be possible to get a consent decree against at least some aspect of their most favored nation clauses. But people have tried. Repeatedly. Maybe it’ll work this time, and if it does, I’ll be watching to see if it is narrow or broad on Amazon, and whether it has the potential to reach beyond Amazon.
It is pretty strange to see the FTC action against Amazon that has been threatened for quite a long while is NOT an effort to expand the understanding of trust behavior to include actions that benefit customers but harm the sellers or the seller ecosystem or industry/industries as a whole or whatever. I also do sort of wonder what the imagined outcome would be of forcing Amazon to stop it with the sponsored results.
My husband remarked that if the most favored nation stuff went away, there’d immediately be a ton of browser plugins to help you find the cheapest price. And I was like, dude, there already are. But I also got to thinking of what happened with airlines in the world of expedia and so forth. I wound up just picking my top 2-3 tolerable airlines and shopping on their websites directly and always paying to pick my seats and often to have checked luggage (altho not this year!). I got so tired of working through the process and then seeing all the last minute fees make the seemingly cheap flight more expensive than the “expensive” one on the airlines website.
I’m happy to see that this FTC action is not trying to break Prime. If they go after Prime as somehow an illegal, trust like behavior, I will be complaining. But they are not. They are acting like limiting access to Prime is somehow an illegal, trust like behavior. Sounds like they are showing at least a degree of sensitivity to what the customers / voters actually want.
ETA:
OK, 413 is really interesting, because they point out ASB contractual pricing issues. That’s _amazing_ in so many ways, because ASB is a big component of the Keep the Brands Happy strategy / deal with fakes, pirated goods, etc. Most of the time, if ASB price is a bone of contention, Amazon is trying to make the third party seller _reduce_ the price. And yet here, the FTC is saying ASB pricing rules are a component of Amazon engaging in trust like behavior. I actually _agree_ that ASB pricing rules are trust like behavior, but it’s Brand driven trust behavior.
I would like to know how this turned out: https://oag.ca.gov/system/files/attachments/press-docs/2022-09-14%20California%20v.%20Amazon%20Complaint-redacted.pdf
It’s a lot of the same rationale — by telling sellers that they cannot sell for cheaper elsewhere, Amazon is controlling pricing everywhere.
https://oag.ca.gov/news/press-releases/attorney-general-bonta-issues-statement-supporting-ftc’s-lawsuit-against-amazon
Looks like the trial date in California is 2026. Most recent news seems to be Amazon NOT getting its request for dismissal.
https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-sues-amazon-illegally-maintaining-monopoly-power
“Conditioning sellers’ ability to obtain “Prime” eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon’s costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon.”
SFP. It’s been around for years. [ETA: Altho to be fair, it was paused to new enrollments starting in September 2020, and is only reopening October 1, 2023. On the other hand, the _reason_ it was paused to new enrollments is because the existing enrollees were not meeting standards.] [ETA: Filing gets into the details on SFP, altho a bunch of stuff is redacted, and they say it closed to new enrollees in 2019, not 2020.][ETA: FTC asserts that Amazon isn’t letting people using SFP use independent fulfillment providers, but I don’t know what the FTC means by that. It certainly _looks_ like you could hire somebody to 3PL or 4PL your stuff for SFP, and there definitely are 3Pls and 4PLs looking to do that for people. It really does look like the lack of current access to SFP is a huge chunk of the complaint.]
“Degrading the customer experience by replacing relevant, organic search results with paid advertisements—and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their advertising purchase.”
Well, that’s a tough one to argue with. I don’t like the sponsored results either. I don’t seriously expect this thing to make it all the way through trial, but if it does, I will be very interested in hearing arguments on search result advertising on retailers. If they come up with something, can we use it to get rid of ads anywhere else, too, will be my next question. Because I would love that so much.
“Charging costly fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business. These fees range from a monthly fee sellers must pay for each item sold, to advertising fees that have become virtually necessary for sellers to do business. Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon. These fees harm not only sellers but also shoppers, who pay increased prices for thousands of products sold on or off Amazon.”
This is a really interesting one, in that it reaches pretty deep into the business itself. There is a model of retail in which the retailer buys product and then sells it, cash both ends. That’s probably the purest form of capitalism, currently probably only expressed in entirely illegal markets. But even there, a lot of times the customer facing end of the deal did not buy it from their supplier and will have to turn over quite a lot of what they get from the customer to their supplier. But in every other form of retail an ordinary customer in the United States engages with, there is some weird, complex web of who pays what how and when. Reaching into that mess via the courts is Fraught.
On balance, it looks like the story the FTC is going for is that Amazon is preventing an Amazon level competitor from forming, because the web of agreements with participants in Amazon’s marketplace limits their ability to outgrow Amazon and/or effectively sign up with a competitor and/or for a new competitor to enter.
From the complaint: “Amazon violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging. By stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance.”
To which I would respond: Jet was bought by Walmart.
Anyway. Most Favor Nation stuff is really interesting, but it isn’t a per se violation for sure. Amazon seems big enough and demonstrates enough of an inclination to engage in enforcement that it _ought_ to be possible to get a consent decree against at least some aspect of their most favored nation clauses. But people have tried. Repeatedly. Maybe it’ll work this time, and if it does, I’ll be watching to see if it is narrow or broad on Amazon, and whether it has the potential to reach beyond Amazon.
It is pretty strange to see the FTC action against Amazon that has been threatened for quite a long while is NOT an effort to expand the understanding of trust behavior to include actions that benefit customers but harm the sellers or the seller ecosystem or industry/industries as a whole or whatever. I also do sort of wonder what the imagined outcome would be of forcing Amazon to stop it with the sponsored results.
My husband remarked that if the most favored nation stuff went away, there’d immediately be a ton of browser plugins to help you find the cheapest price. And I was like, dude, there already are. But I also got to thinking of what happened with airlines in the world of expedia and so forth. I wound up just picking my top 2-3 tolerable airlines and shopping on their websites directly and always paying to pick my seats and often to have checked luggage (altho not this year!). I got so tired of working through the process and then seeing all the last minute fees make the seemingly cheap flight more expensive than the “expensive” one on the airlines website.
I’m happy to see that this FTC action is not trying to break Prime. If they go after Prime as somehow an illegal, trust like behavior, I will be complaining. But they are not. They are acting like limiting access to Prime is somehow an illegal, trust like behavior. Sounds like they are showing at least a degree of sensitivity to what the customers / voters actually want.
ETA:
OK, 413 is really interesting, because they point out ASB contractual pricing issues. That’s _amazing_ in so many ways, because ASB is a big component of the Keep the Brands Happy strategy / deal with fakes, pirated goods, etc. Most of the time, if ASB price is a bone of contention, Amazon is trying to make the third party seller _reduce_ the price. And yet here, the FTC is saying ASB pricing rules are a component of Amazon engaging in trust like behavior. I actually _agree_ that ASB pricing rules are trust like behavior, but it’s Brand driven trust behavior.
I would like to know how this turned out: https://oag.ca.gov/system/files/attachments/press-docs/2022-09-14%20California%20v.%20Amazon%20Complaint-redacted.pdf
It’s a lot of the same rationale — by telling sellers that they cannot sell for cheaper elsewhere, Amazon is controlling pricing everywhere.
https://oag.ca.gov/news/press-releases/attorney-general-bonta-issues-statement-supporting-ftc’s-lawsuit-against-amazon
Looks like the trial date in California is 2026. Most recent news seems to be Amazon NOT getting its request for dismissal.