Merchants were eagerly awaiting the FTC's antitrust complaint which had taken years to prepare. Amazon traders responded positively to the news on an Amazon-run chatroom, although not all merchants agreed and some were uncertain about the ultimate result.
At the end of the day on October 27, 2021, Fred Ruckel received an automated email from Amazon notifying him that one of his most popular products, the Ripple Rug, was available for a cheaper price through an external retailer. Amazon's algorithm had detected this, which would result in Ruckel's product being removed from the website's buy box – an area that shoppers click to add it to their cart. This move would effectively deprive Ruckel of thousands of dollars in daily losses as he is the sole seller of the product on Amazon. The email, seen by CNBC, stated that the product was not competitively priced compared to the outside retailer, who had applied a discount and was selling the same product for $39.99. Yet, after shipping and taxes, the item on Chewy cost $48.54. Therefore, Ruckel's decision was to ask Chewy to increase the price of his product rather than lowering it on Amazon.
Ruckel's experience lies at the core of a major antitrust case filed against Amazon last week by the Federal Trade Commission. The complaint, spanning 172 pages, accuses the e-commerce giant of abusing its monopoly and exploiting sellers in order to increase prices and create a distorted shopping experience. According to the FTC, Amazon exercises an "anti-discounting strategy" and uses a program to track prices online to keep third-party vendors from cutting prices elsewhere. The FTC states that Amazon then threatens to take away these sellers' "buy box", which is considered an existential threat to their business. As a result, prices across the internet are deemed inflated, and the FTC is attempting to hold Amazon accountable for allegedly breaking antitrust laws. Amazon's General Counsel David Zapolsky counters this by arguing that vendors set their own prices and the company invests in tools to help them remain competitive. He further claims that should the FTC win their case, it would be opposed to the goal of antitrust law since it would stop Amazon from highlighting the lowest prices.
Several users on Amazon’s Seller Central forum voiced their approval of the FTC’s actions, while many expressed grievances about the platform's fees, suspension process, and competition. “I think it’s great, Amazon deserves it,” one user commented, adding, “More should be coming on the way.” Amazon responded to the FTC complaint with a message to sellers that nothing had changed, but sellers were unconvinced – one even likened the ordeal to “being up all night at an effing casino.” Users were divided on the issue, with some embracing the FTC’s action as “long overdue” and others defending Amazon as a “life-changing opportunity.”
Sellers who are supportive of Amazon being regulated have apprehensions about it, notably that they don't see how the FTC's picked issues would improve the consumer's and dealer's experience. Scott Needham, an Amazon seller and operator of a product-locator application for other Amazon vendors, remarked that he was "astounded by some of the points the FTC chose."
Needham told CNBC that he has been quite vocal about his disapproval of Amazon over the years and although the topics raised are interesting, it hasn't exactly been an agony for him. He further questioned why inclusion of allegations of Amazon's 'coercive' practice of encouraging sellers to use their fulfillment service, aka Fulfillment by Amazon (FBA) made it to the final argument. On the contrary, Needham maintained that many sellers are in favor of FBA because of its cost-effective two-day shipping which are more of an attraction than a demand they need to oblige. He added that the marketplace's control over sellers is indeed worth considering but he wasn't certain that the case would make much of a difference.
Amazon seller and Grill Sergeant co-founder Scott Moller said Amazon gets rid of the usual struggles with business online. Using FBA, shipping one item to Amazon's warehouse only costs $7.49 which is significantly cheaper than doing it with a traditional carrier. Additionally, he noted that they can access customer data and target ads specifically. He contested the Federal Trade Commission's (FTC) claim that Amazon search results are polluted with ads that could potentially affect shoppers' purchase decisions. Moller argued that with the right ads, sellers can precisely reach the consumers they are targeting, which is beneficial.
Needham believes if the FTC case was filed earlier, prior to the pandemic, he would have been more supportive of it. Nevertheless, he pointed out that modern e-commerce has vastly changed in the last couple of years with Shopify, Walmart, and Chinese competitors like Temu. Sellers now have more ways to reach out to their buyers and even offer them some promotions. Although Amazon still regulates most communications, there is one option available. Although he is invested in the marketplace, he doubts that the case would yield a better experience for the sellers.
Many vendors have honed in on Amazon’s pricing policies and escalating fees as valid regions of worry in the FTC's prosecution. Molson Hart, who owns Viahart which sells toys on Amazon, has been a severe critic of the tech giant’s pricing policies. Hart expressed dissatisfaction with Amazon’s seller fees and their consequences on pricing in a 2019 Medium post, and later during that year he testified before a House committee about his experiences. Hart declared Amazon sales make up around 90% of his business, which implies any decrease in those sales carried out through Amazon will have a major influence. He recounted his “24 tense hours” in September 2022 when a 3rd-party seller of his popular constructible toy Brain Flakes listed the item for a lower cost on Target than what it was offered for on Amazon.
Hart explained that when their product was eliminated from Amazon, they lost $4,000 in sales and their product became harder to find in search. Needham clarified that sellers often feel frustrated when their product is not being promoted properly, and it is at this point that Amazon has the tendency to "suppress the listing" rather than "chase down the price." Moller suggested that Amazon enforces this policy to ensure only the best deals show up on their site. Needham noted that he has seen Amazon prioritize their own listing in the buy box, even if it's slightly more expensive than other sellers with the Prime badge. This led Hart to deduce that if the FTC's lawsuit resulted in Amazon ending this policy, "it would be a good thing." Ruckel took action, cutting ties with Amazon due to the price fixing and "tremendous fees," and is now selling on other outlets including Chewy, Etsy and his own website. He anticipates a substantial financial loss this year but believes he made the right decision, as selling on Amazon was not good for his mental health.
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