The Case Against the FTC’s Amazon Antitrust Case

Time is running out for e-commerce giant Amazon as the Federal Trade Commission is reportedly preparing an antitrust lawsuit against the online retailer for being too powerful in too many areas.

This week, Policy reported that the FTC could launch a lawsuit against Amazon as early as August, which could break up the $1.3 trillion company. While the lawsuit is still being finalized, it will likely focus at least in part on Amazon’s rules that the FTC says lock in lower prices on competitors’ platforms and require sellers to use the retailer’s integrated infrastructure service, Fulfillment By Amazon, to gain preferential treatment on the platform.

Amazon currently accounts for nearly 40% of all retail e-commerce sales in the United States, according to market research firm Insider Intelligence. “This is of course a far cry from ‘monopoly’ status,” says Dan Barker, an e-commerce expert, “but theoretically the FTC is interested in organizations in the process of ‘gaining’ monopoly power through this they perceive to be inappropriate means, as well as those they believe already have monopoly power and are maintaining it unfairly.” (Amazon did not respond to fast businessrequest for comment.)

That could be concerning, the FTC seems to suggest, because of the primacy of Prime delivery services over Amazon. “The first issue was the advantage it gave you of using Amazon’s own fulfillment systems, and the disadvantage it gave you if you used another fulfillment partner,” Barker says. “As a seller, in order for your products to be available through Amazon Prime, at some point you had to use Amazon’s own fulfillment services.”

Fulfillment By Amazon is a boon for retailers because it means they don’t have to worry about holding and storing inventory, or fulfilling delivery shipments. It is convenient. But it’s also expensive, with the cut Amazon takes from every sale in its marketplace increasing beyond 50%, Marketplace Pulse analysts say, and it was something that was, at one point, needed. to be listed as Prime delivery. “If you didn’t pay Amazon to keep your products in an Amazon facility and deliver from there, a large portion of Amazon shoppers simply wouldn’t buy your product because it wasn’t available for quick and easy delivery. reliable,” says Barker.

Fulfillment By Amazon fees have risen more than 30% since 2020, according to Marketplace Pulse, whose analysts believe Amazon is essentially asking companies using its platform to pay increased first-party costs.

The company also welcomes sellers buying advertising on the platform to promote their products. “I’m not sure the general public is really aware of this, but the revenue that Amazon makes from advertising is absolutely huge, approaching $40 billion a year, or about $5 for every person on Earth,” Barker says. . “A lot of that money comes from companies that sell on Amazon by literally paying to place links to their products, or advertisements for their products, in more prominent places on the site.”

However, not everyone believes the FTC’s case against Amazon is worth pursuing, at least not just against Amazon. “Most online marketplaces have a similar policy,” said an e-commerce expert, who requested anonymity to speak freely. “It just means you end up with a pricing model based on your Amazon pricing, which you would realistically do anyway given the proportion of revenue that might come from Amazon.”

This is the standard that e-commerce platforms will prioritize those who bundle more of their services. “Chains will always reward you by using more of their services, promoting your brand in listings,” the anonymous expert says. “You get rewarded for using their ads, logistics, branding services, and signing up for Prime.”

Some also worry that the FTC’s approach to competition has changed informally. “In general, competition ethics in the United States tends to focus on the question, ‘Does this benefit the consumer?’ says Barker. “There seems to be greater leniency if the overall outcome is better for the consumer in the end. I think most would agree that, particularly for the retail side of Amazon, the company has brought enormous benefits to American consumers as a whole, and indeed to much of the world.

And Barker worries that in trying to take proactive steps to tame Amazon’s overflowing power in a space, there could be consequences. “Something that doesn’t seem to be taken into account, but could well become an issue if there is talk of breaking up Amazon, is: what is the cost to the consumer of doing this?” he says.

The anonymous e-commerce expert says any action against Amazon could have a huge impact on the aggregator space – companies that acquire and then scale existing e-commerce brands, improving customer service and quality. “These businesses are built on Amazon and basically exist on Amazon functions,” says the expert. “Any kind of big upheaval could cause them chaos in the short term.”

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