Yesterday, California Attorney General Rob Bonta filed for an immediate halt to what he says is a widespread price-fixing scheme run by the largest online retailer in America, Amazon. “Amazon tells vendors what prices it wants to see to maintain its own profitability,” Bonta alleged. “Amazon can do this because it is the world’s largest, most powerful online retailer.”
His claim is that Amazon has been forcing vendors who sell on and off the platform to raise prices, and cooperating with other major online retailers to do so.
> Vendors, cowed by Amazon’s overwhelming bargaining leverage and fearing punishment, comply—agreeing to raise prices on competitors’ websites (often with the awareness and cooperation of the competing retailer) or to remove products from competing websites altogether. , and it should be immediately enjoined.
Also in the article is the claim that in 2020 82% of US household are Amazon Prime members. I admit to being surprised at that factoid. Thus I am in the minority in not being an Amazon Prime member. When I look online for a product, my go to sites are Amazon & WalMart. Most stuff I ordered is from WalMart. YMMV
I’ve wondered about this for a long time. Amazon clearly displays a “Do you know of a lower price for this item?” link, which you first think “Oh, they want to lower their price to the lowest possible” but in reality stops vendors from lowering their prices on their own sites (minus the Amazon markup & charges) because then Amazon won’t show the product at all, or move it down to page 24.
First of all, it’s Amazon’s website, so they can display products as they please. And presumably they would display products in such a way as to maximize their own profits. That’s how business works. Second of all, now that people use AI (or search engines) to buy stuff, wouldn’t the AI find the lower price, and would they order from there?
How would you remedy this? Would you place a requirement that items have to be listed in some random order? Would other sites be required to list competitor items? Would AIs (or search engines, or other ad driven stuff) be required to list things in a random order rather than in a profitable order?
Require that they remove the link. It does nothing to lower the price for consumers, it only stops suppliers from advertising or offering the same products elsewhere. If another website (for example) wanted to sell it as a loss leader, they would be free to do so. At the moment they’re really not, because they will lose the big big big distribution channel of Amazon.
It’s really the same thing as when manufacturers wouldn’t let stores offer discounts on the “Manufacturers Suggested Retail Price”, which meant no matter how hard you shopped you couldn’t find a bargain. Once the FTC stopped them from doing that, prices immediately dropped as retailers competed. Yes, competed against each other.
So you would be satisfied with this remedy? Just remove the link for customers to report lower prices. But they can continue to inspect other websites to see what the price is and adjust their product display order/highlights as necessary (to maximize profit).
Interesting comment. In the old days manufacturers had a hard time policing what each individual retailer selling their products was doing. In today’s world, different.
I guess you’d have to include in the order that Amazon couldn’t discriminate in showing products, but I can’t envision how you would do that, since it’s core to their service to show products based on price. Hmm. This would require a finer needle than the easy sledge hammer I was proposing. Good catch.
This has become a very interesting conversation! Now what about other retailers? Retailers, almost by definition, sell products made by others. And presumably they always decide which products, and how to sell them, etc based on their estimated profit. They, all retailers, want to sell a mix of products that result in what they consider the optimal profit for them.
So let’s take a supermarket for example. Supermarkets decide many things, they decide which products to carry, they decide where to place those products, does the produce go on the top shelf, the bottom shelf, or the shelves in between where consumers walking the aisles see them more readily. And they decide which products go into the sales bins at the entrance to the store (maximum visibility to the consumer) or on the endcaps (very good visibility), etc. Heck, some product manufacturers even PAY the supermarket for a good location, and some agree to handle the labor of restocking the shelves for the supermarket. Do we also need laws to stop supermarkets from putting the most profitable items (often from large powerful corporations like Unilever, P&G, Pepsico, and similar) where they are much more likely to sell in quantity than other products?
I don’t think there is any simple solution that works at many of the edge cases or even many of the regular run-of-the-mill cases. In fact, I’m not sure there is any solution at all (short of not allowing retailing and forcing all manufacturers to sell their products directly - obviously impossible in the modern world).
Actually most manufacturers now pay for shelf space, perhaps not continuously, but for special sales and promotions. It’s a very important revenue stream for stores.
But to get to your basic point: grocery stores have lots of competition in nearly every market. There are generally at least 3 or 4 competing chains, not to mention Whole Foods, Trader Joe’s, Aldi, etc. Here we have Kroger, Publix, Food City, Ingles, WalMart, IGA, and lesser locations like Fresh Market, Aldi, Trader Joe’s, Whole Foods, Target, Sprouts, Sav-A-Lot, and at least a dozen independent grocers or specialty grocery stores.
That compares quite differently than Amazon’s hold over the on-line market. The only one even marginally close is WalMart, and Amazon had 7 times the sales (and market clout.)
The remedies for anti-competitive or monopoly power in a market do not treat all comers equally; indeed that’s the point. When Microsoft was declared to have a monopoly in OS, they didn’t make Apple or IBM hew to the same standards. When Standard Oil was broken up, the few remaining independents were untouched and went on to found other gas empires like Shell, Texaco, Sunoco, and more. Of the original “Seven Sisters”, only four had roots in Standard Oil.
I posit that Amazon has inadvertently or not, accumulated such power that it now works against competition. The “do you know a lower price” stops suppliers from offering their wares without all the additional Amazon add-on fees that shoppers never see (storage, promotion, delivery, advertising, etc.) which could encourage others to offer lower prices - perhaps with slower delivery or other things consumers might choose. But now they can’t.
[Sidebar story of slotting allowances: Coke and Pepsi buy 24 weeks each of promotional slotting from major chains. That, their lawyers say, leaves “a window” so they can’t be accused of monopolizing the fizzy aisles of supermarket. That includes premium placement, of course, end caps, special displays, special pricing promotions and more. And in doing so they squeezed out many independents, who had no choice but to sell out or die: Dr Pepper, 7-Up, Hires, Canada Dry, and so on, all consolidated because they couldn’t compete with the two big dogs. It worked nicely for both big guys - and was not very unlike what Rockefeller did with Standard Oil: cutting special deals for distribution, making it harder for independent refiners to compete, and so on. In Capitalism the object is to destroy the competition. There was a time when we let that happen. There was also a time when we didn’t. Right now, you have to be pretty flagrant to get on the radar.]