Review of Amazon’s pricing practices continues

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A federal judge in Seattle has denied part of Amazon’s motion to dismiss a class-action antitrust lawsuit filed 2 years ago by third-party sellers, Protocol reported Tuesday.
But on Friday, a DC Superior Court judge dismissed an antitrust lawsuit against Amazon filed last year by the DC Attorney General, according to The New York Times (via the edge).
Amazon sellers face tremendous pressure to offer low prices through the Buy Box — some excerpts from the Seattle lawsuit highlight its importance, including the following (via CourtListener.com):

– “Accepting FBA services also greatly increases the likelihood of the seller’s product being selected for the coveted Amazon Buy Box. Meanwhile, signing up sellers for FBA is a win for Amazon, which never takes the title of the third-party seller’s inventory, but enjoys stable income from its sellers, who do all the merchandising and bear the inventory risk.”

– “…the “fair price” rule penalizes merchants who sell their products at a higher price on the Amazon.com platform by removing the product from the Buy Box, suspending shipping options and terminating sales privileges.”

– “When users click the ‘Add to Cart’ button on the Amazon.com platform, they are buying from one merchant and one merchant only – the winner of the buy box. Similarly, when a user opts for the “Buy Now” button, it will also lead to the owner of the buy box. Over 90% of sales take place using the buy box. Eligibility depends on a number of factors, including the seller’s reputation, price, effectiveness, and whether the seller is selling their product at a lower price through competing retail e-commerce channels.”

The complaint also discusses the factors that lead to “winning” the Buy Box. But can regulators like the DC Attorney General really regulate tech companies like Amazon (and eBay and Google) without knowing the algorithms they use?

The Food and Drug Administration (FDA) is responsible for ensuring that foods sold in the United States are “safe, wholesome, and properly labeled,” and companies must list the ingredients in their products. Should Amazon and Google similarly be required to list the factors (“ingredients”) that go into their algorithms?

Due to the immense pressure to offer low prices in an unforgiving environment, some sellers are tempted to work together to keep prices down – a strategy the government also frowns upon.

In July, a Tennessee seller was charged with an alleged conspiracy to “suppress and eliminate competition by fixing the prices of DVDs and Blu-Ray discs sold through Amazon.” In January, the government billed 3 other Amazon sellers with price-fixing DVDs.
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