Amazon is indirectly causing third-party sellers to raise prices on their products if those products are listed on competing storefronts at lower prices, according to a report from Bloomberg. This is potentially anti-competitive, and it may become a central piece of evidence in the federal government’s ongoing antitrust investigations into US tech companies.
Amazon is not going so far as to openly demand its third-party sellers raise prices, according to Bloomberg. In some cases, Amazon may want the seller to lower the prices of its items on Amazon.com to match the prices on Walmart and elsewhere. Walmart also encourages its sellers to match prices across platforms. But Walmart isn’t as influential as Amazon’s Marketplace, which is the dominant online platform in the US for third-party sellers.
Amazon scans a merchant’s prices for listings on its Marketplace platform and compares them to that same merchant’s listings on other platforms, like Walmart and eBay. It then notifies the seller of the disparity and informs the business that it may lose promotional benefits — like a higher placement in search results, Prime shipping, and access to “buy now” buttons — due to the difference in price, which would lead to lower sales.
“One or more of your offers is currently ineligible for being a featured offer on the product detail page because those items are priced higher on Amazon than at other retailers,” reads one alert sent to sellers that price products differently on Amazon and Walmart.
Because of its scale, Amazon Marketplace has also become the most important retailer for online businesses, a platform most cannot do without. The result of this price-alert system has the effect of getting sellers to raise prices elsewhere, rather than risk lower revenue from Amazon, Bloomberg reports.
Amazon’s increasingly cluttered Marketplace — which now hosts more e-commerce than Amazon’s own retail business — has become more expensive for sellers over the years. Fees have gone up. Amazon now charges significant rates to advertise products to improve visibility. Those fees make it harder to lower your prices on Amazon; instead, sellers are likely to raise their prices elsewhere.
Amazon is under more scrutiny from the FTC over how it controls Marketplace sellers
Amazon used to have a policy that required price parity across marketplace platforms, instead of simply encouraging it. Amazon eliminated that policy in the EU in 2013 and removed it for US sellers in May of this year. But the price alerts appear to be having the adverse effect of keeping prices high across all platforms, rather than influencing sellers to lower them.
That may give ammunition to regulators at the Federal Trade Commission, which is currently looking into Amazon as part of a broad antitrust probe. Although the investigation has not been formally announced, The Verge reported last week that FTC lawyers and economists have begun interviewing Amazon Marketplace sellers over a deal the company struck with Apple last year. The deal, which brought Apple onto Amazon in an official capacity for the first time, had the effect of kicking off third-party refurbishers that were selling low-cost Apple products. The result has been a rise in the average cost of some Apple products sold on Amazon, which is a potential price-fixing violation that could result in antitrust action, experts say.
If Amazon has also been indirectly pressuring sellers to raise prices through its price alerts, which it began sending out to sellers in 2017, the company could come under even more scrutiny.
“Amazon works hard to keep prices low for both customers and sellers. We have very competitive fees for sellers and we make significant investments on their behalf to continually improve our store and empower their businesses,” an Amazon spokesperson told The Verge in a statement. “In our store, we feature the offer that predicts the best shopping experience for the customer based on a number of factors including price and delivery speed. Sellers have full control of their own prices both on and off Amazon, and we help them maximize their sales in our store by providing them insights on how to be the featured offer.”
In a July 18th Medium article, one affected seller points out that 98 percent of all of his online sales come from Amazon. Although the author, a toy seller named Molson Hart, could sell his products for less on his own website, he has feared doing so because it may harm his Amazon listings. Hart already spends more money every year on advertising to ensure his Amazon revenue remains strong; Amazon now takes 15 percent of every sale.
“If we sell our products for less on channels outside Amazon and Amazon detects this, our products will not appear as prominently in search and, if you do find them, they will lose their Prime check mark and with that, their sales,” Hart wrote. He now sells some products at a loss on Amazon to ensure he can maintain lower prices elsewhere. Sellers are still forbidden from trying to send customers to competing storefronts with the promise of lower prices.
Update 8/5, 5:40PM ET: Included full statement from Amazon.