Primer: FTC Pushes Forward With Dismantling Amazon, Harming Consumers and Small Businesses:
The FTC just announced its long-awaited case against Amazon this morning, which will destroy the retailer’s popular customer-focused services.
The FTC’s case comes after years of speculation about how the FTC will need to invent radical new approaches to antitrust to attack one of the nation’s most popular businesses. Research shows the FTC’s theories will have real and dire consequences for consumers and small businesses:
Here’s what you need to know about the latest potential FTC overreach:
The FTC case invents new theories about retail and ignores the realities of modern day commerce:
Competition across retail is robust and benefiting consumers.
In a research report about retail, Rosa Abrantes-Metz and Maim Maloney of the Brattle Group found “intense” competition across retail channels. “Their responses are clearly different when they are the higher price: brick-and-mortar prices will tend to stay high, while online prices will be pulled down to lower levels. This is consistent with intense price competition both within and across retail channels.”
They concluded by stating “our findings suggest that competition among retailers and across retail channels is intense, that they respond quickly to each other’s prices and that, as a consequence, regulation affecting online commerce is expected to affect prices in brick-and-mortar stores, and vice versa. The increasing popularity of omnichannel shopping, whereby consumers mix and match online and offline components of their shopping journey, also may encourage convergence between online and offline prices.”
Project Disco noted the diversity of the marketplace, showing that increasingly, physical stores are adopting sophisticated digital practices, increasing choices and options for all. “Research shows that online stores and retail apps compete directly with brick-and-mortar retailers – for example, prices charged by brick-and-mortar retail channels tend to correspond closely to those charged online – so this entry will benefit consumers across the retail industry through lower prices and diverse venue options. Regionally, nationally, and internationally, new ad practices provide one more method to make offerings stand out to customers seeking competitive prices, choice, and convenience.”
The claim that sellers are prevented from achieving prime placement on Amazon.com is completely false – as evidenced by the sellers who succeed with Amazon every day.
“The problem for the FTC is that this allegation simply isn’t true – according to independent sellers and people who work closely with them…reVend hasn’t used FBA since 2016, nor do they advertise on Amazon, but reVend’s listings still win the Buy Box. ‘Amazon’s algorithms are secret, but it’s well known among sellers that everything at Amazon is based on only one metric – what will best serve the consumer.’”
If the FTC gets their way, they could potentially break the Amazon marketplace, which would have harmful consequences for sellers and consumers.
Adam Kovacevich of Chamber of Progress wrote the potential action could “break-up” Amazon Prime, harming consumers. “Breaking up Amazon Prime will only raise prices for consumers, end free shipping, and make it harder for them to get affordable goods.”
Similar to consumers, breaking up the online marketplace breaks a successful tool for small-to-medium-sized sellers. Bloomberg noted, “The expected allegations are similar to a 2020 report from a US House subcommittee — which counted Khan as a staff member” and that the case could seek to “restructure” Amazon – by forcing a divestiture of Amazon’s logistics.
– At the time, Amazon stated the House report could result in “forcing third-party sellers out” and that the rules would “segregate sellers into separate, less visible stores.”
– This would occur because the rules (and likely, the FTC’s case) wouldn’t apply if a company didn’t operate a marketplace with sellers.
Furthermore, the FTC’s case repeats faulty pricing claims that will result in higher prices for customers
This case is reminiscent of the DC and California Attorney’s General failed arguments against Amazon which mischaracterized Amazon’s pricing policies.The FTC also ignores the fact that other companies engage in pricing practices that would almost certainly run afoul of the standard the FTC is attempting to establish for Amazon.
– Walmart maintains pricing parity rules that will unpublish listings that are highly uncompetitive or unfairly priced, according to Walmart Seller Help. “These rules improve the relationship with customers, increase trust and over time drive better conversions for sellers.”
– Target requires that third-party sellers “price products on the Target Plus marketplace at parity with their other sales channels,” reports Brian Roizen of Feedonomics. By requiring sellers to price products at parity with other sales channels, Target will ‘remain valuable’ for customers, according to Deliverr, an online sales fulfillment company.
Amazon maintains a fair pricing policy that deters “a price on a product or service that is significantly higher than recent prices offered on or off Amazon,” details Amazon Seller Central. “In our mission to be Earth’s most customer-centric company, Amazon strives to provide our customers with the largest selection at the lowest price, and with the fastest delivery as sellers play an important role.”
The FTC’s claim that Amazon is a dominant online retailer pushing prices higher is simply not borne out by fact: data shows online prices have been falling faster than they have in the last 3.5 years. This, in turn, drives price competition across all channels.
Finally, the FTC case could break Prime, which Americans trust and love
Amazon Prime is not unique in trying to vie for consumers’ dollars by providing value. Rather than helping consumers economize, this move would help big competitors such as Costco, Shopify, and Walmart. “Such an outcome would seemingly let competitors’ have their cake and eat it too: third-party sellers would keep enjoying the benefits of Amazon’s outstanding logistics operation—prompt delivery, broad coverage, excellent customer service, etc.—while alleviating the ‘unfair’ competitive pressure Amazon exercises when it acts as a seller on the marketplace (i.e., ‘self-preferencing,’ use of nonpublic, third-party seller data, etc.).” This case is reminiscent of the anti-tech legislative push for AICOA, which has already been rejected in Congress. AICOA has lost a considerable amount of political momentum this Congress (losing five cosponsors)—partially because it was broadly unpopular when voters understood what the bill would mean for popular products like Amazon Prime.
Amazon stated that AICOA would “substantially degrade the value and quality of Prime, as many of the products sold in our store today with Prime’s one- to two-day delivery promise would be undeliverable in that time frame.”
Americans have consistently shown they love Amazon and Prime, making this push unnecessary. In a recent Morning Consult list of most trusted brands, Amazon ranked 3rd among the most trusted brands in the U.S. and 1st among tech brands.
– According to the recent Harvard/CAPS opinion poll, Amazon is the most favored institution in America, even slightly edging out the US military.
– In the Axios Harris Poll, which looks at the 100 most visible companies among American consumers, Amazon is No. 8, marking its 15th consecutive Top 10 ranking.
– In the 2023 Boston Consulting Group’s annual Most Innovative Companies report, Amazon ranks Number 3.
A reminder: when asked what tech issue voters wanted the Biden Administration to address, “Imposing restrictions on Amazon Prime” ranked in last place.