FTC Prepares 'the Big One,' a Major Lawsuit Targeting Amazon's Core Business (arstechnica.com) 15
An anonymous reader quotes a report from Ars Technica: The Federal Trade Commission is preparing to file a major antitrust lawsuit accusing Amazon of "leverag[ing] its power to reward online merchants that use its logistics services and punish those who don't," Bloomberg reported today. Bloomberg described the forthcoming lawsuit as "the big one," following several earlier lawsuits filed by the FTC under Chair Lina Khan. "In the coming weeks, the agency plans to file a far-reaching antitrust suit focused on Amazon's core online marketplace, according to documents reviewed by Bloomberg and three people familiar with the case," the report said. Khan may try to force Amazon to "restructure" its business. "Based on her public comments, Khan is unlikely to accept compromises from Amazon and could seek to restructure the company -- a dramatic outcome that Amazon would surely appeal," Bloomberg wrote. [...]
Third-party sellers can rely on Amazon for warehousing, shipping, and other services through the Fulfillment by Amazon (FBA) system, but it takes a big cut out of their revenue. A recent Marketplace Pulse study based on profit and loss statements from a sample of sellers found that "Amazon is pocketing more than 50 percent of sellers' revenue -- up from 40 percent five years ago," because "Amazon has increased fulfillment fees and made spending on advertising unavoidable." "According to P&Ls provided by a sample of sellers, a typical Amazon seller pays a 15 percent transaction fee (Amazon calls it a referral fee), 20-35 percent in Fulfillment by Amazon fees (including storage and other fees), and up to 15 percent for advertising and promotions on Amazon. The total fees vary depending on the category, product price, size, weight, and the seller's business model," Marketplace Pulse wrote in February.
According to Bloomberg's article, the "FTC has amassed evidence that the company disadvantages sellers that don't use these services, and the agency is investigating an algorithm that selects merchants for the web store's coveted 'Buy Box,' where consumers can add products to their cart with one click." "The expected allegations are similar to a 2020 report from a US House subcommittee -- which counted Khan as a staff member -- and overlap with a European antitrust case that charged Amazon with rewarding sellers that use its fulfillment services and using merchants' sales data to boost its own retail business," Bloomberg wrote. Amazon agreed to a settlement with the EU in December 2022. The FTC's current investigation began two years before Khan became chair. "Amazon received the initial investigation notice in June 2019, according to documents viewed by Bloomberg. The first request for records followed two months later," the Bloomberg article said. Upon taking charge in 2021, Khan "personally helped draft some lines of questioning for investigators" and took other actions to beef up the probe into Amazon.
Third-party sellers can rely on Amazon for warehousing, shipping, and other services through the Fulfillment by Amazon (FBA) system, but it takes a big cut out of their revenue. A recent Marketplace Pulse study based on profit and loss statements from a sample of sellers found that "Amazon is pocketing more than 50 percent of sellers' revenue -- up from 40 percent five years ago," because "Amazon has increased fulfillment fees and made spending on advertising unavoidable." "According to P&Ls provided by a sample of sellers, a typical Amazon seller pays a 15 percent transaction fee (Amazon calls it a referral fee), 20-35 percent in Fulfillment by Amazon fees (including storage and other fees), and up to 15 percent for advertising and promotions on Amazon. The total fees vary depending on the category, product price, size, weight, and the seller's business model," Marketplace Pulse wrote in February.
According to Bloomberg's article, the "FTC has amassed evidence that the company disadvantages sellers that don't use these services, and the agency is investigating an algorithm that selects merchants for the web store's coveted 'Buy Box,' where consumers can add products to their cart with one click." "The expected allegations are similar to a 2020 report from a US House subcommittee -- which counted Khan as a staff member -- and overlap with a European antitrust case that charged Amazon with rewarding sellers that use its fulfillment services and using merchants' sales data to boost its own retail business," Bloomberg wrote. Amazon agreed to a settlement with the EU in December 2022. The FTC's current investigation began two years before Khan became chair. "Amazon received the initial investigation notice in June 2019, according to documents viewed by Bloomberg. The first request for records followed two months later," the Bloomberg article said. Upon taking charge in 2021, Khan "personally helped draft some lines of questioning for investigators" and took other actions to beef up the probe into Amazon.
Amazon should be broken up (Score:2, Flamebait)
That might bring back some competition.
Re: (Score:1)
Capitalism working as designed (Score:2, Insightful)
So, their entire complaint is that if a merchant uses Amazon's fulfillment services, Amazon takes too big of a cut? Easy fix for that - don't sell through Amazon if you can't do so profitably.
Re:Capitalism working as designed (Score:5, Informative)
The complaint is that Amazon is giving an unfair advantage (higher placement in product listings, more promotion, access to 1-click ordering systems etc) to people who use Fulfilled by Amazon.
Re:Capitalism working as designed (Score:5, Insightful)
Amazon holds ~20-60% of the market share from everything from clothing to electronics.
No one can compete with that on their own except big, big, big companies like Apple.
Re: (Score:2)
If we fulfill ourselves and a customer leaves negative feedback about delivery, we are stuck with it.
But if you pay Amazon to fulfill it, they will remove any fulfillment feedback for that order - yet they will still debit your account because of the carrier's performance. You loose either way, and you have even less insight when you use Amazon fulfillment. You do get the "protection" from negative feedback.
Also their order defect rate calculation is terrible. You can have 1,0
Good. (Score:1)
My brand sells on Amazon (Score:4, Interesting)
We use Amazon FBA as it's faster, more reliable and around the same price as other 3PL options. It's also better at handling returns.
As much as I'd love to complain about Amazon, sellers using FBA offering Prime shipping offer a better customer experience than those that don't and will be a preferred choice, making them rank higher.
Oh, great (Score:2)
"Mr. Biden, there's still at least one successful business left in America, and at least one place that people can still sorta buy decently priced stuff."
"Well what are you waiting for, Smithers? Stamp it out!"
Re: (Score:2)
Oh, you mean the electric truck co in Ohio that TFG made a big deal of, that just declared bankruptcy this week?
Infrastructure requires direct public oversight. (Score:2)
And no, the incentive to maximize shareholder value does not make very large businesses run better, because past a certain scale all the easiest ways to increase profit have nothing to do with increased productivity.
12 Years on Amazon (Score:4, Interesting)
Merchant fulfilled: You should have used a better carrier! We will deduct the funds from your selling account
Amazon-fulfilled: The carrier we used was slow. We will deduct the funds from your selling account.
Funny how there are only 3 major carriers in the US to use, and we all use the same ones, but when Amazon uses them it is still your fault for not.. flying it in your personal helicopter?
Another aside, we had to stop fulfilling orders to people in the service. Believe it or not, accurate delivery scans for tracking API's aren't a priority for the military, especially in overseas bases. Could even be a security issue. Well, Amazon was going to punish us for these orders not showing final delivery, despite no customer complaints. So we had to stop sending headphones, protein powder, all sorts of stuff to our military members because Amazon cannot see the forest through the trees.
Every so often we get a product taken down until we upload paperwork from the manufacturer. But if one customer doesn't know how to connect to widgets together and complaints that it must be fake, Amazon suspends our listing because it must be counterfeit - even though it is our product AND we gave them the damn documentation previously. Losing thousands of dollars, have to cut hours for employees because Amazon support in bongobongostan cannot read.
I welcome Amazon getting spanked.
Amazon good, Khan bad (Score:2)
Amazon is the best thing that ever happened to the American consumer, and ditto for some other countries, too.
Lina Khan is against capitalism, so wants to smash any successful capitalist endeavor. That is known as communism. Fine, some people think communism is the way to go. There are many people in the US who fled, or whose families fled, communism who have a different opinion.