A worker sorts out parcels in the outbound dock at the Amazon fulfillment center in Eastvale, California, on Aug. 31, 2021.
Watchara Phomicinda | MediaNews Group | The Riverside Press-Enterprise via Getty Images
It was late in the day on Oct. 27, 2021, when Fred Ruckel received the dreaded automated email from Amazon.
Amazon’s software had detected that Ruckel’s popular cat toy, called the Ripple Rug, was being sold somewhere else for a cheaper price. The email read: “Below is a listing of products in your catalog which are not eligible for the Featured offer because they are priced too high compared to other retailers’ prices.”
Unbeknownst to him,
Chewy was running a discount promotion, and dropped the price of his product by a few dollars to $39.99 – less than the $43 offer on Amazon. The algorithm flagged the offer as lower, even though it cost $48.54 on Chewy after taxes and shipping. Ruckel chose the latter. Fred RuckelFred Ruckel
Nearly 3 years later, Ruckel’s experience is at the heart of a massive antitrust lawsuit against Amazon filed last week. Amazon was accused of using its monopoly to pressure merchants and hinder competitors. The agency claims that this has led to artificially high prices for consumers and a worsened shopping experience. In the 172 page lawsuit, the FTC claimed that Amazon uses an “antidiscounting” strategy and a “massive crawling apparatus” that tracks online prices constantly to stifle the competition. Amazon threatens to remove third-party sellers from the buy box when it detects lower prices. The complaint claims that losing the buy box poses an “existential risk” to the businesses of sellers. The FTC claims that these tactics result in higher prices on the internet. The company steadily hikes the fees it charges sellers and prevents them from discounting on other sites, so sellers often inflate their prices off of Amazon, creating an “artificial price floor everywhere,” according to the complaint.
The FTC is seeking to hold Amazon liable for allegedly violating anti-monopoly law, though it has not yet outlined the specific remedies it believes would best resolve its concerns. In antitrust lawsuits, the remedies are usually determined after the court has found the defendant responsible.
In an Amazon blog post, general counsel David Zapolsky stated that third-party sellers determine their own prices. Zapolsky stated that some businesses may still decide to sell on Amazon at prices they deem uncompetitive, even with the tools available. Amazon’s tense relationship with merchants has been well-documented over the years. Sellers have expressed a range of grievances about issues like rising fees, an arcane suspensions process, and increased competition on the marketplace from all sides, including the e-commerce giant. Amazon’s tense relationships with merchants have been well documented over the years. Sellers expressed a variety of grievances, such as rising fees, an arcane process for suspensions, and increased competition in the marketplace, from both sides, including Amazon. This lawsuit will not affect our relationship with you, or the way we do business today.”
One person called it “BS language,” adding that “Businesses who sell in their store are actually customers.” And which of us has gotten good customer service?”
Another user described their experience in the last 12 months of selling on Amazon as “being up all night at an effing casino but I’m stuck, the drugs are starting to wear off, but I’m trying to break even on the mortgage payment I’m using to play. That’s how it is selling on Amazon right now to me.”
The seller went on to describe the experience as a “race to the bottom.”
“It’s long overdue,” another commenter wrote. When they shut me down, i’m going to apply for a position with the FTC.”
Even sellers who may be sympathetic to the idea of regulating Amazon have concerns, specifically that the FTC’s highlighted issues aren’t necessarily ones that would make the seller and consumer experience better.
Even those sellers who are sympathetic to the idea that Amazon should be regulated have concerns. They worry that the FTC has chosen issues that may not necessarily improve the experience for both the seller and the consumer. I’ve lost sleep over some of their actions. And the issues that they brought up, while they are interesting, they haven’t created me a lot of pain.”
Needham said he was particularly puzzled by the inclusion of the claims that Amazon is coercive in the way it encourages sellers to use its fulfillment service, known as Fulfillment by Amazon, or FBA.
Needham said many sellers “love FBA” because of its compelling value in terms of the price and promise to deliver two-day shipping. FBA is not a mandatory service for many sellers, but it’s something they want to do because of the price and promise of two-day shipping. Needham stated that “I believe that Amazon’s power over sellers is significant and worth investigating.” “But I’m unsure if this will actually change that.” “I don’t need my own warehouse,” said Moller who sells grilling equipment on Amazon.com under the name Grill Sergeant. Moller also denied the FTC’s claims that Amazon is littered by ads, which are causing consumers to wade through less-relevant and lower quality products. “It’s a perfect marriage of a transaction, and that’s one of the beauties of what their marketplace offers.”
Needham said he feels he would have been more supportive of the case if it were filed a few years ago, pre-pandemic.
At that time, he said, “I would have felt, yes Amazon is a monopoly… But actually after Covid, into 2023, ecommerce has had a lot of big changes.” He added, “The competition is just not what it was in 2019. Needham stated that Shopify, Walmart, and Temu are all growing to be viable alternatives for sellers in many categories. Amazon sellers are now able to offer certain promotional offers and communicate better with their customers. Needham added that Shopify gives sellers more control of how they communicate with their customers. Amazon, however, still controls this process. Needham said, “I am a seller on the marketplace and a service provider. I have an interest in it doing well. “
Concerns over Amazon pricing policies, fees
Many sellers have cited the FTC’s lawsuit as a reason to be concerned about Amazon’s pricing policies and rising fees. “
Concerns over Amazon pricing policies, fees
Many sellers have zeroed in on Amazon’s pricing policies and rising fees as rightful areas of concern in the FTC’s lawsuit.
Molson Hart, whose company Viahart sells toys on Amazon, has been a longtime critic of Amazon’s pricing policies. Hart complained of how Amazon’s seller fees impact pricing in a 2019 Medium post and later that year testified about his experience before a House committee.
Hart said Amazon sales comprise about 90% of his business, meaning any hit those sales take on Amazon has a considerable impact.
He recalled “24 anxious hours” in September 2022 when a third-party seller of his popular construction toy Brain Flakes listed the toy for a lower price on Target than it was offered on Amazon.
Molson Hart, CEO of Viahart, an educational toy company that sells on Amazon.
Courtesy: Molson Hart
“When our product was suppressed on Amazon, we lost $4,000 worth of sales. Hart added that you will face negative consequences afterward. It’s more difficult to find your product when searching. As far as I’m concerned, when your product disappears on Amazon, it damages its search ranking. Even Needham, who wasn’t convinced of the FTC case’s direction, admitted that he has some concerns with the buy box. He said that sellers often find it frustrating if another platform listing their product, such as Walmart, offers a promotion that decreases the price more than that of the Amazon listing, and if that happens, Amazon will often “suppress the listing” rather than “chasing down the price.”
Opponents of the lawsuit, such as Moller, argue that Amazon aggressively polices prices because it only wants to show the best deals on its site. Moller, a plaintiff in the lawsuit, argues that Amazon aggressively polices prices because it only wants to show the best deals on its site. The consumer will start with Amazon and then move on to other sites. Needham stated that this was not in the best interest of the consumer. The consumer is unaware that there are other sellers on Amazon who offer better prices. Needham says that the price issue has forced him, to reduce one of his Amazon businesses which resells brand goods. He said that in some cases he would have to lower the price of the same products Amazon offers by about 10% to compete effectively, creating an “opportunity costs”. Hart is not interested in the breakup of Amazon, but said if the lawsuit results in Amazon changing their pricing policy then that would be good. Ruckel, a pet toy manufacturer, has said that he stopped selling products on Amazon last January because of what he calls “anticompetitive pricing fixing” and the “tremendous charges” charged by the company. He claimed that a newly-announced rule requiring sellers pay a’remeasurement fee’ if customers return a package with a larger box than the one it was shipped in or if the box doesn’t match the dimensions of the item listed on the product pages, drove him over the edge. Ruckel estimates that he has lost $300,000 of sales since leaving Amazon. But he continues to sell on other platforms including Chewy,
and his own website.
Despite the financial hit he expects to take this year, Ruckel said he feels he made the right decision. He said that selling on Amazon was bad for his mental health. You’re on eggshells all day long.