The FTC and 17 states recently sued Amazon for using its monopolistic power to the detriment of its third party sellers, competitors, and customers.
Amazon uses a number of tactics to punish its own third-party sellers who offer lower prices outside of Amazon.
According to the complaint, the sanctions Amazon levies on sellers vary and can include:
*MOUSE PRINT:
Amazon knocks these sellers out of the all important “Buy Box,” the display from which a shopper can “Add to Cart” or “Buy Now” … Nearly 98% of Amazon sales are made through the Buy Box and, as Amazon internally recognizes, eliminating a seller from the Buy Box causes that seller’s sales to “tank.”
Another form of punishment is to bury discounting sellers so far down in Amazon’s search results that they become effectively invisible.
If a competitor lowers a price, Amazon often lowers its price to the penny to instantly blunt the competitor’s advantage.
Part of its plan to keep prices high involved a covert strategy called “Project Nessie” which the FTC says resulted in Amazon pocketing more than a billion dollars from American’s pocketbooks.
*MOUSE PRINT:
Project Nessie predicted the likelihood that the online store or stores offering the lowest price for a given product would follow an Amazon price increase. Armed with these predictions, [Amazon] increased products’ prices when those price hikes were most likely to be followed [by the competitor]. After Amazon successfully induced the other online store to raise its price, Amazon continued to sell the product at the now-inflated price.
Project Nessie generated enormous profits for Amazon even though its higher prices caused Amazon’s unit sales to decrease. But in 2019 when regulators started snooping around, the company put Project Nessie on hold.
This will be a long, complicated case, and it is anyone’s guess how it turns out and if shoppers ultimately will see lower prices in the marketplace as a result of real competition.
