In Amazon probe, FTC fielding complaints on pricing,'buy box'

29 August 2019 00:00

Amazon's practice of penalizing sellers offering lower prices on other websites is emerging as a focus of third-party complaints in the US Federal Trade Commission's antitrust investigation of the e-commerce giant, MLex has learned.

In recent conversations and comments, the FTC has heard from third-party sellers who say Amazon makes their products less visible on the site if they offer lower prices elsewhere. Because of the high cost of selling on Amazon and its importance to merchants, prices are typically raised elsewhere, even if the cost to sell on those platforms is lower.

In an interview with MLex, toy company owner Molson Hart said he spoke on the phone for about 90 minutes with FTC officials, walking them through the way in which he believes certain Amazon policies raise prices for consumers.

Hart runs online toyseller Viahart. He published an article on Medium this month outlining his concerns about Amazon's conduct with Marketplace, its site for third-party merchants.

Hart told the FTC that if he sells a product at a lower price elsewhere, Amazon will make it more difficult for shoppers to find his toys. In practice, that means losing the "buy box," Amazon's system for prioritizing sellers of specific products. The buy-box system guides a significant portion of purchases on the platform. The buy box is shown prominently in the upper right hand corner of a product page, allowing shoppers to add the item directly to their cart.

Hart told the FTC his products will disappear from Amazon's search results if they can be found elsewhere at a lower price.

That puts him in a bind, he said. Amazon is more expensive to sell on than his own website, as well as Walmart, eBay and other retail platforms, Hart said. Yet Amazon comprises about 98 percent of his sales. So rather than lower prices on Amazon, he raises them elsewhere, Hart said.

In his Medium post, Hart cited a stuffed tiger he sells on Amazon for $150. Of that, Amazon receives about $40 in commissions and advertising fees. Hart, though, can't sell the product for $110 on his own website because he will disappear from Amazon listings, he said.

For a $15 construction toy, Amazon’s cut is even higher. After commissions, shipping, advertising and storage, Viahart is left with about 47 percent of the total price.

In 2018, Viahart's revenue totaled about $4 million, with Amazon's cut totaling $1.95 million, Hart said.

Amazon maintains that most sellers elect not to pay for advertising, while the ones that do find that it helps them boost sales.

Hart is not the only one complaining to the FTC. Scott Needham is a co-founder of BuyerBox, which manages Marketplace sales for around 200 brands. Needham has been vocal about his interest in improving Amazon's practices for consumers. He told MLex he spoke briefly with FTC officials who asked him to submit a comment in writing.

BuyerBox is number 18 on a list of Amazon Marketplace sellers compiled by Marketplace Pulse, an e-commerce intelligence service. Rankings are based on the number of reviews for each seller.

In his letter to the agency, Needham wrote that Amazon will "arbitrarily suppress the buy box if they think the offer isn't good enough on their marketplace. This has happened with 100's of our products."

And in July, John Bumstead, who sold refurbished Apple products on Amazon, spoke by phone with members of the FTC's technology task force about an agreement put in place last year by Amazon and Apple that kicked most third-party resellers of the iPhone maker's products off the e-commerce platform.

Although the focus of his conversation was the Apple-Amazon agreement, Bumstead told MLex he was asked by the FTC about his experience with the buy box. He told investigators he is a small seller and doesn’t rely on the buy box for sales.

A new website designed to solicit seller comments to the FTC has also emerged this week. “Play Fair, Amazon” links to an FTC email used to submit public comments. “We love Amazon, but marketplace sellers are not on an even playing field,” the website states.

Among the grievances listed on the site are the arbitrary rotation of the buy box between sellers of identical products at identical prices, and Amazon’s access to third-party seller data and advertising opportunities not available to others.

MLex previously reported that the FTC subpoenaed sales data from at least one third-party seller on Amazon.

"Amazon works hard to keep prices low for both customers and sellers," the company said 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.”

The FTC declined to comment.

Amazon, however, isn't the only e-commerce platform with rules against lower competing prices. Walmart “will automatically unpublish items from Walmart Marketplace if a customer would save drastically by purchasing the item on a competing website, regardless of the Seller,” according to the company’s rules for third-party merchants.

Amazon ended its policy this year of outright banning merchants from offering lower prices elsewhere. That followed similar moves in Europe and Japan..

Possible antitrust issues with the way Amazon manages product listings have been percolating for a while. The European Commission has opened a formal probe of Amazon focused primarily on how its uses data from third-party merchants, although the way the buy box is allocated to merchants is also an issue in that investigation.

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