The US Federal Trade Commission (FTC) and 17 states sued Amazon on Tuesday, a highly anticipated legal action, accusing the company of using illegal tactics to control online shopping to neutralize competition and raise prices for consumers and costs for sellers.
Amazon declared that will challenge the lawsuit, which it claims misinterprets how the retail industry works and how its policies benefit consumers and sellers.
The FTC focused on two practices by which Amazon violates the law:
Amazon controls competitors’ prices
The FTC denounced that Amazon controls the prices of its competitors and, in practice, increases them to consumers. It noted that Amazon discouraged third-party sellers on its site from offering discounts on other websites by controlling a key piece of online space, an area on its site known as the “Buy Box” or “Featured Offer.” Spanish. This area of a product page invites users to “Add to Cart” or “Buy Now,” and is one of the main drivers of sales.
Amazon wants to offer competitive prices, so it searches the internet to make sure products are not available at a lower price elsewhere.
“If our customers trust that they will only see competitive prices in our store, they will return more often,” explained at a conference last year Varun Soni, director of Amazon’s seller pricing team. Soni stated that a price “is not considered competitive even if it is just a penny above what big-name retailers outside of Amazon offer.”
If a product is offered for less on another site, Amazon removes the Featured Offer buttons for that seller on its site and replaces them with a less attractive design.
“Removing a seller from the Featured Offer causes that seller’s sales to ‘declin’, as Amazon recognizes internally,” the complaint states.
The FTC mentioned in its lawsuit that selling on Amazon is so important to sellers that they withdraw discounts on other sites in order to recover the Featured Offer on Amazon. The FTC adds that this practice raises prices for consumers and makes it more difficult for other sites to compete on price.
Amazon argued that it did not want to promote bad deals to its customers and that if it had to change its policies, “we would have to stop doing many of the things we do to offer and emphasize low prices.”
Amazon coerces sellers with Prime delivery option
The FTC also said that Amazon coerces sellers to use its vast fulfillment and delivery services if they want to succeed, raising prices for customers and blocking competition.
The commission states that the use of Amazon’s distribution services is a condition for a product to be shipped quickly and free of charge to customers subscribed to Amazon’s Prime membership program.
These products carry the “Prime” logo and are easier to find on the Amazon website. “The Prime designation makes sellers’ products easier to find and, therefore, more likely to be purchased,” the FTC said.
It is estimated that 170 million Americans They are Prime members, so Fulfillment by Amazon services are essential, according to demand.
The FTC said that some sellers prefer to have a single logistics network for all their online orders, both on and off Amazon, and that operating different sets of operations can be costly and make it more difficult to sell elsewhere. He also claimed that Amazon prevents other warehousing and distribution service providers from acquiring enough scale to compete.
Amazon says its fulfillment services are optional and cost on average 30 percent less than standard services offered by other providers. Sellers can choose not to use them, and many do so by turning to other providers.
According to the FTC, pricing policies and compliance requirements reinforce each other, deterring sellers from offering products at low prices elsewhere.
Karen Weise writes about technology and lives in Seattle. Her coverage focuses on Amazon and Microsoft, two of the most powerful companies in the United States. More by Karen Weise