Will antitrust legislation single out Amazon and let retail rivals slide?

Discussion
Photo: Amazon
Jun 01, 2022

Amazon.com is slamming federal legislation that would bar the company from giving preference to its products over items sold by other sellers on its site.

Brian Huseman, Amazon vice president of public policy, writes on a company blog that two nearly identical bills sponsored in the Senate by Sen. Amy Klobuchar and in the House by Rep. David Cicilline would jeopardize “two of the things American consumers love most about Amazon: the vast selection and low prices made possible by opening our store to third-party selling partners, and the promise of fast, free shipping through Amazon Prime.”

Mr. Huseman says that legislation improperly puts Amazon in the same category as Apple, Facebook, Google and Microsoft, despite its  very different business model.

He contends that Amazon, as a retailer, is more directly comparable to Costco, CVS, Target and Walmart, “all of which would be mysteriously excluded from the bill’s proposed regulations.”

Mr. Huseman says the legislation is targeted at companies with a market value of at least $550 billion but Walmart, which had annual revenues of $559 billion in 2021, is not included.

“Walmart is excluded despite also being a large retailer that allows small businesses to sell in its online marketplace. Similarly, Target, which is headquartered in Sen. Klobuchar’s home state of Minnesota, is excluded even though it too operates an online marketplace for sellers,” said Mr. Huseman.

“CVS, which is headquartered in Rep. Cicilline’s home state of Rhode Island, is excluded despite being one of the U.S.’s largest retailers, largest health insurance companies, and largest pharmacy benefit managers, all at the same time,” he added.

Mr. Huseman claims that third-party sellers using the Fulfillment by Amazon (FBA) service could be hurt by the legislation despite its intention to protect them.

“A key advantage of using FBA is that businesses can offer their products to shoppers under the Prime brand and accompanying benefits, which leads to significantly higher sales volume because so many customers prefer buying items that are eligible for Prime. Critically, using FBA allows these sellers to bypass all the work required to store, fulfill, and get products delivered to customers with the quick delivery and high degree of dependability consumers have come to expect — all at a more affordable cost than they could do on their own.”

Third parties represent about 60 percent of sales on the Amazon platform.

DISCUSSION QUESTIONS: Does Amazon unfairly give preference to products it sells versus those sold by third parties on its marketplace? Will the bills being considered in the Senate and House single out Amazon and let its retail rivals slide?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"As often as I am wary and critical of many of Amazon’s tactics, in this case I am wary of this specific regulation that would limit some of those tactics. "
"Two simple words – government overreach! If you don’t want to sell on Amazon or abide by Amazon policies, nobody is forcing you."
"...the consumer controls Amazon and there is no need for politicians to intervene by imposing their personal views."

Join the Discussion!

17 Comments on "Will antitrust legislation single out Amazon and let retail rivals slide?"


Sort by:   newest | oldest | most voted
Dion Kenney
BrainTrust
6 months 3 days ago

“If you have the facts on your side, pound the facts; if you have the law on your side, pound the law; if you have neither the facts nor the law, pound the table.” Yes, there is likely to be uneven application of the law. The rules are different depending on scale, scope, and history of behavior. And it is easy to follow the breadcrumb trail to see who is leveraging their business strengths not just for competitive advantage, but to injure competitors to the net detriment of the consumer.

Cathy Hotka
BrainTrust

The sheer volume of attack ads airing in the DC area slamming this bill made me want to read it for myself. You can too.

Scott Norris
Guest

There’s a lot of similarity between this bill and the Communications Act the FCC uses to make sure, say, Comcast doesn’t give NBC-Universal channels preferential access over their network/telecom-owner competitors. I feel we’ve covered the concept of Net Neutrality here, and had the impression that most of the commenters thought it was a good principle. (That is, if Verizon has a sponsorship deal with Safeway, they can’t throttle Kroger’s uplink speed or delay their emails.)

Cathy Hotka
BrainTrust

Good point!

Dave Bruno
BrainTrust

As often as I am wary and critical of many of Amazon’s tactics, in this case I am wary of this specific regulation that would limit some of those tactics. As long as Amazon is not in breach of contractual agreements with sellers, deceiving consumers or falsifying search results, I don’t think it is an unfair business practice to promote products Amazon sells over those sold by third parties. The practice gives them an advantage, of course, but to the victors come the spoils, and Amazon has clearly created a winning marketplace model. I suspect I may receive some criticism here for this perspective, and I welcome differing opinions that may help me better understand the issues.

Shep Hyken
BrainTrust

So let me make sure I understand this. Let’s say I owned a company and wanted to promote my products. I also allow other retailers to sell on my platform (in my store, online – it doesn’t matter). Then I’m told that I can’t promote my own products over the others I allow to participate on that platform. I own it. Don’t I get to make the rules?

I know it’s not as simple as this with Amazon, but when any other retailer or manufacturer decides they want to participate in a marketplace owned by another retailer (in this case Amazon), they have to know what they are getting into. If they don’t like that Amazon promotes certain products, they don’t have to participate in the marketplace.

DeAnn Campbell
BrainTrust

I see what you’re saying, and it makes a lot of sense. But the problem lies in the sheer scale of Amazon. Does that enormous scale smother other opportunities to the point where a vendor has no choice but to accept Amazon’s terms and its resulting profit margin? Walmart has similar clout, but doesn’t seem to impede industry development of other platforms to the same extent.

pxl
Guest
5 months 16 days ago
I agree with you in that companies should be left alone to do business the way they want to, within legal limitations. But, to echo what DeAnn Campbell has said in response here, the size of Amazon (and contextually the size of the third-party sales on its platform, which is much larger than the other marketplace-vendor sites) creates a unique consideration — is there a point in market share where a company has to be “reined in”? For example, in the EU now there are laws recognising that many small businesses depend on online marketplaces for their survival — as such it is now illegal for Amazon to arbitrarily terminate third-party seller accounts and if they do so they can, upon challenge and judgement by the courts, be forced to resume business with the account or pay compensation, almost like severance, to the account holder. This same law applies to eBay and other sites in the EU. Saying this, Amazon will likely increase third-party seller fees if they are forced to comply with this US… Read more »
Lisa Goller
BrainTrust

Lately I’ve found more third-party sellers (vs. Amazon brands) dominating search results. Digital ads and keyword-driven visibility have emerged as marketing essentials for brands selling on Amazon. I’ve had to use filters if I want Amazon Essentials or other private labels.

These bills characterize Amazon as a tech platform rather than an omnichannel mass merchant. Notably, these bills could limit consumers’ access to affordable private labels as inflation soars.

Dr. Stephen Needel
BrainTrust

Two simple words – government overreach! If you don’t want to sell on Amazon or abide by Amazon policies, nobody is forcing you.

Neil Saunders
BrainTrust

The proposed legislation is anti-freedom and anti-American. Amazon is a private business. It is entitled to use its platform in any way it chooses, including giving its own products preferential treatment. The same thing applies to Walmart, Target and any other retailer; they are all entitled to promote and give preference to their own products if they wish. Politicians have no right to interfere in this area and tell private companies how to run their operations. At the end of the day, Amazon has an extensive offer – via its own and third party products – and the consumer has the freedom to pick and choose what to buy. In this sense, the consumer controls Amazon and there is no need for politicians to intervene by imposing their personal views.

Jeff Sward
BrainTrust

Does Amazon treat third parties unfairly? You bet. Do they use data from the sales of third party products to create and advantage their own products? Yep. And have department stores and other retailers been doing the exact same thing for decades? Oh yeah. And do these third parties know exactly what’s been going on the whole time? Yep. None of which to say this is proper behavior. But singling out Amazon is ridiculous. And excluding retailers in the legislators’ home districts or state makes it all the more ridiculous. Aren’t laws supposed to try to create a level playing field?

Doug Garnett
BrainTrust

Amazon should be up against antitrust laws for its fundamental abuse of power. Unfortunately, starting in the 1970s courts began to view low prices as indicators of healthy markets (not the least true except in commodities). So we will have to single them out some other way and maybe this would work.

I searched a product yesterday and Amazon search has become a mess of their own self promotion. Their PR team better find something more believable than this argument.

Mohamed Amer, PhD
BrainTrust

Amazon is the behemoth in the space, but that doesn’t justify arbitrary revenue threshold numbers or ignoring other highly concentrated positions in different segments like healthcare, as in the case of CVS. Consumers love a good deal and having choices. Third-party sellers love the access to demand and the trust of Amazon’s platform. There are ways to influence Amazon’s behavior, but this is probably not the one.

Ryan Mathews
BrainTrust

Amazon probably does give preference to products it sells — kind of like supermarkets and drug stores that advantage retailer-owned brands at the expense of their national brand competitors in terms of in-stock positions, shelf position, number of facings, etc. At first blush this looks more like an anti-Amazon bill than consumer protection legislation. Antitrust laws are supposed to be just that – rules that apply to everyone playing the game.That said I’m with Cathy Hotka. Her suggestion is right on the money. Want to know what a bill really says and who it really benefits or disadvantages? Try reading it first.

Scott Norris
Guest
This is a similar case to the travel industry’s CRS wars of the late 1980s-mid 1990s, where if you were using SABRE, American’s flights would somehow always come up first; United if you were on Apollo; etc. High switching costs meant agencies were locked in, which would mean even whole towns were effectively locked in. (Lock-in is just as real if you’re selling on FBA or buying with Prime.) Yes, the politicians had to get involved and yes, it was legal for them to do so and yes, the airlines wailed and made the same arguments Amazon is using. Ultimately the airlines spun off their CRS systems, partly because of antitrust, but mostly due to their ever-growing investment requirements, and those CRS companies merged and evolved into the websites and apps we rely on today. Marketplaces evolve, sometimes from within and sometimes due to external forces. I will beat my drum again to spin out Amazon’s logistics division, because I think it will create much more value for sellers as well as consumers if allowed… Read more »
Craig Sundstrom
Guest

Unfortunately, George’s piece is notably scant on details of what the legislation actually does — and why — so it’s hard to comment intelligently on it, but as for the more basic issue of preference, I think that can be broken down into two parts: “do they give preference?” Probably, yes — and “is this unfair? And here’s where I have a problem: yes of course a store gives preference to its own products … why would we even ask that?

There are a lot of things to dislike about Amazon, but so far at least, critics seem to have trouble articulating exactly what they are … let alone how to fix them.

wpDiscuz
Braintrust
"As often as I am wary and critical of many of Amazon’s tactics, in this case I am wary of this specific regulation that would limit some of those tactics. "
"Two simple words – government overreach! If you don’t want to sell on Amazon or abide by Amazon policies, nobody is forcing you."
"...the consumer controls Amazon and there is no need for politicians to intervene by imposing their personal views."

Take Our Instant Poll

Do you agree that Amazon unfairly gives preference to products it sells versus those sold by third parties on its marketplace?

View Results

Loading ... Loading ...