Why Retail Expert Says Amazon, in FTC Firing Line, Is ‘Stimulating’ not ‘Stifling’ Competition

Glenn Taylor
·4 min read

The Federal Trade Commission (FTC) could file a long-awaited antitrust suit against Amazon as soon as this week, according to several news reports.

Amazon has been criticized and scrutinized by lawmakers and third-party platform sellers for years now. They question how Amazon uses third-party seller data to inform its own private-label product strategy. Critics accuse Amazon of favoring its own products at the expense of sellers who don’t use its logistics and advertising services. This essentially forces sellers to use these Amazon services to gain better visibility and drive sales.

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Several state attorneys general have sued Amazon for barring third-party sellers from advertising lower prices on rival platforms. Amazon got the Washington D.C. lawsuit dismissed, while a California case is ongoing.

The looming FTC suit is said to include similar claims that Amazon blocks sellers from offering lower prices on competing websites. Other charges accuse Amazon of forcing merchants to use its logistics and advertising services, including Fulfillment by Amazon (FBA). The suit also challenges Amazon Prime’s far-reaching benefits.

The exact details of the pending lawsuit are under wraps, but Politico reported that the case could be filed as early as Tuesday. According to Reuters, the FTC has sent a draft complaint to the state attorneys general trying to get them to sign on, which generally indicates a lawsuit is close to being filed.

Amazon and the FTC declined comment.

Ahead of the potential lawsuit, Amazon recently reneged on the 2 percent fee it slapped on third-party sellers using the recently relaunched Seller Fulfilled Prime (SFP) delivery program. The fees, which would have taken effect in October, were a way to get more money from sellers who shipped Prime-eligible products out of their own warehouses instead of Amazon’s.

Bloomberg, which reported the about-face on the fees, said Amazon attributed the decision to merchant feedback. Scrapping the fee suggests that the e-commerce giant is being cautious about how much money it tries to get from online sellers with so much antitrust scrutiny.

Merchants have paid increasingly more in fees to work with Amazon in recent years. They typically pay to use the tech titan’s advertising and logistics services to grow their sales. Seller services generated $32.3 billion in revenue in the second quarter, up 18 percent from the same period a year earlier.

But even as Amazon abandons the SFP fees, it might not make any fundamental changes to address an FTC lawsuit should one materialize, said Neil Saunders, managing director of consultancy GlobalData Retail.

“Amazon has already met with the FTC and did not make any changes following the meeting, which suggests it thinks there is no real case to be answered,” Saunders told Sourcing Journal. “In my view, I see the FTC’s case as being without much merit. It seems to be pursuing Amazon to chase optics rather than because there has been a genuine failure in the market.”

This year, Amazon has shown a willingness to collaborate with rivals while still dominating the industry.

For one, Amazon now allows sellers at competing e-commerce giant Shopify to use “Buy with Prime”—a service that means U.S. Prime members can shop directly from merchants’ online stores and use the features of the program without accessing Amazon itself.

Amazon also introduced Supply Chain by Amazon and relaunched the Amazon Shipping ground delivery service for shippers who don’t sell on its marketplace. The former allows Amazon sellers to distribute products in bulk from Amazon’s warehouses to fulfillment channels and retail stores not affiliated with the company.

“It is true that Amazon is launching services like Supply Chain by Amazon and these will make it more money,” Saunders said. “However, no seller is forced to use this service. Many will voluntarily opt to use it because it is to their advantage. What the FTC misses is that by providing these services Amazon is leveling the playing field between small sellers and some of the big brands and retailers out there, Amazon is actually stimulating competition, not stifling it.”

The launch of Amazon Shipping pivots the company firmly as a direct competitor to UPS, FedEx and the USPS giving brands another shipping choice in the U.S., according to Sucharita Kodali, vice president, principal analyst at Forrester Research.

“It helps [Amazon] make the case they are increasing competition for suppliers and bringing prices down,” Kodali told Sourcing Journal.

The FTC already filed a separate complaint in June accusing the company of using deceptive tactics to trick users into signing up for Prime subscriptions without their consent, while intentionally making it difficult for consumers to cancel their membership.

On Wednesday, the agency amended its complaint, adding three individual senior Amazon executives to the lawsuit, charging that they were fully aware of the issues.

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