FTC and 17 states sue Amazon

[Smoove_B]

Well, that's unexpected:

In a sweeping complaint filed in federal court in Seattle Tuesday, the FTC and attorneys general from 17 states accused Amazon of wielding its "monopoly power" to inflate prices, degrade quality for shoppers and unlawfully exclude rivals, thereby undermining competition. The FTC didn't specify potential remedies such as a breakup or divestitures in its announcement, saying it is primarily seeking to hold Amazon liable.

The agency laid out a two-pronged strategy by which Amazon "unlawfully maintains" its monopoly power. It pointed to so-called anti-discounting measures the company uses to punish sellers and deter other online retailers from offering lower, more competitive prices than Amazon, which translates to keeping prices higher for products across the internet, the FTC said.

Amazon also "effectively requires" that sellers use its "costly" fulfillment services in order to obtain the vaunted Prime badge for their products, the FTC said, which in turn makes it more expensive to do business on the platform.

The FTC and states alleged that Amazon forces sellers to pay expensive fulfillment and advertising fees to market their goods on the site, while facing no other choice "but to rely on Amazon to stay in business." These tactics have degraded the shopping experience on Amazon by flooding search results with "pay to play ads" that steer shoppers toward more expensive and less relevant products, FTC Chair Lina Khan told reporters at a briefing Tuesday.

[Daehawk]

Well the cats out of the bag now.

[Smoove_B]

I totally missed the June of 2023 lawsuit:

The Federal Trade Commission sued Amazon today, claiming the online giant violated US law by tricking consumers into signing up for the $14.99-per-month Amazon Prime subscription service and making it annoyingly difficult to cancel.

"For years, Defendant Amazon.com, Inc. has knowingly duped millions of consumers into unknowingly enrolling in its Amazon Prime service," the FTC alleged in a complaint filed in US District Court for the Western District of Washington. "Specifically, Amazon used manipulative, coercive, or deceptive user-interface designs known as 'dark patterns' to trick consumers into enrolling in automatically renewing Prime subscriptions."

The FTC said that until recent changes spurred by the agency's investigation, Amazon required Prime customers who wanted to cancel to go through a "four-page, six-click, fifteen-option cancellation process." For example, Amazon's "End Membership" button did not actually end membership in Prime, the FTC said. Clicking "End Membership" redirected consumers to Amazon's actual, extremely tedious process for canceling, the FTC said.

[Octavious]

Amazon is such a shitty and shady company. It was great a few years back, but as they gained traction it's just a horrific money grab. You have to be super careful about what you order and god bless anyone that thinks they will always get the best price on there. I've seen prime stuff at double the cost to buy it at the local store if you don't know the prices and don't pay attention.

[Carpet_pissr]

Well, that's unexpected:

Sarcasm, I presume? This (along with Google and some others) has been brewing for a looong time.

[malchior]

Yeah this has been a long time brewing. We have to keep in mind that the government has hardly had a great anti-trust track record in recent years.

[Blackhawk]

David Zapolsky, Amazon’s general counsel and senior vice president of global public policy, said in a statement that the FTC’s complaint is “wrong on the facts and the law.”

“The practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon’s store,” Zapolsky said.

I like that - he's defending them by saying that their monopoly has resulted in Amazon getting more business. Well, gosh!

“If the FTC gets its way, the result would be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small businesses—the opposite of what antitrust law is designed to do.”

He then goes on with a statement that sounds like it came from a mobster. "We control the business. Hurt us, you hurt everyone." At the same time, just like his previous statement, everything he said is related to Amazon's business, and the impacts on Amazon's business.

It isn't about the Amazon's business. It's about everyone else's.

In the first half of 2023, the company collected a 45% cut of every sale made by sellers in the U.S., up from 19% in 2014

And people have been up in Arms about Valve's 30% cut. Yipes.

[waitingtoconnect]

Amazon is lucky they’ll be a shutdown.

[Smoove_B]

Sarcasm, I presume? This (along with Google and some others) has been brewing for a looong time.

No, genuine surprise. Brewing and rumored is one thing. Actually doing? I guess maybe if I saw the story in June I might not have been as surprised.

[Carpet_pissr]

Sarcasm, I presume? This (along with Google and some others) has been brewing for a looong time.

No, genuine surprise. Brewing and rumored is one thing. Actually doing? I guess maybe if I saw the story in June I might not have been as surprised.

Fair. As mentioned above, the previous decade+ has not exactly seen much enforcement in this space (in the US).

But more than a few notables on Wall St. called this one correctly for the past several months, as in ‘it’s very likely going to happen, finally’. Wish I could remember the sources, but it wasn’t the typical chowderhead analysts trying to sell retail traders on a bs position, it was serious finance ppl talking about it as if it was a done deal, ‘GOING to happen, let’s move fwd with that assumption’

Enough so that I dumped about half my Amazon shares (but kept GOOGL, which will likely get caught up in this as well).

[malchior]

Right. It has been widely predicted and the chance of success is a bit of a huge unknown. The market seems to have bet that not much happens. Which feels right. It's the US after all. Those with the most money usually get to make up their own rules.

[Blackhawk]

Those with the most money usually get to make up their own rules.

Does Amazon own more politicians, or does all of Amazon's competition combined?

[LawBeefaroni]

Those with the most money usually get to make up their own rules.

Does Amazon own more politicians, or does all of Amazon's competition combined?

They're not that short-sighted. A weaker FTC is better for them all.

[Smoove_B]

David had a secret chord and apparently Amazon had a secret price algorithm:

People familiar with the FTC's allegations in the complaint told the Journal that it all started when Amazon developed an algorithm code-named "Project Nessie." It allegedly works by manipulating rivals' weaker pricing algorithms and locking competitors into higher prices. The controversial algorithm was allegedly used for years and helped Amazon to "improve its profits on items across shopping categories" and "led competitors to raise their prices and charge customers more," the WSJ reported.

The FTC's complaint said:

Amazon uses its extensive surveillance network to block price competition by detecting and deterring discounting, artificially inflating prices on and off Amazon, and depriving rivals of the ability to gain scale by offering lower prices.

The FTC complaint redacted this information, but sources told the WSJ that Amazon made "more than $1 billion in revenue" by using Project Nessie, while competitors learned that "price cuts do not result in greater market share or scale, only lower margins," the FTC's complaint said.

"As a result, Amazon has successfully taught its rivals that lower prices are unlikely to result in increased sales—the opposite of what should happen in a well-functioning market," the FTC alleged.

Amazon stopped using the algorithm in 2019—for no clear reason, sources told the WSJ.

[Kurth]

My understanding is the FTC is zeroing in on two Amazon practices:

(1) Prime shipping - The FTC argues that Amazon forces sellers to use Amazons logistics and supply chain in order to qualify as part of Prime.
(2) Pricing - The FTC argues that Amazon penalizes any seller that offers the same products it sells on Amazon at a lower price somewhere else.

I get how each of these things could be seen as anti-competitive, but I also think consumers are going to pissed if this FTC lawsuit results in higher pricing on Amazon and increases in shipping costs and times.

[Kraken]

Over the too many years that I tried to make a go of Curio City, Amazon tried to recruit me about once every other year. I refused because the numbers just didn't work; they took too much out of every sale to leave any profit for me, and their many rules and conditions demanding conformity removed any creative control. I would've been working for Amazon, basically. It was a "join or die" situation. I wouldn't join, so of course I died. It's very, very hard to succeed as an independent small online retailer. How many are left today, compared to when I started planning my store in 2004?

[Blackhawk]

I also think consumers are going to pissed if this FTC lawsuit results in higher pricing on Amazon and increases in shipping costs and times.

Consumers have a limited ability to see past their current purchase. Yeah, they may pay more at Amazon, but in the long run it could improve prices, competition, and quality across the market. People would just need to learn that they'll need to actually shop around again as opposed to having a one-stop solution for knockoff junk.

[Kurth]

I also think consumers are going to pissed if this FTC lawsuit results in higher pricing on Amazon and increases in shipping costs and times.

Consumers have a limited ability to see past their current purchase. Yeah, they may pay more at Amazon, but in the long run it could improve prices, competition, and quality across the market. People would just need to learn that they'll need to actually shop around again as opposed to having a one-stop solution for knockoff junk.

That’s certainly the FTC’s take. And I don’t disagree, except with the notion that the general public will ever be nuanced or sophisticated enough to understand that.

[Unagi]

So, I have an uneducated question I'd like to be enlightened on.

It seems to me that Amazon offering 'free delivery to Prime customers' is indeed dependent on Amazon's ability to control the logistics.
So, in order to qualify for it, sellers need to accept the logistics that make it happen. Why is that wrong? I'm not defending it, I'm just not seeing how that's not like UPS or FedEx forcing customers to use their logistics if they want to get in on some great 'delivery deal' UPS or FedEx may offer.

[Smoove_B]

except with the notion that the general public will ever be nuanced or sophisticated enough to understand that.

The state would like to submit the following as "Exhibit A" - pandemic response in the United States, 2020-current

[Jolor]

Cory Doctorow's explanation of Enshittification, applying it to Amazon but also social media platforms.

Excerpt:

Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die. I call this enshittification, and it is a seemingly inevitable consequence arising from the combination of the ease of changing how a platform allocates value, combined with the nature of a “two sided market,” where a platform sits between buyers and sellers, hold each hostage to the other, raking off an ever-larger share of the value that passes between them.

[Blackhawk]

That’s certainly the FTC’s take. And I don’t disagree, except with the notion that the general public will ever be nuanced or sophisticated enough to understand that.

I never meant to imply that they would. They won't. They'll still blame whoever they feel like blaming (probably whoever is sitting in the White House, because omniscience.) But they will learn to shop around, to pay attention to prices.

So, I have an uneducated question I'd like to be enlightened on.

It seems to me that Amazon offering 'free delivery to Prime customers' is indeed dependent on Amazon's ability to control the logistics.
So, in order to qualify for it, sellers need to accept the logistics that make it happen. Why is that wrong? I'm not defending it, I'm just not seeing how that's not like UPS or FedEx forcing customers to use their logistics if they want to get in on some great 'delivery deal' UPS or FedEx may offer.

Why? Anyone can ship something without charging extra for it, and now that 'free shipping with Prime' just means that it'll ship in one to three days, and take anywhere from one day to a week to get to you, there really isn't anything special about their shipping vs UPS/FedEx/USPS.

Amazon just wants to get the money that they've been paying to the other shipping companies routed back into their own pocket, and are making it impossible for the other places to be competitive by forbidding their use completely.

[Zaxxon]

Why? Anyone can ship something without charging extra for it, and now that 'free shipping with Prime' just means that it'll ship in one to three days, and take anywhere from one day to a week to get to you, there really isn't anything special about their shipping vs UPS/FedEx/USPS.

I think your vision is altered by living in small-town, USA. Prime in larger metro areas is absolutely still mind-blowing. Virtually anything, anytime, delivered in a few hours. It blows UPS/USPS/FedEx out of the water. They ship nearly immediately, in their own vans/contractor cars, and have better tracking than any competitor, to boot. 'One to 3 days to ship, and then take up to a week to arrive,' is not something that has described any Amazon order I've placed in the past several years--and I've placed a terribly embarrassing number. For the large majority of the population, there isn't a viable comparison between Amazon + Amazon fulfillment and <vendor X> + traditional USPS/UPS/FedEx shipping. Amazon is just light-years ahead.

Back to this (I've been down with the COVIDS, yo):

In the first half of 2023, the company collected a 45% cut of every sale made by sellers in the U.S., up from 19% in 2014

And people have been up in Arms about Valve's 30% cut. Yipes.

To be fair, 30% on an ephemeral product with extremely low distribution costs is not comparable to 45% on physical objects being routed, stored, managed, and shipped on behalf of sellers. I'd argue that the 30% Valve/Apple/et al cut is grossly worse.

That said, the revenue calculator is eye-opening.

All this is not to defend Amazon--while they've no doubt been a huge boon for shopper convenience, it's been clear for awhile that they're also the bull in the china shop, 'disrupting' a whole lot of businesses--including many that are Amazon's own customers. I have no doubt that there's predatory, monopolistic behavior going on.

[Unagi]

Someone correct me if I’m wrong.

Amazon is a logistics and supply chain company.


(I realize they do more, but speaking of amazon.com )

[Carpet_pissr]

Someone correct me if I’m wrong.

Amazon is a logistics and supply chain company.


(I realize they do more, but speaking of amazon.com )

I know you...disclaimed your comment, but just for general reference for the board:

"Of Amazon's $7.7 billion in operating profit, 70% of it came from Amazon Web Services"

And probably around 20% of revenue.

[Unagi]

Someone correct me if I’m wrong.

Amazon is a logistics and supply chain company.


(I realize they do more, but speaking of amazon.com )

I know you...disclaimed your comment, but just for general reference for the board:

"Of Amazon's $7.7 billion in operating profit, 70% of it came from Amazon Web Services"

And probably around 20% of revenue.

yes. thanks.

Does anyone know what percent of Amazon's $7.7 billion in operating profit came from AWS?

[Kraken]

Back to this (I've been down with the COVIDS, yo):

In the first half of 2023, the company collected a 45% cut of every sale made by sellers in the U.S., up from 19% in 2014

And people have been up in Arms about Valve's 30% cut. Yipes.

To be fair, 30% on an ephemeral product with extremely low distribution costs is not comparable to 45% on physical objects being routed, stored, managed, and shipped on behalf of sellers. I'd argue that the 30% Valve/Apple/et al cut is grossly worse.

That said, the revenue calculator is eye-opening.

All this is not to defend Amazon--while they've no doubt been a huge boon for shopper convenience, it's been clear for awhile that they're also the bull in the china shop, 'disrupting' a whole lot of businesses--including many that are Amazon's own customers. I have no doubt that there's predatory, monopolistic behavior going on.

As a reseller (retailer who doesn't produce their own products, or have unique products), my overall cost of goods was 50%. Marketing consumed 20% of my revenue, virtually all of which went to Google to buy keywords. My third-biggest cost was shipping, which ran about 15% of the price of most products and is the reason I had to charge for it. I couldn't usually raise my prices high enough to cover "free shipping" (i.e., hide the shipping cost in the price). So my rock-bottom cost was about 70%. The remaining 30% of revenue covered my salary, payment processing, taxes, etc.

If Amazon takes 45%, that leaves just 5% to pay myself and cover my other costs of doing business. If Amazon is handling fulfillment, and if I'm getting enough exposure just by virtue of being an Amazon seller that I don't need to advertise, I might be able to just eke out a living on that tiny margin thanks to volume. But you're oh-so vulnerable, and Amazon is capricious.

Finally, Amazon has a reputation for taking over their vendors' most successful products -- either competing directly by underpricing their own sellers or producing cheaper knock-off versions. And of course they decide your placement on their site. So there was always a risk, bordering on certainty, that if I ever had a big enough hit, Amazon would take it away.

Thus I never signed on, even though they tried repeatedly to recruit me. But if you're not an Amazon seller, you're competing with them, and that's not tenable either (unless you have a unique product). Twenty years ago it could be done. Not anymore.

[Carpet_pissr]

Someone correct me if I’m wrong.

Amazon is a logistics and supply chain company.


(I realize they do more, but speaking of amazon.com )

I know you...disclaimed your comment, but just for general reference for the board:

"Of Amazon's $7.7 billion in operating profit, 70% of it came from Amazon Web Services"

And probably around 20% of revenue.

yes. thanks.

Does anyone know what percent of Amazon's $7.7 billion in operating profit came from AWS?

I think around ass percent, IIRC.

[Unagi]