Antitrust

D.C.'s Attorney General Is Suing Amazon To Force It To Feature Worse Deals

A new antitrust suit targets third-party seller agreements.

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In the name of providing consumers access to lower prices, District of Columbia Attorney General Karl A. Racine has launched an antitrust lawsuit aimed at Amazon. Strangely, if Racine's lawsuit were to succeed, the result would be that Amazon would show consumers…higher prices. 

Racine's suit alleges that Amazon is engaging in anticompetitive behavior by barring third-party sellers from selling at lower prices on their own websites through a policy that amounts to a "most-favored nation" clause in the third-party seller agreement, leading to higher prices on other sites.

These sorts of clauses are a favorite target for modern antitrust hawks, and there's a lengthy section about Amazon's use of these sorts of policies in the giant House Antitrust Report released by Democrats on the Antitrust Subcommittee last fall. That report was a 400-page compendium of complaints about seemingly every minor business practice by a large tech company. Yet even that report, with its maximalist view of antitrust regulation, notes that such clauses are "not inherently anticompetitive"—before, of course, alleging that Amazon's use of them is.  

It's true that Amazon used to explicitly bar sellers from charging lower prices elsewhere, but that policy ended in 2019 and was replaced with a less strict agreement known as the "Fair Pricing Policy." 

The Fair Pricing Policy allows sellers to set their own prices, but it also allows Amazon to respond by removing the seller's listing from the Buy Box. The Buy Box is the main price you see on an item's sale page, so it's the one that most consumers pick, even when there are multiple sellers selling the same item. In many cases, it shows the lowest price for the item. Obviously, sellers work hard to get their listings into the Buy Box and adjust their pricing accordingly. But it's also true that you can click through to see other listings at other prices. 

Vendors who sell through other outlets have objected to this arrangement, however, with one telling Wired that after putting up items for sale on non-Amazon sites at lower prices, they found their products were in some cases no longer in the Buy Box. "You could still buy the product," he explained, "but it was an extra click." 

In some ways, that's the crux of the issue: a single extra click. That the attorney general for the District of Columbia has launched a major suit over that extra click shows how nitpicky a lot of modern antitrust activism is. Page through last fall's House antitrust report, and it quickly becomes clear that a faction of big tech-skeptical activists and policymakers on the left has decided that just about every modern business practice in the tech economy, no matter how minor or perfunctory, is an antitrust violation, and needs to be regulated, managed, or outlawed by federal overseers. 

And, of course, a lot of that regulation would end up being counterproductive, potentially harming consumers rather than helping them. Sen. Elizabeth Warren's (D–Mass.) push to prohibit companies like Amazon from offering house-brand products, for example, would result in the elimination of a bunch of inexpensive, high-quality brands and subbrands for everything from HDMI cables to couches. In service of protecting consumers, Warren's antitrust crusade would end up making consumers worse off.  

The D.C. A.G.'s suit could produce a similar effect. As an Amazon rep tells Recode, "The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law." The Buy Box is built to show Amazon customers the site's most appealing deals. It's a consumer-focused product. Upending that system, as this suit aims to do, would result in customers seeing higher prices and worse deals on the site. 

The new suit against Amazon is typical of so many of today's antitrust pushes in that it's both nitpicky and counterproductive. But it's also a portent of things to come. As Elizabeth Nolan Brown reports in the cover story for the latest issue of Reason, the new antitrust crusaders on both the left and the right are determined to use—or abuse—antitrust law to pursue a wide array of preexisting political agendas. And there's a large contingent of policymakers and politicians who don't seems to care if consumers are harmed in what is supposedly a battle to protect consumers.

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  1. How dare anyone infringe on my RIGHT to CONSOOM product for CHEAP.

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  2. Fuck it trillion dollar companies and amoral billionaires can follow the law and pay up. Besides, Bezos is getting a sweetheart deal from NASA so no prob.

    1. He is following the law. Antitrust law requires consumers are being harmed to invoke antitrust action by the government – which patently isn’t the case here.

      Point out what law Amazon is actually violating by requiring an extra click. As in, the precise line in the US Code that they’re in violation of.

      1. Standard Oil kept lowering the price of kerosene for twenty years even when they had over 80% of the market, mostly by finding ways to control costs. That didn’t stop the federal government from breaking them up.

  3. Bezos bought the wapo in order to show that he can suck progressive cock with the best of them. Shock of all shock proggies still hate Bezos.

    1. I’ve found the best way to convince progressives to appreciate billionaires is to point out how much money they spend on open borders advocacy. This approach was highly effective in getting my left-leaning friends to change their minds about Reason.com’s benefactor Charles Koch.

      #BillionairesKnowBest

  4. “Captain, I wish you’d stop being so good to me”

  5. “Vendors who sell through other outlets have objected to this arrangement, however, with one telling Wired that after putting up items for sale on non-Amazon sites at lower prices, they found their products were in some cases no longer in the Buy Box. “You could still buy the product,” he explained, “but it was an extra click.”

    I’m not in support of this antitrust action, by any means, but if vendors are concerned about avoiding that extra click, it’s probably a valid concern.

    I can think of a couple of examples of this being extremely important in brick and mortar. For instance, grocers will charge higher rates, I understand, for items that are displayed on the end of the aisle–because they get more foot traffic than putting your items in the middle of an aisle. Some people won’t walk down the aisle at all, and you can still sell to those people if your items are placed on the end of the aisle.

    Another example, from commercial real estate, is that retail space is more expensive to rent or buy if it features a higher traffic count. If people can’t see your storefront from a large street, it may be only an extra turn to find your store, but the fact is that they won’t make that extra effort. Trader Joe’s has saved a tremendous amount of money because they purposely pay less for retail space by buying it in out of the way places for their stores–because their customers are so enthusiastic, they don’t need to have their stores on an intersection that is highly visible.

    Drive thru service at fast food restaurants is the same thing. Some people would rather have Chipotle than Taco Bell, but they go to Taco Bell because there’s a drive thru–and they don’t want to bother getting out of the car. Your local gas station charges an arm and a leg for things you could buy at the grocery for much less, but people are willing to pay extra for the convenience of not having to make an extra trip.

    I appreciate that having to make an extra click seems like a small thing, but I also remember when AOL was the way most Americans got online, and most of them thought AOL’s website was the entirety of the internet because to get off of their website, after you dialed in, you had to make several clicks–and that was a click too far for them.

    I wouldn’t discount the importance of an extra click to Amazon’s vendors. This website is full of ads and links that I never click.

    1. Of course the extra click is important. That doesn’t make it an anti-trust issue. Is it anti-trust when, as you say, grocers charge more for products that will be displayed on the end-cap than in the middle of the aisle? Is it anti-trust to have a drive-thru?

    2. I think the extra click is what’s important. There’s loads of information about consumer behavior on the internet- they only wait a few seconds for websites to load before they move on, they only look at the first page of search results, they only look at the top five search results on the page, etc. There is an entire multi-billion dollar industry built around optimizing web commerce to suit consumer behavior.

      While I don’t support this type of anti-trust action either, I do think there are some legitimate issues that need to be addressed somehow, namely, that Amazon is one of the big tech companies that essentially owns the digital public square, and can use their vast market power to punish or reward other players.

      I think your gorcery store analogy would work better if it were a case of there only being one ENORMOUS grocery store that owns most of the prime real estate, and can decide on its own whether your product ever gets seen. You don’t want to or can’t afford to pay the price for shelf space, so your product gets stashed on the bottom shelf, next to the rat poison. It may be technically legal, but it’s certainly not ethical.

    3. I sell on Amazon. As Rossami states, the extra click is important, it’ll cause you to lose 90% of your sales. Most of the time, though, I get the buy box because I’m the only vendor for a clothing product. The big problem is that Amazon sells 50% of the products in the marketplace. They could increase their profits sharply by leaving the marketplace, selling advertising space the way grocery stores sell shelf space to vendors. The stock market doesn’t care how much money Amazon earns. As long as the Fed prints money, investors will treat it like a Vegas casino.

  6. Given that I live in a small community, there are lots of items I purchase which are not readily available locally.

    Note: I often use Amazon for the reviews on certain items, and then purchase them locally — often at the same, or sometimes, a lower price, as with my new lawn-mower.

    I see this everywhere:
    “May be available at a lower price from other sellers, potentially without free Prime shipping.”
    Of course it’s still sold through Amazon, but, as an example, the latest DVD I purchased I initially found priced at $21.25
    Looking through the other offers, I found the exact same DVD for $7.97

    Oh yeah, Amazon is SUCH A RIPOFF!! I DEMAND FEDERAL ACTION!!!! NOBODY SHOULD BE ABLE TO SELL MOVIES THAT CHEAP!!!

  7. The big problem with Amazon is that when you are huntng for something, with a specific search term (make and model number), you have to dig past page after page of stuff you didn’t ask about to find the ones you’re looking for.

    1. Amazon has multiple big problems. Such as, when you’re looking through the reviews on a product, they often won’t be for that product. Amazon aggregates reviews for ‘similar’ products.

      So, you’re looking for a 1Tb, 7200RPM hard drive with 128Mb cache? Most of the reviews will be for different drives.

      That’s fine when the review happens to mention those details, so you know which ones are relevant. But, what if the review is just, “Arrived damaged”, or “Didn’t format to the advertised size”, or “Drive diagnostics said it wasn’t spinning that fast”?

      Worse than useless. And they know this practice pisses off customers, and don’t care. That sort of behavior, not caring if you’re pissing off the customer, is considered classic evidence that you’ve achieved enough market power to be considered a monopoly.

  8. The relief the AG seeks would force Amazon to feature higher prices to customers,

    You might object to the AG interfering on “libertarian” grounds, but I don’t see how that follows at all. Right now, Amazon does not display the cheapest price in the Buy Box, but the cheapest price from vendors who haven’t offended Amazon by also listing elsewhere. The proposed relief would change that and hence shold lead to lower prices being featured.

    And, of course, Amazon is not really a private company to begin with; at this point, it is heavily in bed with the US government.

    1. Yeah, this is the key thing that’s glossed over.

      Amazon isn’t defaulting to the lowest available price ON AMAZON for purchases.

      I can see the anti-trust angle there.

      Having built a “monopoly” based one pricing expectation, they have changed the model. That’s the consumer facing aspect of the issue.

      I wonder how they actually enforce this. Why would I set up the *same* company as a vendor to Amazon and elsewhere?

      1. Not only that, but it’s a pretty rich complaint, if you’ve ever used the “buy again” button. You can track down the cheapest source of something, but if you click that convenient “buy again” button, will Amazon place the order with your original lowest price source?

        No, they’ll place the order where they see fit, no guarantee it’s the cheapest, or where you originally bought it. Got me once with that, never again.

      2. I don’t think it’s being “glossed over”, it’s simply wrong.

        My guess it that Suderman didn’t think this through and simply fell for some press release b.s. from Amazon.

      3. because Amazon charge very close to twenty percent as the “listing fee”. If I sell it elsewhere I do not lose that 20% of the selling price right up front. Sure, they provide a service in connecting buyers with sellers. But at 20% I can do a lot to find buyers outisde the Zon. Since the Zon ain’t fleecing ME for the 20%, I can offer a part, or even all, of that as an upfront discount. Few people realise how much Zon grabs until they become a third party seller on that site.

  9. D.C.’s Attorney General Is Suing Amazon To Force It To Feature Worse Deals

    Section 230: More winning than Trump since 1997.

  10. In this day and age why are we still buying from middlemen like Amazon?

    1. In case you don’t see it; the reason eBay and Amazon have been successful is they’re a “name of trust” as well as it is with most large brand names. The one’s who can’t provide any retail justice in the retail market won’t succeed (rip-offs).

      While some think profits from being trustworthy is the root of all evil others wonder why there isn’t more trustworthy in the market. Then again; with those same ‘some’ trying to fraudulently take all that profit by gov-gun pointing it really isn’t much of a wonder after all why trust sells for so much.

      1. Having seen up close and hurtfully personal how Amazon treat their third party Marketpplace vendors, AND having purchased junk knock off items listed as “genuine” when they are not, I no longer trust the Zon at all. In factI never use the place any more.

    2. Because they are a useful intermediary: they provide some quality control, act as a mediator when necessary, process payments, and handle fulfillment.

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  12. I am personally acquainted wiht two practices by Amazon that are VERY harmful to the retail trade in general, certain brands in particular, and have directly raised prices on some product lines found on Amazon.

    One way, they VIOLATE Minimum Advertixed Pricing CONTRACTS with manufacturers, refusing to honour those prices and heavily discounting them on their site. I personally know of at least two manufcturers that warned them to honuor MAP contract or they would simply cease shipping their product to Amazon to well. Amazon apparently thought they were blufing. They refused to honour MAP contracts, that manufacturer had shipped their final order the day before their warning. They have ever since been able to purchase that product line direct from manufacturer. AMazon violate MAP becoming the low priuce leader, third party sellers either have to match theZon or not sell product. Retailers of those products also take a huge hit, as customers walk into their brick and mortar stores, take the staff time, handle and examine the items, then go home and buy it off Amazon, thus destroying the retail marketplace at large. This IS antitrust activity.

    Second way is Amazon invent false claims that a given marketplace seller is selling counterfeit cheap knockoffs as the genuine branded item, when this is not the case. They demand the seller PRoVE their item is genuine, listing several ways to do that. Even when done. Amazon simply ignore it, and continue to block the listing of those priducts, by their target marketplace sellers. The seller never has an opportunity to get a review, no proof ever sent is ‘good enough” though they turn right round and demand the same proof again (such as copy of invoice from the branded manufacturer proving the manufacturer has sold the items in question to the reseller, and that packageing is manufacturer’s retail packaging.

    Third way they rip thired party sellers is to make the false counterfeit or intellectual property violationi claims thus “justofying’ the reomval of tose products offered by all other sellers, thus removing al competitive listings of the identical product. In other words, they run everyone else off their marketplace with false accusations of counterfeit goods, then become the ONLY one selling those products.. then systematicaly raise theprice on Amazon for Slod By and Ships From Amazon listings to just below MAP, thus gaining al the amargin allowable yet still undercutting off-Amazon vendors who are bound by MAP agreements, just like Zon are. So the price rises higher than it ever was on Amazon, yet below manufacturerss MAP contract pirce.. and thye undercut every retailer pricewise.
    If this is not anitrist I have no clue what might be…. but thislawsuit does not address thsi practice. It should.

  13. Drive thru service at fast food restaurants is the same thing. Some people would rather have Chipotle than Taco Bell, but they go to Taco Bell because there’s a drive thru–and they don’t want to bother getting out of the car. Your local gas station charges an arm and a leg for things you could buy at the grocery for much less, but people are willing to pay extra for the convenience of not having to make an extra trip.

    I appreciate that having to make an extra click seems like a small thing, but I also remember when AOL was the way most Americans got online, and most of them thought AOL’s website was the entirety of the internet because to get off of their website, after you dialed in, you had to make several clicks–and that was a click too far for them.
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