Amazon Being Sued For Being a Monopoly

[aaronc879]

Just a quick note before I go mow the church lawn - just having a monopoly is not a violation of the antitrust laws. Using illegal means to achieve and maintain a monopoly is illegal.

What they do should be illegal. They pay their employees sh!t wages and then expect them to do inhumane amounts of physical labor all in the name of more profit for the corporation.

 

[Go-NoGo]

I remember when "mail order" used to take 2-4 weeks to arrive and to add insult to injury they added $19.95 for shipping and "handling".

Amazon came in and disrupted their entire business model and the consumer was the better off for it. Lots of business were disrupted, including WMT - but hey, that's what free markets do.

Interestingly enough there is hedge fund that is betting against Lina Khan, and is making a bundle doing so:

The Hedge Fund That Made a Killing Betting Against Lina Khan:
https://www.wsj.com/us-news/law/the...-a-killing-betting-against-lina-khan-d5b395b1

Yet for a handful of firms willing to stomach the volatility, the FTC’s antitrust efforts have yielded an unexpected windfall. Their strategy? Betting big against Khan.

Florida-based Pentwater stands to be a large winner from the FTC’s recent failed bid to block the Amgen-Horizon deal. It built a stake of almost 7% in Horizon after the drugmaker began fielding takeover interest last year.

Pentwater is estimated to have scored around $100 million on its Horizon trade on paper, according to an analysis of the hedge fund’s public filings.

 

[Sunset]

What they do should be illegal. They pay their employees sh!t wages and then expect them to do inhumane amounts of physical labor all in the name of more profit for the corporation.

Nobody is forced to work for them.

There are lots of other jobs that are hard(er) work, like roofing and I bet those guys don't get paid a lot either, plus they have to work outside.

When a person has a job that only requires some high school education at most, there is a pretty low barrier for anyone else to take the job.
The lowest job I could find was warehouse worker Packer

1K Salaries submitted $28K-$35K $31K | $0 2 open jobs
https://www.glassdoor.com/Salary/Amazon-Salaries-E6036.htm

 

[Sunset]

One thing I was told about by a friend who sold stuff from his warehouse on Amazon. Was that he felt he had to quit Amazon.
He claimed Amazon could watch what sold and for how much, and then after some months would sell the same stuff.
He called his Chinese pal who ran the factory and complained about his pal selling to Amazon for less, and his pal replied he sold cheaper to Amazon because they would buy bigger lots.

So maybe that's illegal, or just better business to find a cheaper source and sell for cheaper

 

[disneysteve]

It seems to me that the free enterprise/entrepreneurial spirit we promote here in the US has limits. They want you to be successful, but only to a degree and stepping carefully as you grow. Amazon is a good example.

So true. This concept drives me crazy. People love to shout about supporting "small businesses" and "shopping local" and avoiding the "big guys" and the "chains" but every single one of those big guys and chains started as small businesses with a single location. At what point are we supposed to stop supporting them because they succeeded? Is it when they open their second location, their third, their 10th? What about franchises? Sure they are part of a big company but the owner of the location down from the street from me is a small business owner who lives in my community and has kids who go to school with mine. Did people think Sam Walton was evil when he opened his first store in Bentonville? Probably not. But now? Walmart is the devil to many.

 

[Aerides]

He claimed Amazon could watch what sold and for how much, and then after some months would sell the same stuff.

Yes. Amazon is not just competing with Walmart, but with all the small businesses they encourage to join them. Your example is cited frequently by sellers on amazon.

They find a product, or work with a factory to make something. They are successful. Then they find amazon is competing with them on the same listing, selling at a loss even for a while because they can. Amazon gets the buy box, and the original seller is relegated down to the little-seen "other sellers" box on the page.

Trust me it is expensive to sell on Amazon, even more so if you want them to fulfill your orders (to be "Prime" eligible). Far more expensive then eBay, or running your own site.

 

[Gumby]

What they do should be illegal. They pay their employees sh!t wages and then expect them to do inhumane amounts of physical labor all in the name of more profit for the corporation.

I don't know anything about their labor practices, but if there is some sort of legal violation there, it would most likely not be of the antitrust laws. Although there are labor practices that can be an antitrust violation. For example, if competitors in the same industry agree to limit salaries paid to engineers and not poach them from each other, that would be a violation of the antitrust laws (it is essentially the same as price fixing).

 

[MichaelB]

Amazon is not being challenged because it is big or successful. The complaint is against specific anti-competitive strategies and behavior.

Here’s a summary of the FTC complaint https://www.ftc.gov/news-events/new...s-amazon-illegally-maintaining-monopoly-power. A few highlights

The complaint alleges that Amazon violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging.

The complaint then focuses on two sets of behavior

The FTC and states allege Amazon’s anticompetitive conduct occurs in two markets—the online superstore market that serves shoppers and the market for online marketplace services purchased by sellers. These tactics include:

Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon, keeping prices higher for products across the internet. For example, if Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible.

Conditioning sellers’ ability to obtain “Prime” eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon’s costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon.

 

[Car-Guy]

I don't know anything about their labor practices, but if there is some sort of legal violation there, it would most likely not be of the antitrust laws. Although there are labor practices that can be an antitrust violation. For example, if competitors in the same industry agree to limit salaries paid to engineers and not poach them from each other, that would be a violation of the antitrust laws (it is essentially the same as price fixing).

I was waiting for that... So oil companies (for an example) are not suppose to get together (collude) to set gas prices BUT, I see the locals here all charging the exact same price all the time. We have 4 gas stations in town at the "4 corners" all different brands. You can bet as soon as one changes their price the others will too within an hour. Did they collude or are they just being competitive. I guess since it's just local it's competitive? Again, where is the line drawn.

 

[Qs Laptop]

Their complaint does lay out some apparently real anti-competitive practices. Here's a better summary of the complaint straight from the FTC.

https://www.ftc.gov/news-events/new...s-amazon-illegally-maintaining-monopoly-power

Of the five actual complaint bullets I think the worst is "anti-discounting" where vendors cannot offer prices lower than Amazon. IMO, the others are pretty weak sauce. The government seems to be suggesting that Amazon cannot charge fees, offer fulfillment services, advertise, or prefer its own products on Amazon's own storefront.

Amazon seller here. USGrant1962 (and MichaelB) has nailed the crux of the lawsuit.

To be clear, the complaint of anti-discounting is when vendors sell their products lower than Amazon on websites other than Amazon itself. In these cases Amazon tweaks their product search result so the vendor with lower prices elsewhere gets buried in Amazon's search results

The other big complaint is taking away the ability of vendors to be Prime sellers but not use Amazon as the shipment fulfillment service. In other words, the vendor promises to meet all the requirements of Prime shipments but ship the packages themselves. IMO, this isn't much of a complaint really because if I as a Prime Vendor that does my own shipping gets an order on Saturday afternoon that requires 2 day delivery, there is no way I can meet that criteria since I can't ship anything on Saturday afternoons or Sunday and would have to resort to next day shipping (in most cases), which destroys my profit margins.

 

[Gumby]

I was waiting for that... So oil companies (for an example) are not suppose to get together (collude) to set gas prices BUT, I see the locals here all charging the exact same price all the time. We have 4 gas stations in town at the "4 corners" all different brands. You can bet as soon as one changes their price the others will too within an hour. Did they collude or are they just being competitive. I guess since it's just local it's competitive? Again, where is the line drawn.

Charging the same price is not illegal. Agreeing with your competitors to charge the same price is illegal. The agreement is the problem, not the fact that the price is the same. That nuance appears to be a stumbling block for many.

 

[Car-Guy]

I doubt in this case that they are calling each other to agree and set the price since they can all see each others signs/prices, but it makes me wonder. Just funny to watch, who's first to go up or down with their gas prices.

There is a new gas station in town about 1/2 mile down the road. (Another brand) and they can't see the other guys signs and don't seem to be playing the game. They are usually 3 to 5 cents different.

 

[Zathras]

I doubt in this case that they are calling each other to agree and set the price since they can all see each others signs/prices, but it makes me wonder. Just funny to watch, who's first to go up or down with their gas prices.

There is a new gas station in town about 1/2 mile down the road. (Another brand) and they can't see the other guys signs and don't seem to be playing the game. They are usually 3 to 5 cents different.

Gas prices around here tend to be the same for different stations right next to each other.
However, there is also a variety of prices based on location.

Ever notice the last gas station as you approach an airport car rental place has high prices?
You will also find lower gas prices further from the freeway.

These are all examples of free market working well. The only restriction in my state is stations can’t price their product below a certain level.

And Amazon, if they loose, won’t disappear. I’ve seen these suites result in fines, changed business practices, at worse, breaking up the company into parts.
But not elimination.

 

[Car-Guy]

That reminds me, the next town a little further away and much bigger (~7k people) has about 10 or 12 gas stations. Prices there seem to vary as much as 10 to 12 cents a gallon between stations. I don't even need to look at the signs/prices for the cheapest gas. I just look for the lines of cars. A few cents a gallon must mean a lot to folks around here.

 

[disneysteve]

That reminds me, the next town a little further away and much bigger (~7k people) has about 10 or 12 gas stations. Prices there seem to vary as much as 10 to 12 cents a gallon between stations. I don't even need to look at the signs/prices for the cheapest gas. I just look for the lines of cars. A few cents a gallon must mean a lot to folks around here.

It’s not uncommon for two stations directly across the street from each other to vary by as much as 25 cents. I have no clue why anyone goes to the expensive ones. I always figure it’s a front for something else.

 

[Walt34]

What they do should be illegal. They pay their employees sh!t wages and then expect them to do inhumane amounts of physical labor all in the name of more profit for the corporation.

What they do is not illegal and that's a good thing. Every employee in there accepted an offer which they were, and are, free to reject at any time and walk out of there. Now I'll grant that in many areas other employment opportunities might be shall we say "limited" but the solution to that problem is pack one's bags and seek greener pastures or to better oneself through education or technical training that is worth more on the free market.

 

[CRLLS]

Yes. Amazon is not just competing with Walmart, but with all the small businesses they encourage to join them. Your example is cited frequently by sellers on amazon.

They find a product, or work with a factory to make something. They are successful. Then they find amazon is competing with them on the same listing, selling at a loss even for a while because they can. Amazon gets the buy box, and the original seller is relegated down to the little-seen "other sellers" box on the page.

Trust me it is expensive to sell on Amazon, even more so if you want them to fulfill your orders (to be "Prime" eligible). Far more expensive then eBay, or running your own site.

I've been reading this thread and want to ask about the above highlighted words. If it is true that the seller actually helped to make a new product, doesn't the problem lie with the manufacturer selling the seller's created product and not Amazon buying a product offered? Maybe this appears to be a fine detail, but not in my opinion. Was there not some contract between the seller and the manufacturer prohibiting this practice? I don't see how this is Amazon's fault.

Just to be clear. I often price shop elsewhere. However, when I need something today or tomorrow, I will pay Amazon a bit more. Amazon has some advantages but not always the place I place the order with. It is not uncommon that I find a company selling on their own site for less than they sell it on Amazon. As for an independent seller on Amazon, who is simply a reseller, their cost to purchase in smaller qty's, their cost to stock product and their fees to sell on Amazon, are certainly higher than Amazon can get to. That is not Amazon's fault either. However, if Amazon is found guilty of using the sales data of independents as marketing data for their own sales, then I'm all for holding them accountable to the fullest extent of the law
.

 

[explanade]

She wrote a great article in the Yale Law Journal* about the problems of applying the antitrust laws to a two sided market like Amazon. In my opinion, it was very analytical and balanced; I do not get the feeling that she has been "gunning" for Amazon. The issues with their size and dominance were being considered by regulators long before she ever wrote that article. And, for an academic, it is a very interesting issue to write about.

I would not be concerned about her lack of trial experience, as she will most certainly not be the one litigating the case. The FTC has excellent lawyers on staff to do that, and they will be bolstered by assistant attorneys general from the state co-plaintiffs.

*https://www.yalelawjournal.org/pdf/e.710.Khan.805_zuvfyyeh.pdf

Do regulators need to demonstrate consumer harm in anti-trust cases??

I believe in similar cases, they would have as expert witnesses professors of economics who would come up with estimates of how much more consumers paid because of illegal behavior.

FTC is alleging that Amazon suppressed lower prices from other sellers so they must have some evidence, like maybe internal emails.

I don't know if some random searches showing lower prices at the bottom of search results is necessarily proof because searches are dynamic and there's no way to show that a given search is representative of the millions of searches people must make on Amazon's site every day.

 

[Gumby]

Do regulators need to demonstrate consumer harm in anti-trust cases??

I believe in similar cases, they would have as expert witnesses professors of economics who would come up with estimates of how much more consumers paid because of illegal behavior.

FTC is alleging that Amazon suppressed lower prices from other sellers so they must have some evidence, like maybe internal emails.

I don't know if some random searches showing lower prices at the bottom of search results is necessarily proof because searches are dynamic and there's no way to show that a given search is representative of the millions of searches people must make on Amazon's site every day.

It's impossible to tell what information they may have gleaned during the course of their investigation (they do have subpoena power.) Consumer injury is necessary to an antitrust action, but it need not always be concrete, it can be hypothetical. You have to prove that the challenged actions have produced or can be expected to produce a decrease in output and an increase in price. And you can get an injunction against anticompetitive practices without corresponding damages. Some anticompetitive actions are considered so likely to cause injury to consumers that they are either treated as per se violations or they are subject to the "quick look" standard. Others, governed by the so-called "rule of reason" standard, require more detailed proof as to the extent of the market and the anticompetitive effect of the challenged action on that particular market. Here is a law review article that addresses the issue in more detail:
https://scholarship.law.stjohns.edu/cgi/viewcontent.cgi?article=1414&context=lawreview

 

[harley]

I'm not too concerned about the lawsuit. Lina Khan (head of the FTC) has been anti-large business for all of her career, but she's lost (I think) every case she's brought since taking over the FTC. Her definition of a monpoly doesn't jive with the legal definition currently in use, and the FTC keeps losing in the Supreme Court.

Here's an interesting article about the attempts to use anti-trust suits against large businesses.

Khan's 2017 Yale Law Journal article, "Amazon's Antitrust Paradox," was a foundational text for this cohort. Khan's essay argued that Amazon's "sheer scale and breadth" made it a ripe target for antitrust law enforcement if only we would change the way we've been thinking about antitrust law. "The current framework in antitrust—specifically its equating competition with 'consumer welfare,' typically measured through short-term effects on price and output—fails to capture the architecture of market power in the twenty-first century marketplace," wrote Khan, warning that this framework hid "the potential harms to competition posed by Amazon's dominance." Khan wanted a return to economic structuralism, which she described as resting "on the idea that concentrated market structures promote anticompetitive forms of conduct."

 

[Gumby]

Just a quick follow up to my earlier post. I retired in May 2019 and I have not devoted myself to keeping up with the trends in antitrust law since then, so you should take all my posts with a grain of salt, given that they rely on dated knowledge. I'm sure things have evolved substantially in the last 4+ years.

 

[Qs Laptop]

I've been reading this thread and want to ask about the above highlighted words. If it is true that the seller actually helped to make a new product, doesn't the problem lie with the manufacturer selling the seller's created product and not Amazon buying a product offered?

Yes, you are on the right track. A lot of sellers on Amazon find a Chinese made product then import it and list it on Amazon. They might even private label the product with their own brand name. Once it starts selling well the Chinese manufacturer will approach Amazon and offer to supply it directly to Amazon. (Or Amazon will find the Chinese manufacturer and buy from them.) Of course Amazon can sell the product for less and control the Buy Box. The original importer that listed the product on Amazon will always lose because they don't have a patent and/or they don't have a trademark. They have no protection.

 

[Ready-4-ER-at-14]

It’s not uncommon for two stations directly across the street from each other to vary by as much as 25 cents. I have no clue why anyone goes to the expensive ones. I always figure it’s a front for something else.

No idea if this explains those particular stations but I drive by stations literally blocks from each other where the price may vary by 50 cents a gallon. The far higher station has mechanics on duty and even through both are quite close to express way entrances (to the same express way) the more expensive one is a busier road with an expressway exit a couple blocks away leading to it as well. The less expensive station has more of the buy snacks and stuff inside flavor as well.

I always assumed people paid more for gas to have a neighborhood mechanic when they needed one. Maybe the answer is simply drive by traffic.

 

[CaptTom]

...Of course Amazon can sell the product for less and control the Buy Box. The original importer that listed the product on Amazon will always lose because they don't have a patent and/or they don't have a trademark. They have no protection.

Sounds like the free market doing what it does best. If Amazon can source a generic, Chinese product for less, why would I want to pay more to some middleman who buys from the same factory? I can't imagine anyone would feel sorry for me if I were reselling something, then got undercut by a more efficient competitor.

 

[Qs Laptop]

He claimed Amazon could watch what sold and for how much, and then after some months would sell the same stuff.
He called his Chinese pal who ran the factory and complained about his pal selling to Amazon for less, and his pal replied he sold cheaper to Amazon because they would buy bigger lots.

So maybe that's illegal, or just better business to find a cheaper source and sell for cheaper

It's not illegal to offer discounts for higher volumes.

Yes. Amazon is not just competing with Walmart, but with all the small businesses they encourage to join them. Your example is cited frequently by sellers on amazon.

They find a product, or work with a factory to make something. They are successful. Then they find amazon is competing with them on the same listing, selling at a loss even for a while because they can. Amazon gets the buy box, and the original seller is relegated down to the little-seen "other sellers" box on the page.

If Amazon is competing directly with an Amazon Seller the listing will say "Shipped and Sold by Amazon" in the Buy Box. If this is the case the vendor was contacted by Amazon and invited to join Amazon Vendor Central. Under this arrangement the vendor sells directly to Amazon. The vendor has no control over pricing and very little control over the listing.

Trust me it is expensive to sell on Amazon, even more so if you want them to fulfill your orders (to be "Prime" eligible). Far more expensive then eBay, or running your own site.

"Expensive to sell on Amazon" is relative, of course. Yes, they do have a hefty fee structure. They are also the largest store in the world. It's the old adage--"Do you want 50% profit on 100 sales or 35% profit on 1,000 sales?"

As to your profits being less if you have Amazon fulfill your orders (Amazon Prime) that depends on the product. Shipping cost is the controlling variable. Products that weigh less than 1 lb. might be more profitable if done seller fulfilled. Products that weigh more than a pound and are being shipped more than several states away are probably best having the shipping handled by Amazon.

Of course, if you are shipping your own product on Amazon there is a 99% probability you won't have the Buy Box since the number one factor for gaining the Buy Box is that the product be a Prime product. And if you don't have the Buy Box, you're likely not going to be seen.

As to it being cheaper to sell on your own website or via Ebay, better check your shipping costs before you declare this to be true. Again, if your product weighs less than 1 lb., you might be better off. Otherwise, it depends on the profit margins and how much work you want to do with order fulfillment, shipping, processing of returns, credit card processing, sales tax, etc. etc.

In my case it's more profitable to ship product to Amazon's distribution centers and let them do all of these tasks.