[Ars Tech] FTC prepares “the big one,” a major lawsuit targeting Amazon’s core business

Not sure if this will do anything to help the FBM sellers or even people like me that had Amazon take their sales by forcing Manufacturers to sell to them or ban their products but it’s a start. We know this is true

The Federal Trade Commission is preparing to file a major antitrust lawsuit accusing Amazon of “leverag[ing] its power to reward online merchants that use its logistics services and punish those who don’t,” Bloomberg reported today. Bloomberg described the forthcoming lawsuit as “the big one,” following several earlier lawsuits filed by the FTC under Chair Lina Khan.

“In the coming weeks, the agency plans to file a far-reaching antitrust suit focused on Amazon’s core online marketplace, according to documents reviewed by Bloomberg and three people familiar with the case,” the report said.

Khan may try to force Amazon to “restructure” its business. “Based on her public comments, Khan is unlikely to accept compromises from Amazon and could seek to restructure the company—a dramatic outcome that Amazon would surely appeal,” Bloomberg wrote.

Amazon declined to comment when contacted by Ars today.

FTC filed three other lawsuits against Amazon

Khan was known as a critic of Amazon before becoming FTC chair in 2021. In 2017, Khan wrote a Yale Law Journal article titled “Amazon’s Antitrust Paradox,” which argued for a more aggressive approach to antitrust enforcement to counter “Amazon’s dominance.”

The FTC sued Amazon last week, claiming it violated US law by tricking consumers into signing up for the $14.99-per-month Amazon Prime subscription service and making it exceedingly difficult to cancel. In the Prime case, the FTC is seeking a permanent injunction, civil penalties, and other monetary relief.

The FTC also recently filed one privacy lawsuit against Amazon with allegations related to kids’ Alexa voice recordings and another with allegations that Amazon’s Ring division invaded users’ privacy by “allowing thousands of employees and contractors to watch video recordings of customers’ private spaces.” In both cases, Amazon agreed to settlements requiring financial penalties and changes to privacy practices.

As for the upcoming “big one,” Bloomberg wrote that “FTC investigators and Khan’s office have been honing the complaint for several months… and finalizing key details such as where to file suit.” The FTC can file complaints in either federal court or in the FTC’s own administrative process. Suing in a federal court “would avoid drawn-out litigation on whether Khan has a conflict of interest, but could make the case harder to win,” the Bloomberg article said.

In June 2021, Amazon petitioned the FTC to have Khan recuse herself from antitrust investigations into the company because of her previous public statements criticizing Amazon and later accused Khan’s FTC of “harassing” its top executives. The Meta-owned Facebook also sought Khan’s recusal. She has rejected such requests despite a recommendation from an FTC ethics official to recuse herself from adjudicating the Meta case.

Amazon fulfillment takes big chunk of seller revenue

Third-party sellers can rely on Amazon for warehousing, shipping, and other services through the Fulfillment by Amazon (FBA) system, but it takes a big cut out of their revenue. A recent Marketplace Pulse study based on profit and loss statements from a sample of sellers found that “Amazon is pocketing more than 50 percent of sellers’ revenue—up from 40 percent five years ago,” because “Amazon has increased fulfillment fees and made spending on advertising unavoidable.”

“According to P&Ls provided by a sample of sellers, a typical Amazon seller pays a 15 percent transaction fee (Amazon calls it a referral fee), 20–35 percent in Fulfillment by Amazon fees (including storage and other fees), and up to 15 percent for advertising and promotions on Amazon. The total fees vary depending on the category, product price, size, weight, and the seller’s business model,” Marketplace Pulse wrote in February.

According to Bloomberg’s article, the “FTC has amassed evidence that the company disadvantages sellers that don’t use these services, and the agency is investigating an algorithm that selects merchants for the web store’s coveted ‘Buy Box,’ where consumers can add products to their cart with one click.”

“The expected allegations are similar to a 2020 report from a US House subcommittee—which counted Khan as a staff member—and overlap with a European antitrust case that charged Amazon with rewarding sellers that use its fulfillment services and using merchants’ sales data to boost its own retail business,” Bloomberg wrote. Amazon agreed to a settlement with the EU in December 2022.

The FTC’s current investigation began two years before Khan became chair. “Amazon received the initial investigation notice in June 2019, according to documents viewed by Bloomberg. The first request for records followed two months later,” the Bloomberg article said. Upon taking charge in 2021, Khan “personally helped draft some lines of questioning for investigators” and took other actions to beef up the probe into Amazon.

One of the major reasons I stopped FBA was the costs involved, then the refund monkeys of Amazon customer service. I saw it as a place that increased sales 50% but then increased costs 75%

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They are going to have a hard time proving the “big cut out of their revenue” part being for many sellers in metro areas FBA is far cheaper than FBM. The overwhelming majority of the time the evaluation of costs of equivalent service is only better for FBM either at low volume or in a cheap/free labor market where a business owner does not equate for the value of their own time or that of their employee or they live/operate in a low wage community.

Their logistics system is cost effective for many if not most business models. I would think they would fight the buy box algorithm being skewed to FBA, but 99.999% of FBM sellers do not have nationwide distributed inventory, making even that fight more complex than a simple assertion of unfairness.

The FTC should address the business practice of intentional Amazon incompetence resulting in financial loss to sellers and unfair conditions associated with that incompetence.

I would love to contact the FTC regarding Amazon’s use of negative inventory receiving, if I didn’t think I would be kicked off the platform for a few hundred dollars of inventory over the last few years. I also am a fan of Hanlon’s Razor, so that also keeps me questioning the nefariousness of the situation.

I don’t think that applies to most sellers.
image
I don’t think I could buy a soda with a 50% increase of my 1-3% total refund rate being most of our products are simply returned due to packaging, not theft.

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Article link:

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Straight to the source, as is your long- & well-demonstrated wont.

“Amazon declined to comment when contacted by Ars today” caught my eye, as well, when I read Lunaticks’ post; there’s a reason why I subscribe to so many sources of information…

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I was going to post yesterday but everything I found was paywalled. Thanks @papy, and thanks @Thelunatick for pasting the Bloomberg text here (it was paywalled)

This is going to be interesting when it comes down, because Amazon has argued in the past how much it helps small business, but in reality we all know some help comes with a lot of pain on Amazon.

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Very double edged sword for us. Gave us our huge boost in business until 2015 (when they opened it to Chinese to sell direct in America). Since 2015 we have been on a steady decline, most of it because Amazon used us and others as research for hot products.

Then then forced Manufacturers to sell direct to them or quietly did made the product violate Amazon’s policies. Any Manufacturer that had MAP pricing Amazon ignores and the Manufacturer kind of shrugs their shoulders because they end up dependent on Amazon because the competition is driven out of business.

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Mr Rossmann nails it on this one.

-Ana

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I am happy they are finally going after Amazon, but as said I am expecting a slap on the wrist.

What they need to do:
Stop Amazon from direct competition with their 3p sellers.
Stop Amazon from “losing” FBA items so they can reverse engineer them for Amazon basics.
Create a clear buy box algorithm based on price and how long the store is in existence.
Get rid of the fair price policy
Get rid of the fair shipping price policy.
Put returns back in the hands of the sellers no more RFS, No more Safe-T Claim where an item is not sellable and we get back at most 20%

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Agreed, on all points.

Sadly, as was pointed out 28Jun23 in the News_Amazon Headline-accompanying ‘discussion’ thread “New options to report seller-fulfilled returns issues” (link, NSFE), Amazon has instead veered in the opposite direction w/ the Editorial Team’s latest revision of the SHC’s Guidelines for charging restocking fees (link, Help Hub Revision).

Ever since I first began monitoring that help page on 20Nov2016, I’ve archived each of its revisions - three alone between 20Aug2020 & 1Oct2020 (which were all different, as a result of the implications of what was more-or-less belatedly heralded in the 15Sep`20 News Headline “Policy update: Updates to the seller-fulfilled returns refund workflow” (link, Seller Central), and represented the first times the page had changed since 21Sep2019) - so I am thereby able to substantiate what COMIX notes in that post (citational references & screenshots of the archived .mht files available upon request).

Sigh.

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I had to do some actual work for a couple hours, but Forbes, Politico, Bloomberg, Reuters and others had stories out the last couple days.

This was part of one from Reuters –
" The U.S. Federal Trade Commission (FTC) is finalizing its long-awaited antitrust lawsuit against Amazon (AMZN.O) in a move that could ultimately break up parts of the company, Politico reported on Tuesday.

The wide-ranging lawsuit is expected as soon as August and will likely challenge a host of Amazon’s business practices, the report said, citing people with knowledge of the matter.

The complaint could focus on challenges to Amazon Prime, Amazon rules that the FTC says block lower prices on competing websites, and policies it believes force merchants to use Amazon’s logistics and advertising services, the report said."

I follow way too many sites and do so sometimes to see what ‘questionable’ sources might be up to.

This is a poll that Ed (whose name shall not be said) had out on LinkedIn –

I’m kind of digging that 71% number :rofl: :rofl: :rofl: :rofl:

Ed’s next poll. “Should I have to serve hard time?”

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:man_shrugging:

The FTC’s Amazon complaint is heavily redacted, so it’s hard to know whether the FTC has the goods on Amazon. But even if the accusations are true, there are many companies that are worse than Amazon.

A study of 11,000 shopping websites found that nearly 2,000 use dark patterns but didn’t name names. A study of 105 popular online services found 2,320 instances of dark patterns and each service used at least one. Amazon Prime was an offender in the study, but so were eBay, CBS News, TikTok, and ESPN. And only 4 of the 105 online services used fewer dark pattern practices than Amazon.com.

A database of about 950,000 political emails from 16,082 senders finds that 99% use dark patterns, 42% of emails contain at least one dark pattern tactic, and that Democrats tend to send twice as many emails as Republicans.

Deception in business and politics is wrong. But it seems there are bigger fish to fry than Amazon when it comes to dark patterns in marketing.

The FTC is attacking dark patterns but missing the biggest abusers | Washington Examiner (MSN)

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I think the heart of the matter is as Chris Rock put’s it “selective/utilitarian outrage” - it’s all game theory and everything is fuq’d

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They might be worse, but do they have the same reach, (misplaced) consumer trust, or US market share as Amazon?

They can be the absolute worst, but if they only affect 500 people versus Amazon’s 5,000,000 (<made-up number), then resources should be focused on setting precedent with the biggest fish first.

The FTC chair has made it clear in her public statements that she will pursue anti-trust actions where the law is unclear about whether the practices in the charge are illegal.

Obviously, if the target decided to settle, the law will remain unclear but she will get a result which satisfies her.

If this is litigated, it is likely that we will not know what the law is until SCOTUS has ruled, which could take longer than Ms Khan’s tenure at the FTC.

Thread on the NSFE by our mew SAS member @snobfoods .

https://sellercentral.amazon.com/seller-forums/discussions/t/86bfef05-ec7a-4e03-842b-5eb41f34adc9

Interesting read.

-Ana

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I appreciate the re-post. The mods closed the thread a few minutes after I used the term “union.” Maybe “council” would be less alarming? Anyhow, I obviously have some strong feelings about what needs to change within Amazon and I hope regulators will make at least a decent attempt. On that note, is anyone following the UK CMA agreement? In my searches, it appears to be mostly ignored and the window to send comments to CMA is rapidly closing.

Indeed, and the FMT (“Forum Moderation Team” aka "CMT’ for "Community Manager Ream Team) ‘scrubbed’ many posts between my first archiving of your NSFE discussion (081423 7:19 PM EDT) & my second (081623 12:17 PM EDT) - but somewhat inexplicably, they didn’t scrub the thread entirely - evidently, they struggle w/ the illogical ‘nesting’ format as mightily as does anyone else.

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lol. No doubt. It’s infuriating trying to find a certain message to which you wish to respond.

Agreed.

Along many other members of our Seller Community, I pledged to never again post in the ASF (“Amazon Seller Forums”) from this SoA Account once it got borked borged into the NSFE (“New Seller Forums Experience”), and as my word is my bond, I will not be doing so in any foreseeable circumstance - but I still peruse it rather copiously, and the ‘nesting’ format is just as aggravating to me as it apparently is for everybody else, active participant or not.

More than a few of the best and brightest among us have opined that this ‘feature’ might be among the indications that Amazon’s actual intent is to hamstring the ASF entirely, but I personally suspect that Hanlon’s Razor is probably in play with Katie’s brainchild, the NSFE.

BTW, I hope that you will forgive my laxness in not offering you welcome in my initial reply to you upthread - which I shall endeavour to correct now:

Welcome to the SAS - and may you find it to be what so many of us do, the pinnacular exemplar of a BSFE (“BEST Seller Forums Experience”)!

Like our friend @Image asked in another thread, I am curious as to how you found the SAS - may I make so bold as to ask if you can find your way clear to provide some detail as to that, and as to whether or not it stemmed from submissions to the forum you created for gathering evidence to submit to the FTC (and/or other regulatory bodies)?

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