Imagine trying to demonize Christmas. The Grinch succeeded and failed. It is hard to put an ugly face on what is glorious. Despite this truth, the FTC continues to try to demonize the beloved Amazon.
The strategy its bureaucrats have settled on appears to be rooted in finding fault with Amazon’s behavior toward its third-party sellers. Punches don’t land, though, and they don’t land because they’re countered. Basically the FTC is contradicting itself.
To see why, consider the FTC’s original lament that Amazon loomed so large in an online sales market it created. The number it reached was 38 percent of the market share. Keep this number in mind as you read.
It’s important because by failing to sway public opinion with its 38% disclosure, the FTC has once again dealt with third-party sellers looking to take advantage of Amazon’s online weight. Which is the point. Or should be.
The simple truth is that many third-party sellers want to list their products on Amazon. Which makes sense. If your goal is to sell products and services, it’s best to go where the buyers are. Take it? Third-party sellers do, but apparently the FTC doesn’t.
A report from Wall Street Journal indicates that the FTC has studied Amazon’s “requirement that sellers offer their products at their lowest price on Amazon.com.” It is unknown where the problem lies. For third party sellers or Amazon.
To see why, stop and think about Walmart. Why can it offer “everyday low prices”? It can because it makes up for in volume what it gives in lower prices per unit sold. Which is just a reminder that even if Amazon didn’t require third-party sellers to offer the lowest prices on Amazon, they would far more often do so of their own volition. As evidenced by Amazon’s weight, it is the ability to sell in bulk that enables lower prices to be offered.
Contrast that with third-party sellers who offer products in their own brick-and-mortar or online stores. Why offer the lowest prices in two locations where sales volume would be much lower? They probably wouldn’t, and they wouldn’t do it for the same reason they would offer the lowest prices on Amazon: third-party sellers can’t generate the volume necessary to support the lowest prices on their own stores or websites.
It’s all a reminder that while Amazon’s demands on third-party sellers are perfectly reasonable, most of the time the Seattle giant doesn’t have to make the demand. Amazon is where the lowest prices make the most economic sense.
However, it is important to address the logic behind Amazon’s claims. And it makes sense. If anyone doubts this, imagine having your own business only to have someone show up looking for shelf space. If so, you better believe you’re doing it to get the best rates for your customers. Really, what business would give up shelf space (or search space) just to make it smaller? No thanks. In criticizing Amazon, the FTC is demanding that instead of prospering, Amazon will hurt itself and its sales.
Which brings us to a contradiction, admittedly one of many. The FTC’s claim about its third-party seller requirements is that Amazon is forcing those third parties to raise prices to consumers by requiring them to stay below Amazon. Besides, the FTC has long claimed that with a 38% market share, Amazon handles a dominant number of online transactions.
OK, which one is it? Is Amazon dominant or not? If it is as the FTC claims, then by definition Amazon’s demands on its third-party sellers result in lower consumer prices precisely because most shoppers come to Amazon. The FTC’s charges are controversial precisely because they are antitrust law. Always.