It sounded to me like the problem part was where Amazon sold competing products, then used the agreement to price-fix between their own products and the third party's.
Example: Amazon sells a dongle for $20, the competitors sell them for $20. Amazon makes a deal with each competitor, then raises all the prices to $25.
(edit) I think this kind of example also: The competitor's dongle is priced at $24 on Best Buy. Amazon raises competitor's the price to $24, but keeps its own dongle priced at $20.
> The “Sold by Amazon” program resulted in prices for some products increasing when Amazon programmed its pricing algorithm to match the prices that certain external retailers offer to online consumers.
> As a result, when prices increased, some sellers experienced a marked decline in the sales and resulting profits from products enrolled in the program. Faced with price increases, online customers sometimes opted to buy Amazon’s own branded products — particularly its private label products. This resulted in Amazon maximizing its own profits regardless of whether consumers paid a higher price for sales of products enrolled in the “Sold by Amazon” program or settled for buying the same or similar product offered through Amazon.
A wholesaler sells to a reseller at their usual price.
Reseller deliberately sells less than RRP & sometimes less than their buy price. It's a good way to guarantee the reseller "owns" the market.
Then, if the reseller is big enough and has captured the market, has the leverage to tell the wholesaler to lower the wholesale price and/or the reseller gets it made elsewhere and becomes the wholesaler.
It's pretty nasty.
It happened to my family business. A big box chain sold the same products for less than their buy price. We were close friends with the wholesaler ( a timber mill), and the sales rep even went to the big box to get them to lift their price.
2 years after shutting us down, the big box store sells the same product, from the same source, for 50% more than we ever used to sell it for.
It's more nefarious than simple loss-leadering and undercutting your competitor's margins. That's business 101. Amazon is playing business 201. Amazon took over pricing for the widget, and then undercut that price with their own. Stay with me for a second because 201 is kinda complicated.
Widget usually sells for $25. Amazon agrees to buy 1 from you at $20 (you give them a volume discount because it's Amazon buying so you figure it'll sell like hotcakes. You still make a profit at $20.). Amazon then prices your widget on their marketplace for $30. Seems fine so far. The trick is that Amazon turns around and sells their widget, made by an alternate supplier, for $23.
Your deal with Amazon means you no longer have control over how much your widget sells for, just that you're selling them to Amazon at $20 and Amazon gets to charge however much they want.
To no one's surprise, your widget, priced at $30, doesn't sell because Amazon's is $23. You're not allowed to turn around and sell them on Amazon's marketplace at all,
so they just sit there at $30 and don't sell.
The “Sold by Amazon” program resulted in prices for some products increasing when Amazon programmed its pricing algorithm to match the prices that certain external retailers offer to online consumers.
As a result, when prices increased, some sellers experienced a marked decline in the sales and resulting profits from products enrolled in the program. Faced with price increases, online customers sometimes opted to buy Amazon’s own branded products — particularly its private label products. This resulted in Amazon maximizing its own profits regardless of whether consumers paid a higher price for sales of products enrolled in the “Sold by Amazon” program or settled for buying the same or similar product offered through Amazon.
Amazon is actually fixing the price that you are selling on Amazon matched to what other sites are selling. There's no point in leaving if you're selling your widget on other platforms for the same price.
That sounds like pretty normal branding. I can get a powered hub for $20 from BUNCHALETTERZ who will disappear without a trace next quarter, or $35 from Anker that I’m pretty sure won’t burn down my apartment.
Is that true? This sounds like typical white label type stuff that you'd see at the grocery store. Safeway sells Safeway brand X and also name brand X, and presumably chooses the prices for both.
The grocery store probably has less incentive to abuse the relationship since the shelf space both products take up in the store is limited and valuable.
There used to be a restaurant chain called "Boston Market" (there are a few left). One of their signature products was cooked rotisserie chickens. What killed them was not a direct competitor, but the fact that Costco did, and still sells a similar product at a one dollar loss per chicken. The loss leader is going on forever.
Well, the competitor did agree to sell the items to Amazon. Nobody forced them. They did it for economic benefit. So I don't understand the problem here.
I don't really buy that consumer protection and antitrust regulations actually result in a better free market. I think the market is better off doing it's thing rather than a bunch of politicians trying to make it more efficient.
What do you mean by "better free market?" Are you using terms like "efficient" and "free market" in their technical sense or are you just saying that you don't like regulations?
Definitionally regulations are a divergence from an ideal free market. Provably, under some conditions (which don't exist in the real world) a market will converge to some definition of efficiency. Practically, no politician cares about this.
Politicians aren't trying to make the market more efficient with regulations -- good politicians are trying to protect their constituents, bad ones are mostly trying to protect their donors.
The funny thing is IP laws are by definition monopolies protected by government. Every one of the big tech "quasi-monopolies" are sitting on a mountain of it.
Be careful, IP is a hodgepodge of things, like copyrights, patents, trademarks, and trade secrets.
To pick one: trade secrets are not a monopoly. If you figure out the secret ingredient in Coca Cola (by legal means), you are free to use that knowledge and even publish it.
Similarly, I have my reservations about whether patents are a good idea; but I don't mind trademarks nearly as much.
This is anti trust because it’s probably in violation of the sherman act and price fixing.
The anti trust laws are designed to prevent monopolies and promote competition… as Amazon is acting as the market here and simultaneously fixing prices and discouraging competition with them thats a no-no
They did bought the goods from him beforehand. And he agreed to sell. He should have considered the possibility that Amazon has option to later sell the items as a higher price. Isn't that obvious to any seller?
Amazon does not buy and keep a stock, they charge you for the privilege of selling in their marketplace:
> Sellers then bore the risk of having their products not sell in a timely manner, or at all, while still paying Amazon for things like storage fees of their enrolled products
It's about the consumer, price fixing removes the competition and consumer have to pay more than they would in a competitive market.
It's sort of a cartel.
Example: Amazon sells a dongle for $20, the competitors sell them for $20. Amazon makes a deal with each competitor, then raises all the prices to $25.
(edit) I think this kind of example also: The competitor's dongle is priced at $24 on Best Buy. Amazon raises competitor's the price to $24, but keeps its own dongle priced at $20.
> The “Sold by Amazon” program resulted in prices for some products increasing when Amazon programmed its pricing algorithm to match the prices that certain external retailers offer to online consumers.
> As a result, when prices increased, some sellers experienced a marked decline in the sales and resulting profits from products enrolled in the program. Faced with price increases, online customers sometimes opted to buy Amazon’s own branded products — particularly its private label products. This resulted in Amazon maximizing its own profits regardless of whether consumers paid a higher price for sales of products enrolled in the “Sold by Amazon” program or settled for buying the same or similar product offered through Amazon.