“I built Amazon 26 years have passed with a long -standing mission to make it the most customer -centric customer center on Earth, ”Jeff Bezos witness before the House Antitrust Committee last summer. “Not every business does the customer first approach, but we do, and it’s our biggest strength.”
Bezos ’concern for customer satisfaction is at the center of Amazon’s own mythology. Every action taken by the company, on this account, is designed with only one purpose in mind: to make the customer happy. If Amazon has become an economic juggernaut, the king of ecommerce, that’s not because of any unfair approach or sharp elbow; it’s simply because customers love it so much.
the antitrust lawsuits filed against Amazon on Tuesday directly challenging the narrative. The lawsuit, brought by Karl Racine, a Washington DC attorney, points to Amazon’s use of a so -called “most preferred country” proposition in its contracts with third -party vendors, which are considered the majority of Amazon sales costs. A most favored country factor requires retailers not to offer their products at a low price on any other website, even their own. According to the lawsuit, it hurt consumers by artificially inflating prices across the internet, while preventing other ecommerce sites from competing against Amazon on price. “I filed this antitrust lawsuit to end Amazon’s ability to control prices in the online retail market,” Racine said at a press conference announcing the lawsuit.
For a long time, openly Amazon did what DC said; the “price parity provision” clearly requires third-party vendors from offering a lower price on other sites. It stopped in Europe in 2013, after UK and German authorities began an investigation. In the U.S., however, the period lasted, until Senator Richard Blumenthal wrote to antitrust agencies in 2018 suggesting that Amazon had violated antitrust law. A few months later, in early 2019, Amazon dropped the price parity.
But that’s not the end of the story. The DC lawsuit says Amazon simply replaced a new policy using different languages to accomplish the same result as the old rule. Amazon’s “Fair Pricing Policy” notifies third party sellers that they may be penalized or suspended for various violations, including setting the price of a product or service higher than recent prices offered by or on Amazon. ” This rule can protect consumers if used to avoid entering the price for scarce products, such as facemasks in the early days of the pandemic. But it can also be used smolder prices for items that sellers want to offer more cheaply. The key phrase is on Amazon. That is, Amazon has the right to cut sellers if they list their products cheaper on another website – just as it did under the old price equality provision. Agreed to final report filed by an antitrust committee last year, based on testimony from third-party vendors, the new policy “has the same effect of blocking vendors from offering more. low consumer prices on other retail sites. “
The main form taken by this price discipline, according to sellers speaking against Amazon publicly or anonymously, is by manipulating access to the Buy Box-those buttons “Add to Cart “and” Buy Now “in the upper right of an Amazon product listing. When you go to buy something, there are always a lot of sellers trying to sell. Only one can “win the Buy Box,” meaning they are the ones who sell when you click one of the buttons. Since most customers won’t scroll down to see what other sellers have to offer a product, winning the Buy Box is essential for anyone trying to make a living by selling on Amazon. According to James Thomson, a former Amazon employee and partner of Buy Box Experts, a brand consultancy for Amazon sellers, I said in 2019, “If you can’t make money in the Buy Box, for all intents and purposes, you can’t get what’s sold.”
Jason Boyce, a longtime Amazon sales consultant, explained to me how it works. He and his colleagues were excited when the final contract with the third-party seller they signed with Amazon, to sell sporting goods on the site, excluding the price parity provision. “We thought,‘ This is great! We can offer discounts at Walmart, and Sears, and wherever, ‘”he said. But something strange happened. Boyce (who spoke to House investigators as part of the antitrust inquiry) noted that, once his company lowered prices on other sites, Amazon’s sales began. “We went to the list and the ‘Add to Cart’ button was gone, the ‘Buy Now’ button was gone. However, there was a gray box that said, ‘See All Shopping Options.’ You can still buy the product, but it’s one more click. Now, one more click on Amazon is a forever-it’s all about instant gratification. ”In addition, ad spending on his company went down, which he realized was because Amazon didn’t show ads to users without a Buy Box. “What did we do? We went back and raised our prices everywhere, and within Everything is back in 24 hours. Traffic has improved, clicks have improved, and sales have returned. ”