Amazon’s battle against the FTC’s bogus lawsuit continued with the online retailer and marketplace asking the court to throw out the suit because it lacked the legal grounds to go to trial. Small sellers across the country criticized the FTC for not understanding how Amazon, e-commerce, or running a business works, and shared concerns over how changing Amazon’s operations could hurt their business.
Below are some key reasons Amazon asked the court to throw out the suit and the consequences for small sellers if the FTC successfully forces Amazon to change its operations.
Ignoring Retail Realities
At the heart of the FTC’s suit is a notion that Amazon is a monopoly with a stranglehold on a very specific market of “online superstores.” However, in reality, U.S. retail is a fluid, dynamic competitive landscape where online retailers compete against retail chains, department stores, and big box stores. Online marketplaces also compete fiercely for sellers’ business and are gaining ground on Amazon.
The FTC is just wrong. Amazon is less than 5% of the $7 trillion U.S. retail industry, and it’s worth noting that Walmart makes up 6% with $393 billion in sales.
Retail is not a zero-sum game. It’s the 21st century; sellers are smart and know that diversifying their sales methods and channels makes sense and is easier than ever. That’s why most sellers use five or more different sales methods.
If the FTC Wins
If the FTC is allowed to label Amazon, with just 5% of the U.S. retail market, as a monopoly, it will severely limit the size of any business and hurt every company’s ability to innovate, drive value for customers, and compete. Any standard business practice, including lowering prices to match or beat competitors or offering new products or services to customers, could be labeled anti-competitive.
Amazon Featured Offers
In its lawsuit, the FTC claims that Amazon uses anti-discounting measures that punish sellers.
All marketplaces, Amazon, eBay, Etsy, Walmart, HomeDepot, CVS, Target, and others – allow sellers to control their inventory, pricing, shipping, warranty, and customer service. The seller does not need the marketplace’s permission to raise or lower prices or introduce new products.
Amazon’s goal is to sell products that make consumers happy. Amazon provides the “Featured Offer” (formerly known as the Buy Box) to boost visibility for the product that will best meet customers’ needs and factors in price, shipping speed and accuracy, reviews, and available inventory. If a seller is not competitive on any of these, including price, they are unlikely to be the “Featured Offer,” but that listing will still be included in the search results.
If the FTC Wins
A platform’s rule favoring the lowest competitive prices helps all marketplace sellers because consumers know they are getting low prices (and quality service), increasing store traffic.
Suppose the FTC wins and Amazon can no longer feature products that meet customers’ needs, including competitively priced products. In that case, sellers lose because customers will stop trusting the marketplace to offer low prices.
Amazon Prime and Fulfillment by Amazon (FBA)
The FTC claims that sellers’ ability to obtain “Prime” eligibility for their products is predicated on using Amazon’s costly fulfillment service, making it substantially more expensive for sellers on Amazon to offer their products on other platforms.
For many sellers, Prime offers many sellers terrific value to help their businesses grow and succeed. But for other sellers, choosing to sell without Prime or choosing Prime for only some products or listings makes sense for their businesses.
Sellers are not required to use FBA to qualify for Prime. FBA is frequently the easiest and least expensive way for small sellers to meet the guaranteed delivery requirements for Prime. Still, sellers have the option of seller-fulfilled Prime so long as they meet the required product quality, delivery speed, and customer service standards.
If the FTC Wins
If Amazon can no longer require sellers to meet fast, advertised shipping speeds, then Prime loses its value to consumers and sellers alike. The FTC could also force a breakup of Amazon’s logistics network resulting in higher prices for sellers and consumers.