Amazon appears determined to maintain its position as the dominant force in the online retail industry, even if it means negatively impacting both its sellers and customers. In September, the FTC finally filed the long-anticipated antitrust lawsuit against Amazon, alleging the use of illicit strategies to maintain its supremacy. Previously undisclosed details of the lawsuit have now been made public.
Amazon’s undisputed control of the online retail market has been instrumental in enabling small businesses to reach a broader audience. However, over time, Amazon’s approach appears to have shifted towards exploitation. The company continues to raise fees for third-party sellers, a move that has been particularly burdensome for smaller businesses, even pushing some into bankruptcy. Amazon had previously dismissed these allegations as groundless, but the recently revealed documents tell a different story.
According to The Wall Street Journal, internal documents cited in the initial complaint indicate that Amazon’s executives were well aware of the consequences of the company’s policies. These documents reveal that Amazon’s policies, including the requirement for sellers to offer the lowest prices online or face penalties, had a punitive element. One executive pointed out that many sellers “live in constant fear” of Amazon’s repercussions for not complying with the ever-changing pricing policy.
The FTC alleges that Amazon had been closely monitoring its sellers and penalizing them for offering lower prices on other platforms, a practice the agency deems a violation of antitrust laws. The unredacted documents also show that Amazon increased prices by over $1 billion between 2016 and 2018 through the use of covert algorithms referred to as “Project Nessie.” It was further disclosed that the “take rate,” which represents the amount Amazon collects from sellers using the Fulfillment By Amazon logistics program, climbed from 27.6 percent in 2014 to 39.5 percent in 2018. It remains unclear if these figures have changed in more recent years, as that information remains redacted.
Amazon’s negative impact isn’t limited to its sellers; it also extends to its customers. The complaint reveals Amazon’s expanded use of ads in search results, with several ad executives within the company acknowledging that these sponsored ads often do not align with the original search and harm the consumer experience on the site.
The FTC alleges that these policies were conceived by Jeff Bezos, Amazon’s founder and former chief executive, with the aim of boosting the company’s profit margins. The FTC complaint contends that “Mr. Bezos directly ordered his advertising team to continue increasing the number of advertisements on Amazon, even if it meant allowing more irrelevant ads, because the revenue generated by advertisements outweighed the revenue lost due to the deterioration of the consumers’ shopping experience.”
