Lately, there’s been a lot of antitrust chatter surrounding the big five tech giants. Last month, Apple was under the microscope for its strict control over the App Store. Now it looks like it’s Amazon’s turn. According to recent reports from the Washington Post and Vox, it looks like the US Federal Trade Commission (FTC) is keen on investigating whether Amazon’s been unfairly undercutting competition with its Fulfillment by Amazon and Prime services.
At the start of June, sources told the Washington Post the FTC and US Department of Justice (DoJ) had struck an agreement to quietly divide responsibilities regarding competition oversight. While the DoJ got Google, the FTC reportedly called dibs on Amazon.
As to what caught the FTC’s eye? Vox cited a source saying the FTC is quietly gathering information from Amazon’s competitors in three areas: Pricing for Amazon’s Fulfillment By Amazon (FBA) service, Amazon undercutting its own sellers, and Amazon Prime bundles.
First off, FBA. It’s a logistics service where sellers can store their products in Amazon warehouses and have Amazon handle the packing, shipping, and customer service. What you may not know is sellers can also use it to ship items sold on other sites like eBay or Etsy. In fact, Gizmodo came across this as part of our ‘Goodbye Big Five’ series. Reporter Kashmir Hill tried to cut out Amazon and instead ordered a product off eBay...only to have it arrive in an Amazon box.
The problem isn’t necessarily FBA itself. It’s the pricing structure. Vox reports Amazon charges 75 per cent more if a seller ships to a customer who bought from a competing site. So while a seller pays $4.76 to pack, ship, and handle customer service for an item weighing between one to two pounds on Amazon US, the same item costs $8.75 on their own store, Etsy, eBay, or another commerce site.
The other two issues deal with Amazon undercutting competitors on Marketplace and through Amazon Prime. With Marketplace, the argument centres on whether its fair for Amazon to create over 100 of its own brands to compete with small-to-midsize third-party sellers. As for Prime, customers can pay a flat fee of $119 per year in the US (£79 in the UK) to gain access to benefits like one-day shipping, TV shows, music, and storage. The issue is that smaller services don’t have the same advantages that Amazon does, and may have to charge for each service individually. Furthermore, it’s not clear if Amazon needs to, or actually does, profit off of its annual Prime membership fee. If that’s the case, then bundling the services together may only serve to undercut competitors. [Vox, Washington Post]
Featured image: Getty Images