Amazon Exposed For Illegally Squeezing Merchants As War With Walmart Heats Up

Years ago, US regulators quietly put a stop to Amazon's practice of forcing third-party sellers to offer their best prices on Amazon's platform, arguing that this practice was a blatant violation of anti-trust laws. But back in 2017, Amazon found a way to circumvent these rules by instituting "price alerts" that incentivized sellers to raise prices of their goods on rival platforms like

On Monday, Bloomberg published an expose revealing how Amazon appears to still be violating federal anti-trust rules by forcing third-party sellers to lower prices of products sold on Amazon. If sellers don't comply by either lowering prices on Amazon or raising prices on rival platforms, Amazon's algorithms will bury their listings, causing a sharp drop in sales. This has prompted some companies to sell their products at a loss just to hold on to market share.

This is one of the many practices that has prompted retailers to demand an anti-trust probe into Amazon. The FTC has taken the lead in the federal government's anti-trust probe of Amazon as the Trump Administration makes anti-monopoly scrutiny of big tech a priority.

Amazon price alerts reviewed by Bloomberg revealed how Amazon strategy works: The eCommerce giant doesn’t explicitly instruct merchants to raise prices on other sites. Instead, the notices might be an under-the-table strategy to encourage merchants to lower their prices on Amazon.

Some of the merchants who spoke with BBG said they’re so hemmed in by rising advertising costs on Amazon that they're more likely to raise the costs on other platforms. Particularly now that Amazon controls 40% of the US eCommerce market.

"Monopolization charges are always about business conduct that causes harm in a market," said Jennifer Rie, an analyst at Bloomberg Intelligence who specializes in antitrust litigation. "It could end up being considered illegal conduct because people who prefer to shop on Walmart end up having to pay a higher price."

In a statement delivered to BBG, Amazon insisted that sellers have "full control" over pricing (though, judging by the facts that BBG turned up in its investigation, this appears to be disingenuous).

In an emailed statement, an Amazon spokesperson said: "Sellers have full control of their own prices both on and off Amazon, and we help them maximize their sales in our store by providing them insights on how to be the featured offer." Walmart declined to comment. Online merchants typically sell their products on multiple websites, including Amazon, Walmart Inc. and EBay Inc. But many generate most of their revenue on Amazon, which now accounts for almost 40% of online sales in the U.S., according to EMarketer.

One eCommerce consultant told BBG that he advises his clients to list their products for the same price across all platforms, even if they can afford to sell for less on other platforms.

Jason Boyce, an Amazon merchant turned consultant, said he instructs clients to offer the same prices on all sites to avoid losing prominence on Amazon even if they can afford to sell for less on other sites. "Amazon is in control of the price, not the merchant," said Boyce, who runs Avenue 7 Media.

A former FTC lawyer said that if federal regulators determine that Amazon's "price alerts" are forcing merchants to cut prices on other platforms

Even so, Michael Kades, a former FTC attorney who now researches antitrust issues at the Washington Center for Equitable Growth, says the price alerts will almost certainly draw the government’s attention. "If regulators can prove that this conduct is causing merchants to raise prices on other platforms," he said, "Amazon loses the argument that their policies are all about giving everyone lower prices."

All of this, plus the cost of advertising that merchants must absorb to make their products stand out to customers, has effectively forced many merchants to hand Amazon nearly half of the sticker price of the items that they sell. Because of this, many merchants now hope that Walmart will overtake Amazon in terms of its dominance of the eCommerce market as the war for retailer dominance between the two companies picks up.

Online merchants typically sell their products on multiple websites, including Amazon, Walmart Inc. and EBay Inc. But many generate most of their revenue on Amazon, which now accounts for almost 40% of online sales in the U.S., according to EMarketer. Merchants have long complained that Amazon wields outsize influence over their businesses. Besides paying higher fees, many now have to buy advertising to stand out on the increasingly cluttered site. Some report giving Amazon 40% or more of each transaction, up from 20% a few years ago.

Here's what a typical pricing alert looks like, according to BBG. Moreover, BBG's revelation about the pricing alert would seem to contradict the company's testimony from a Congressional hearing last month.

A typical pricing alert reads: “One or more of your offers is currently ineligible for being a featured offer on the product detail page because those items are priced higher on Amazon than at other retailers.”

In plain English, that means merchants lose the prominent “buy now” button that simplifies shopping on Amazon. With that icon missing, shoppers can still buy the products, but it’s a more tedious and unfamiliar process, which can hurt sales. The lost purchases cascade through algorithms determining which products shoppers see, resulting in the items getting buried on the site, according to several

Anders Palmquist, a former Amazon employee and now vice president of the e-commerce consulting firm ARMR, said one of his clients was told that a lawn and garden product sold on Amazon was found at a lower price on another site. Palmquist investigated and discovered the item was selling for less on Walmart, prompting his client to halt the discount. Palmquist said his client is the only one selling the product online, so it wasn’t a matter of a competing manufacturer offering the same product for less.

Sutton said Amazon faces stiff competition from rivals like Walmart and EBay, giving it an incentive to help online merchants succeed on Amazon so they don’t defect to other sites.

Some merchants also revealed that nearly all of their sales happen via Amazon, and thanks to the company's pricing rules, they would be able to sell products for much lower prices on their own site - but unfortunately Amazon makes this effectively impossible.

Molson Hart, who sells toys online through his company Viahart, typifies the challenge. Hart says more than 98% of his $4 million in 2018 sales came from Amazon even though he also sells his products on EBay, Walmart and his own website. He was trying to sell a toy stuffed tiger for $150 on Amazon. Hart designs, manufactures, imports, stores and ships the item to customers; Amazon would get $40 for listing some photographs on its website, handling the payment and charging Hart to advertise the product on the site.

Hart said he could sell the product for about $40 less on his own website, but won’t since that would jeopardize his sales on Amazon due to its pricing enforcement, he said. “If we sell our products for less on channels outside Amazon and Amazon detects this, our products will not appear as prominently in search,” he wrote in a recent article on Medium. Hart has since lowered the price of the tiger.

Bloomberg's reporting might be enough to push federal regulators to hold Amazon accountable. Fines and even more stringent anti-trust actions might follow in the very near future if the feds determine that the company's "price alerts" are, in fact, illegal.