Amazon punishes seller for 5-cent price cut, echoing FTC case

About once a week, Bernie Thompson gets a “take action” email from Amazon. Online sellers like Thompson dread these messages because it means the ecommerce giant has discovered one of their products is selling for a lower price on a competing website. Unless he adjusts the price, Thompson says, Amazon could make his merchandise virtually invisible to shoppers.

Such emails are at the heart of the antitrust lawsuit the US Federal Trade Commission filed on Tuesday. The agency alleges that Amazon uses its online dominance to prevent would-be competitors from luring customers away with discounts — indirectly pushing up prices for consumers. In the complaint, the FTC says the company buries products in search results unless merchants comply with its “take action” demands.

Amazon has vowed to challenge the FTC lawsuit in court, adding that it “radically” departs from the agency’s mission of protecting consumers.

Earlier this month, Thompson received an email alerting him that his company, Plugable Technologies, was offering a multiport USB adapter for $39.95 somewhere online when the price on Amazon was a nickel more. The five-cent discrepancy was enough to trigger the email, a jargon-filled missive that would baffle most people.

“Below is a list of product(s) in your catalog that are not currently eligible to be the Featured Offer because they are not priced competitively compared to prices for those products from retailers outside Amazon,” states the email, which provides a link Thompson can click to change his price on Amazon. “If you’d like to restore Featured Offer eligibility visit Pricing Health within the Pricing section of Seller Central to lower your price on Amazon.”

In this instance, Thompson lowered his price on Amazon by a nickel. In other cases, he either raises his price on competing sites or just lets his inventory sell out without replenishing it so Amazon no longer detects a price difference.

In its complaint, the FTC says Amazon monitors prices across the web with such vigilance that competitors never have a chance to emerge. Even if competing businesses charge merchants less to sell on their platforms, Amazon’s actions discourage sellers from passing along the savings to shoppers. These “antidiscounting tactics” upend “the normal give-and-take process of competition,” the agency says.

Influencing prices on other sites is one of several ways Amazon stifles competition and hurts consumers, according to the FTC. Other practices include selling the most prominent placement on the web store to the highest bidders in advertised slots and giving preferential treatment to merchants who pay Amazon additional fees for warehouse storage, packing, and delivery services. Those practices all degrade the experience for shoppers, the agency says.

In a blog post, General Counsel David Zapolsky said the agency’s allegation that the company’s pricing policy leads to higher prices is wrong and backwards. “If they were successful in this lawsuit,” he wrote, “the result would be anticompetitive and anti-consumer because we’d have to stop many of the things we do to offer and highlight low prices — a perverse result that would be directly opposed to the goals of antitrust law.”

Merchants have complained for years that Amazon forces them to increase their prices on other websites, a practice Bloomberg first reported in 2019. Several sellers provided detailed evidence to federal investigators in the hopes that the government would crack down. In the meantime, they simply did what Amazon asked.

Still, some merchants believe years of pressure from the FTC and other government agencies, as well as stepped up competition, have already made Amazon more seller friendly. Andrew Morgans, who has sold apparel, pet supplements, and a variety of other products on Amazon for the past 12 years, said Amazon’s practices are common throughout the retail industry.

“I’m sure there’s things happening behind the scenes that give Amazon some kind of preference, but all businesses do that,” Morgans said.