antitrust amazon

Seeking to Land Punches on Amazon, the FTC Is Punching Itself

Imagine trying to demonize Christmas. The Grinch did and failed. It’s hard to put an ugly face on what is glorious. Despite this truth, the FTC continues to try and demonize the much-beloved Amazon.

The strategy its bureaucrats have settled on seems to be rooted in finding fault with Amazon’s treatment of its third-party sellers. The punches aren’t landing, however, and they’re not landing because they’re contradictory. Basically the FTC is arguing with itself.

To see why, consider the FTC’s initial lament that Amazon looms so large in an online sales market that it created. The number arrived at was 38 percent of market share. Please keep that number in mind as you read on.

It’s important because in failing to shift public opinion with its 38 percent revelation, the FTC has once again tacked to the treatment of third-party sellers eager to profit from Amazon’s heft in the online space. Which is kind of the point. Or should be.

The simple truth is that lots of third-party sellers want to feature their wares on Amazon. Which is logical. If your goal is to sell products and services, it’s best if you go where the shoppers are. Get it? Third party sellers do, but apparently the FTC doesn’t.

A report from the Wall Street Journal indicates that the FTC is worked up about Amazon’s “requirement that sellers offer their goods at their lowest price on” Unknown is where the problem is. For third-party seller or Amazon.

To see why, stop and think about Walmart. Why can it offer “everyday low prices”? It can because it makes up in volume what it gives back in lower prices per unit sold. Which is just a reminder that even if Amazon didn’t require that third-party sellers offer the lowest prices on Amazon, they would much more often than not do so of their own volition. As evidenced by Amazon’s heft, the potential to sell in bulk is what enables the offering of lower prices.

Contrast that with third-party sellers offering up products at their own physical or online stores. Why would it offer the lowest prices at two locales where the volume of sales would be so much lower? They most likely wouldn’t, and they wouldn’t for the same reason they would offer the lowest prices on Amazon: third-party sellers can’t generate the volume necessary to support the lowest prices at their own stores or websites.  

It’s all a reminder that while Amazon’s demands of third-party sellers are wholly logical, most often the Seattle giant wouldn’t need to make the demand. Amazon is where the lowest prices make the most economic sense.

Still, it’s essential to address the logic underlying Amazon’s demands. And they are logical. If anyone doubts this, imagine running your own business only for someone to show up in search of shelf space. If so, you better believe you’re doing to demand the best prices for your customers. Really, what business would give up shelf space (or search space) only to be undercut? No thanks. In criticizing Amazon, the FTC is demanding that rather than prosper, Amazon harm itself and its sales.

Which brings us to the contradiction, admittedly one of many. The FTC’s claim about its third-party seller demands is that Amazon is forcing those third parties to raise prices on consumers by demanding that they remain lower on Amazon. Except that the FTC has long claimed that with 38 percent market share, Amazon handles a dominant number of online transactions as is.

Ok, which is it? Is Amazon dominant or not? If it is as the FTC claims, then by definition Amazon’s demands of its third-party sellers bring about lower consumer prices precisely because most buyers come to Amazon. The FTC’s accusations are contradictory precisely because antitrust law is. Always.

Republished from RealClear Markets


  • John Tamny

    John Tamny is a popular speaker and author in the U.S. and around the world. His speech topics include "Government Barriers to Economic Growth," "Why Washington and Wall Street are Better Off Living Apart," and more.

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