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Amazon Shutdowns Program Accused of Price-Fixing

Kris Wassell • January 31, 2022

The tech giant denies wrongdoing and says its Sold by Amazon was legal, Washington’s Attorney General alleged it involved price-fixing and violates antitrust law.

Amazon is ending its third-party seller program that Attorney General Bob Ferguson alleged is involved in price-fixing.  Price-fixing is an illegal agreement between participants which agree to buy or sell products or services at a set cost. Amazon is accused of using technology to agree on prices with third-party sellers who sold on the multinational technology company’s e-commerce platform rather than compete with those businesses.  Amazon will now need to provide annual updates on its compliance with antitrust laws. Ferguson said in a press release that “Consumers lose when corporate giants like Amazon fix prices to increase their profits,” “Today’s action promotes product innovation and consumer choice, and makes the market more competitive for sellers in Washington state and across the country.” Amazon had declared net sales of $110.80 Billion during the third quarter of 2021. 

Ferguson alleges that Sold by Amazon drew in third-party sellers by guaranteeing that they would receive an agreed upon minimum payment for sales in exchange for their agreement to stop competing with Amazon. This program resulted in product prices increasing as Amazon’s algorithm was used to match prices from certain external retailers. As these prices increased, these sellers experienced a loss in sales and profits from Amazon’s algorithm and pricing practices. As these prices had been raised, many consumers had switched to buying Amazon branded products instead of third-party seller products which helped Amazon maximize their profits. 

According to the investigation, a majority of products offered in the Sold by Amazon program have been set at artificially high prices. As this algorithm was used, sellers had limited ability to lower the price of the product without withdrawing from Amazon’s third-party seller program. Many e-commerce platforms are available for third-party sellers, but Amazon has a large share in the e-commerce market with a forcasted 50% market-share. As many businesses try to compete with companies such as Amazon, trying to break into the market can be difficult as they cannot offer as many products at the low prices that Amazon branded products are being sold at. Many consumers also forget that they can contact these third-party sellers to support them directly or they many even be able to offer their original price before the algorithm had adjusted their products pricing. 

If you would like to learn more about the article please contact inquiry@tsgbrandedsolutions.com

Most of the information in this article has been sourced from the Advertising Specialty Institute

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