The Web Retailer News Digest for May 28th, 2021
For the first time, Amazon is being sued in an antitrust lawsuit in the US.
The attorney general for Washington, D.C., Karl Racine, alleges that Amazon engaged in anti-competitive practices that resulted in consumers paying higher prices. It’s the sixth antitrust case targeting major US tech companies in the last year, but the very first involving Amazon.
These cases take a long time to come to court, and the Federal Trade Commission’s own investigation into Amazon over potential market abuses is still ongoing. But the first shot has now been fired, and Racine has thrown out the welcome mat to other lawyers to join his case.
But what in particular does this case allege that Amazon has done?
The policy that finally landed Amazon in court
Out of the many competition law violations that Amazon has been accused of, which one is finally getting them sued?
The answer begins with Amazon’s notorious “price parity” clause. This policy said that marketplace sellers could not offer the same products at a lower price on another website. It was dropped in Europe in 2013, and in the US in March 2019. Why? Well, from regulatory pressure that the policy could stifle competition and inflate prices.
The removal of the price parity clause did not mean the end of the practice, according to the lawsuit, because it was swiftly replaced with a near-identical clause, called the “fair pricing policy”. This enables Amazon to take a range of actions, including Buy Box suppression and even account suspension, if it believes that prices are set at levels that could “harm customer trust”.
Practices that might do that include, but are not limited to, the following (emphasis added):
- Setting a reference price on a product or service that misleads customers;
- Setting a price on a product or service that is significantly higher than recent prices offered on or off Amazon; or
- Selling multiple units of a product for more per unit than that of a single unit of the same product.
- Setting a shipping fee on a product that is excessive. Amazon considers current public carrier rates, reasonable handling charges, as well as buyer perception when determining whether a shipping price violated our fair pricing policy.
So, while price parity forbade sellers from offering higher prices on Amazon than other websites, the fair pricing policy targets sellers who offer prices which are significantly higher. You can probably see why government lawyers have not taken Amazon’s actions here in good faith!
The logic of why these policies result in higher prices goes like this: sellers set their prices on Amazon to include additional costs such as referral fees and FBA fees, then they have no option but to set their price the same (or higher) on platforms with lower fees, such as their own website. So, the Amazon price serves as a floor that keeps prices up everywhere.
Amazon, unsurprisingly, does not agree. A spokesperson said in a statement:
The DC Attorney General has it exactly backwards – sellers set their own prices for the products they offer in our store. Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively. The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.
Clearly their logic is that these policies keep prices low on Amazon, rather than keeping prices high everywhere else. As prices are always relative, those two things are exactly the same, aren’t they? Give it a couple of years (or more) for this case to run its course and we will find out.
Read more at Bloomberg.
Amazon to collect EU VAT from July 1st
New VAT rules come into effect in the EU from July 1st. Amazon will start collecting VAT on the sale of goods to consumers in the EU where either of the following apply:
- Goods worth up to €150 are delivered from outside the EU.
- Goods of any value are delivered from within the EU where the seller is established outside the EU.
Sales to businesses are not affected.
The changes aim to simplify VAT collection and ensure that taxes are correctly paid on all relevant sales. There are also changes for sellers based within the EU.
Read more at Amazon Seller Forums.
Amazon welcomes sellers from 85 additional countries
Amazon now accepts seller registrations from almost all countries in the world, after adding 85 new countries to their list.
The new additions read like a very exotic travel itinerary, including Bhutan, Fiji, Iraq, Kazakhstan, Montenegro, Tuvalu, and Zambia.
Only countries under sanctions from the US are still excluded, such as Cuba, Iran and North Korea.
Rest of World tells the story of a linen exporter in Pakistan who had to work around the previous restrictions by trading through a partner in Dubai. Now businesses in Pakistan – and almost anywhere – can sell directly on Amazon.com.
Will this lead to an influx of new sellers from these previously banned countries? Sellers might fear the arrival of new competitors, particularly those from countries with low costs of production and, in some cases, a reputation for unscrupulous practices.
However, Amazon does still require an internationally chargeable credit card and phone verification for sellers. In its Brand Protection Report released earlier this month, Amazon said that six million seller registration attempts were blocked by its verification processes, so it’s not like the doors are as wide open as they used to be.
New tool for customized products, faster default handling time
Amazon has released a new bulk listing tool for sellers of customized products. By using an Excel template, sellers can make changes to many ASINs at once. The tool is only available to sellers registered in the Amazon Custom program, a scheme for businesses selling products that customers can tailor with their own text or images.
Sellers who fulfill their own Amazon orders can now set a faster default handling time of one business day. Previously, Amazon used a default handling time of two business days to calculate estimated delivery times for seller-fulfilled orders. The expected ship date for orders with one business day handling time will be the next business day. Sellers can still change the default to two business days if they choose.
Etsy passes Digital Services Taxes on to sellers
Digital Services Taxes have now been introduced in the UK, France, Italy, Spain, and Turkey, in an effort to address the common practice of tech companies (e.g. Facebook, Google and Amazon) avoiding local taxes by shifting their profits to low-tax jurisdictions such as Luxembourg and Ireland.
Etsy has decided to pass the cost of these new taxes onto their sellers, who are already laboring under hefty fee increases, as a “Regulatory Operating fee”.
The new fee will be charged on the total sale price including shipping, but will be fairly small. In an example provided by Etsy, a UK seller with a £25 sale will pay a Regulatory Operating fee of 6 pence, equivalent to around 0.25%.
Read more at Etsy.
Webinars in the week ahead
Various dates: Amazon advertising’s global webinar program rolls on with 20+ webinars scheduled, covering Sponsored Products, Sponsored Brands, reporting, optimization and tips (Amazon).
For US sellers
June 1: Crushing Your Amazon Competition (Tinuiti)
From TikTok leggings to TikTok kitchen cleaner
The 157 featured items run the narrow gamut from beauty products to cheap fashion items to miracle cleaning products and then back to more beauty products. This is clearly not about attracting a wide demographic.
The hottest product, which is currently sold out, is a household cleaning paste called The Pink Stuff. Apparently, cleaning is a very popular activity on TikTok.
For those who enjoy watching videos of people bleaching their toilets, here is a compilation of some of the (supposedly) greatest hits on TikTok:
According to AdAge, searches on TikTok for The Pink Stuff return about 225 million videos.
The Pink Stuff company president Sal Pesce said, “It’s insanity, I’ve just never seen anything like it. People are just fascinated by it. We’re not paying anybody. We don’t have any agreements with any influencers right now.” Sales have risen from 50,000 to 350,000 units a month.
Read more at AdAge.