Welcome to 3PM Snacks, a mid-week (and mid-day!) rundown of what’s going on in the worlds of eCommerce, big data, and artificial intelligence. We hope you find it informative and easy to digest.
As first reported by CNBC, in late July, Amazon quietly launched a new program called Sold by Amazon (SBA), which lets the company control third-party product prices in exchange for a minimum payout to sellers. The new program comes at a time when Amazon’s pricing policy has drawn the attention of critics, who argue it prevents sellers from offering lower prices elsewhere, or in some cases, forces them to raise prices at other sites.
Amazon touts SBA as a way for its third-party sellers to “save time and increase sales by automating prices so they can consistently and effortlessly offer customers great prices.” For customers, it would seem that SBA is a clear win. And, if you ask some experts, they’ll say that SBA is a low-risk initiative that will allay some of the anti-competitive criticism of Amazon. Time will tell if SBA ultimately helps Amazon navigate out of the antitrust maelstrom that it finds itself in.
But the thing about storms is that there’s almost always another one on the way. In Amazon’s case: the product liability storm. One question that no one has asked since SBA was announced is: Did Amazon just open Pandora’s Box on its liability for third-party products sold on its site? Amazon has faced a number of lawsuits over the years from customers for defective and dangerous products purchased from third-party sellers on its marketplace, the most recent of which involving a woman blinded by a faulty dog leash. In these cases, Amazon’s defense more or less boils down to: “we’re not a seller; we merely provide an online marketplace for products.”
But now, with SBA, when a customer places an order, Amazon buys the product from the third-party seller and ships it (basically a consignment model). So, now that Amazon is a seller for some third-party products, will it face strict product liability? Time will tell.
If you ask antitrust expert Sally Hubbard, then yes, Amazon is a monopoly because it has the power to both control prices and exclude competition.
Amazon obviously disagrees, claiming that it represents a small percentage of overall retail and notes that it competes with a variety of businesses in cloud, streaming, grocery, and other sectors. Hubbard’s response to Amazon’s market segment defense: “Monopoly power can be proved by direct evidence: the actual exercise of control over price or the actual exclusion of competition. Defining the market and looking at market share is a form of second-best indirect evidence and shouldn’t even be necessary here because direct evidence exists.”
In the end, whether Amazon is or isn’t a monopoly might be an entirely philosophical question — antitrust experts are skeptical of whether any real action will come out of the FTC’s investigation because, “in the U.S., prosecutors have to show that a company is using its monopolistic power to raise prices for consumers, which isn’t Amazon’s model.”
And they still matter.
Despite widespread reporting of fake reviews on Amazon, eBay, and other online marketplaces, consumers still trust them. According to eMarketer, consumers “view quantity of reviews as a way of immunizing from the distorting effects of fake reviews, while also serving as a proxy for a brand having an established track record. They also know that products and experiences can erode over time, so they place additional weight on the most recent reviews.”