Amazon push for lower prices could be bad for shoppers everywhere

As antitrust scrutiny of Amazon mounts, the retail behemoth has been pressuring some of its top sellers to drop prices to ensure shoppers cannot find a lower price anywhere else — online or in a brick-and-mortar store.

Since early this year, Amazon has been telling some of the largest third-party sellers on its Marketplace platform they can't list new products until they match prices offered by Amazon's retail competitors, like Walmart, Target and Costco, according to copies of emails between seven sellers and Amazon seen by The Seattle Times.

Amazon's threats may add fuel to arguments that the company's control over its Marketplace platform violates federal antitrust laws. The tactic could also raise prices for consumers, according to interviews with employees and executives of some of the largest sellers on Amazon's platform.

'Scared of Amazon'

The CEO of one seller whose ability to create new listings was suspended earlier this year said he believes Amazon's pricing policy is anticompetitive, but, fearing retaliation, has not communicated those concerns to Amazon.

"Amazon sellers are more scared of Amazon than [of] the U.S. government," he said.

In email messages to sellers, Amazon has said that "to protect the customer experience" the seller is "prevented from listing new products."

The emails go on to say the seller "has failed to consistently maintain our standards" by not ensuring its prices were "competitive compared to what could be found in other retailers" 95% of the time.

Amazon believes its policy "helps to produce lower prices for customers overall," spokesperson Patrick Graham said in a statement.

"Sellers have full control over the prices they set on Amazon," Graham said. But, he continued, if prices for nationally recognized brands are "consistently" higher on Amazon than at other major retailers, "we see that as trying to gouge Amazon customers and we don't think that's acceptable."

But sellers, antitrust attorneys and Amazon's hometown congresswoman say the policy demonstrates how Amazon is increasingly exerting control over the activities of the businesses on its Marketplace.

The Seattle Times interviewed executives and current and former employees at five major Amazon sellers who have experienced pressure from Amazon to lower their pricing.

Not mom-and-pop shops

The merchants affected by Amazon's new policy aren't the mom-and-pop operations Amazon typically highlights when publicizing its $295 billion marketplace, where nearly 2 million sellers globally list merchandise for sale.

These third-party sellers are well-bankrolled businesses, some with hundreds of millions of dollars in revenue. One recently went public. Many have authorized reselling relationships with nationally known brands like L'Oreal, Unilever and Johnson & Johnson that can prohibit them from selling products for less than a contractually mandated price.

E-commerce firm Packable, by some estimates the largest seller on Amazon.com, was unable to create new listings for some brands for nearly a month this summer, according to a current employee who asked not to be named because they were not authorized to discuss the issue. On Amazon, Packable sells health and beauty products, household goods and medical supplies like CeraVe lotions, Nature's Bounty vitamins and Sensodyne toothpaste.

The new-listing prohibition contributed to a projected year-over-year drop in sales of more than 50% for one brand Packable sells, they said.

"We have warehouses full of product that we can't get to the market because of this policy," said the CEO of a third large Amazon seller. Citing constraints in the global supply chain, he added, "it was hard enough to actually order it, get it to arrive in time. Now we have to see if we can actually get it listed."

Rep. Pramila Jayapal (D-Wash.) described Amazon's new tactic as another way that the company uses its "monopolistic power" to "control a marketplace completely, so consumers don't have choices." Jayapal, vice chair of the House committee dealing with antitrust issues, has introduced legislation that could compel Amazon to spin off its retail marketplace.

"Companies have to have the autonomy to set their own prices," Jayapal said. Amazon's pricing policy "is not how a competitive, free and healthy marketplace works, that one company can dictate the behavior of other companies on its platform."