Home Business News New Amazon sellers’ fees could lead to the e-commerce giant’s breakup

New Amazon sellers’ fees could lead to the e-commerce giant’s breakup

by LLB staff reporter
17th Aug 23 11:45 am

Just as America’s Federal Trade Commission prepares to launch a major antitrust lawsuit against Amazon, the giant online seller has announced a new fee for those Prime traders who don’t use its logistics services.  

Starting in October, US Seller Fulfilled Prime users who opt out of Amazon’s delivery and warehousing services will have to pay Amazon a 2% cut of every sale, or a minimum of $0.25 per item, according to the global news organisation AP.

The news comes just as it’s reported Amazon’s representatives have failed to persuade America’s Federal Trade Commission (FTC) that it has not misused its size to engage in anti-competitive behaviour. The new fee could help pave the way for the FTC to file its antitrust lawsuit in an American federal court.

The UK-USA delivery specialist ParcelHero says the FTC’s Chair, Lina Khan, has previously criticised the actions of several big tech companies, particularly Amazon. The addition of new fees for Prime sellers attempting to avoid using Amazon’s logistics services will do nothing to mollify the FTC. If the Commission were to win its case, that could result in the breakup of the online giant.

ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘Amazon reportedly met this week with the three FTC Commissioners in what is commonly known in the US as a “last rites” meeting, which generally precedes the launch of a full-scale lawsuit.

‘The Commission is thought to have been investigating Amazon since 2021, looking into evidence of anti-competitive practices. These potentially include allegedly launching copy-cat white label products and allegedly giving undue prominence to sellers using its Logistics by Amazon service.

‘If the Commission wins its case, US experts say it could lead to the breakup of Amazon’s $1.3bn business.

‘America’s FTC operates in a similar way to the UK’s Competition and Market’s Authority (CMA).  The FTA upholds US anti-trust laws prohibiting practices that could have a negative impact on free markets and create entry barriers. Common examples of such behaviour may include price-fixing, corporate mergers that are anti-competitive and artificial pricing that helps maintain a monopoly.

‘Don’t think that the breakup of Amazon couldn’t happen. Back in the 1990s, an FTC investigation into Microsoft eventually led to a US Department of Justice trial. In 2000, the world’s then-biggest software company was found guilty of constituting a monopoly of the PC market and stifling competitors.

‘The US Government ruled that the company should be divided into two separate entities. One would be responsible for Windows and the other for all of Microsoft’s other software.  The long-term impact of that case has been continued attempts by legislators to break up those big tech companies seen as having too much power. Some US politicians say they want to see Amazon broken up into a web sales platform and a separate company running the Amazon Web System (AWS).

‘Could we see a similar result to the Microsoft case in Amazon’s prosecution? It’s certainly possible. The complaint is likely to focus on issues around Amazon Prime, allegedly blocking lower prices on competing websites, and potentially forcing sellers into using Amazon’s logistics and advertising services.

‘Returning to that 2000 Microsoft anti-trust judgement, ultimately Microsoft managed to avoid being broken up, after an appeal. However, it was forced to reveal details of its software coding to competitors, to make it easier for PC manufacturers to use non-Microsoft software.

‘How might Amazon fare in a similar case? In fact, the FTC has had little luck in its other recent attempts to sue big tech companies. This summer, for example, it was pursuing various legal challenges against Microsoft to stop its $68.7bn acquisition of “Call of Duty” maker Activision Blizzard. However, it has now lost or dropped all these cases.

‘Amazon did seem worried, however, about the FTC’s investigation into its private label brands. It has hastily dropped 27 of its 30 in-house clothing brands, seemingly in anticipation of legal action. However, its latest move in introducing new fees for Prime sellers who choose not to use its logistics services perhaps indicates it’s now feeling more confident about the outcome of any case.

‘The smart money is still on Amazon winning its battle against the FTC. However, the Commission has deposed around 30 Amazon executives, thought to include Executive Chairman Jeff Bezos and Chief Executive Officer Andy Jassy, and has collected a considerable amount of internal emails and other evidence. The outcome is certainly not a done deal.

‘US retail and trade practices can differ surprisingly from those of the UK, especially as there are many state laws that may seem to contradict its federal legislation. ParcelHero’s USA page gives full details on Customs advice, sending food, prohibited items, etc.’

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