The Wall Street Journal reported Monday that two U.S. states had initiated investigations into Amazon’s “business practices”. Officials in Washington and California are skeptical about Amazon’s treatment of its third-party (independent) sellers.
It is unclear whether the new investigations had anything to do with a previous investigation carried out by the EU in 2019. It was reported that the EU had initiated an investigation in 2019, following allegations of the tech giant engaging in “anti-competitive behavior”.
Margrethe Vestager, EU Commissioner, announced in July 2019 the European Commission would carry out a formal investigation to determine if Amazon was treating its third-party sellers fairly in its marketplace.
Vestager said there were concerns that Amazon utilizes collected data to gain a competitive edge over its independent sellers. Allegations claim the company replicates items that are highly successful on its marketplace. The replicated items are sold at a lower price, according to the allegations.
New allegations have surfaced, claiming Amazon takes control of Buy Boxes even though third-party sellers are offering the items at lower prices. Most customers do not give much thought to the Buy Box, they trust that Amazon will treat them fairly. Other than wanting to know the price of the item, not much else is taken into consideration.
From the minute Amazon launched on July 5, 1994, it has gone to great effort to provide its customers with superb customer service. The company has diligently delivered on its guarantee of two-day delivery since the program launched in 2005. The program allowed Prime members to receive their orders in two days following the initial purchases.
In exchange for the two-day delivery, Prime members paid $79 per year. In 2014, the company announced it would increase its Prime membership from $79 to $99. The fee would cover movies, TV shows, and delivery. In May 2018, the company increased its Prime subscription once again. This time, Prime members would pay $119 per year. It was reported the same year, the number of Prime members had soared to over 100 million. In the first quarter of 2018, Amazon reportedly made $1.6 billion in profit.
Most American businesses were negatively impacted by the COVID-19 pandemic. Walmart, Target, and most supermarket chains cut their store hours but appear to have gone unscathed. Amazon, on the other hand, was not so lucky. The company halted all deliveries, excluding essentials, during the pandemic.
It was alleged, Amazon was struggling to keep its workforce in operation. Those who did work claim to have been forced to work extended hours in conditions that did not support the “social distancing measures”.
In the meantime, Amazon’s third-party businesses and independent sellers continued to ship items to customers all throughout the United States. The demand for Amazon products was at its highest, as many American consumers were laid off and isolated in their homes. The essential businesses remained open but cut their store hours to accommodate for few employees.
On April 13, 2020, it was reported that Amazon would begin shipping nonessential items once again. Within days, third-party sellers begin to complain about Amazon’s misuse of the Buy Box. The sellers alleged the company took control of Buy Boxes even though the items were marked “out of stock” and third-party sellers were offering them lower prices.
Amazon responded to the allegations saying its algorithms consider more than just the price. As a result, its customers would unknowingly pay a higher price for items they could have gotten cheaper from third-party sellers.
Is this what Amazon considers to be fair business practices?