Following yesterday’s coverage on Amazon’s series of trouble with antitrust regulators, I digged into the filing complaint of CA v Amazon and the orginal complaint and amended complaint of FTC v Amazon. We can obtain quite a bit of interesting information about Amazon’s Buy Box: (at least, from the perspective of regulators…)
first, Amazon chose to make purchasing outside the Buy Box hard:
Nearly 98% of Amazon sales are made through the Buy Box.
Amazon imposed a lot of friction for buyers to purchase outside of the Buy Box, the complaint gives a detailed breakdown (page 30-32 of the amended complaint):
Amazon deliberately steers shoppers away from offers that are not featured in the Buy Box. If a shopper using a computer wants to see an offer from a seller that is not featured in the Buy Box, the shopper must either click a link that identifies only the number of additional offers, which takes the shopper to the “All Offer Display,”, or scroll down the page to see “Other Sellers on Amazon,”
Amazon makes it similarly difficult for shoppers to make a purchase when Amazon has removed the Buy Box from an item’s Detail Page. Amazon’s page layout prevents shoppers from adding to a shopping cart or buying any offers directly from the Detail Page.
And there’s more:
Today, Amazon carries out the “dirty job” of ensuring that no seller “step[s] out” on Amazon by wielding a suite of penalties to bury products without a Buy Box, including:
(a) demoting them in search results;
(b) hiding their prices on the Search Results Page;
(c) excluding them from Sponsored Products advertisements; and
(d) prohibiting them from appearing in certain recommendation widgets.
Buy Box rule is unclear
The only direct communications are to the contrary; Amazon directly communicates to sellers, “we welcome sellers advertising the same pricing and discounts off-Amazon as they offer in our store.”
…
As an example of its obfuscation, when Amazon sends a seller a notification, alerting the seller that its offer is “priced higher on Amazon than at other retailers,” and accordingly has lost eligibility for the Buy Box, it does not disclose the identity of the “other retailers” offering the lower price.
hence
As a result of Amazon’s price parity enforcement, third-party sellers have learned to raise their prices on eBay and other marketplaces, and their own direct-to-consumer websites, to match or exceed their prices on Amazon—even though it costs them far more to sell on Amazon.
(it seems) one of Buy Box’s objective is to lower prices
On top of Buy Box’s dominance, Amazon has made the price parity enforcement explicit:
Today, Amazon tells sellers that they will be punished if Amazon detects a lower price on any other online store. In 2022, for example, Amazon explained to thousands of sellers that a ‘‘pre-requisite" to “win[ning] the ‘Buy Box”’ is to ensure that lower prices are never available off Amazon.
It seems that Amazon attempts to use Buy Box to lower prices, to be the lowest selling channel (isn’t that what every platform aims for?)
Amazon’s CEO of Worldwide Stores explained that policing sellers to prevent them from discounting elsewhere, so Amazon can maintain a reputation for having low prices, is “a dirty job, but we need to do it.”
Buy Box induces algorithmic pricing, and Amazon promotes it:
Amazon provides pricing tools to its third-party sellers that encourage them to adopt the same pricing strategy. Specifically, Amazon encourages its third-party sellers to use its Marketplace Automated Repricing Service, or “MARS.”
With MARS, third-party sellers can implement what Amazon calls the “Competitive Price Match Rule,” which “[u]pdates your price to help stay eligible for Featured Offer [Buy Box] status and ensure that you always match the competitive price (when there is one), to increase your chances of becoming the Featured Offer.”
“Competitive price” means the lowest price offered by other online stores outside of Amazon.
In pitching the MARS tool to third-party sellers, Amazon highlights: “And remember, if a competitive price goes up, your offer price changes too.” In other words, Amazon actively encourages adoption of a tool that lets third-party sellers automatically raise their prices on Amazon if the price rises elsewhere.
Now that the two cases are both under investigation, we can look forward to a more concrete revealment of Amazon’s Buy Box policy, which is central to Amazon’s market power. Stay tuned.