Amazon reportedly used a secret algorithm to jack up prices — A new report details Amazon’s Project Nessie pricing algorithm::Amazon deployed a secret algorithm to gauge how high it could raise prices before its competitors stopped increasing their prices as well.
This is not evidence of a monopoly.
This tactic would only impact Amazon owned listings, which account for a minority of the listings on Amazon.
Amazon does not change prices for listings controlled by third party sellers.
What’s funny to me is that Amazon has a competitive price match policy, where they will hide offers for listings that are priced above other retailers. So the FTC’s argument is that Amazon is trying to drive prices up while also driving prices down.
Isn’t the competitive price match policy a symptom of their monopolistic domination?
Amazon uses its vertically integrated distribution to provide faster shipping. But their marketplace has a higher cut (
5% iircEdit: 15% average). The price match prevents sellers from adjusting Amazon listings to compensate for those fees, forcing the decision to (a) sell at lower margin on Amazon, (b) don’t sell on Amazon, or ©, raise the price across all marketplaces to maintain margin.Rather than holding Amazon prices down, it pulls prices on other marketplaces up. It’s an abuse of the inertia of a large customer base to prevent competition by other marketplaces on the basis of a different blend of cost and delivery service.
In my experience, Amazon takes a lower cut than retail chains. In fact, Amazon is less expensive than DTC when you factor in advertising costs. In all likelihood, it is not causing anyone to drive up their prices off Amazon.
I work with many many brands. I have seen several turn off their DTC channels because customer acquisition costs are simply too high.
The competitive price match policy is a nuisance when retailers liquidate inventory for pennies in the dollar.