On Wednesday, July 22, the American Booksellers Association (ABA) wrote the House Subcommittee on Antitrust, Commercial, and Administrative Law to provide information as to why Amazon’s anticompetitive behavior warrants a comprehensive investigation. The letter comes in advance of a July 27 antitrust hearing examining the dominance of Amazon, Apple, Facebook, and Google.
The July 27 hearing, scheduled for 12:00 p.m. ET, is part of the Subcommittee’s ongoing investigation into competition in the digital marketplace. Scheduled to testify at the hearing are the CEOs of Amazon (Jeff Bezos), Apple (Tim Cook), Facebook (Mark Zuckerberg), and Google (Sundar Pichai). This will mark Bezos’ first appearance before Congress.
ABA’s letter, addressed to Subcommittee Chair David Cicilline (D-RI), focuses on Amazon’s growth in the marketplace arena and details how this growth exhibits a pattern of anticompetitive behavior that can be seen in Amazon’s expansion into other markets.
According to a report by economics research firm Civic Economics total retail sales with Amazon as the seller increased by 94 percent from 2014 to 2018; however Amazon’s third-party sales increased more than 300 percent over the same period.
As the letter notes, “Amazon’s third-party marketplace has become the company’s core retail growth strategy.”
“In the first quarter of 2020, 52 percent of products sold on Amazon were sold by third-party sellers. Based on a 2018 survey of primarily U.S.-based Amazon marketplace sellers, 47 percent of sellers report that between 81 and 100 percent of their e-commerce revenue comes from Amazon marketplace sales. The third-party marketplace is a source of high-margin revenue for Amazon, with third-party seller service revenues comprising Amazon’s second-largest revenue stream in 2019,” the letter states.
ABA’s letter goes on to explain how Amazon has essentially forced other retailers to become third-party sellers by using Amazon Prime as a tool to garner an increasing share of the online retail market.
Retailers that want an e-commerce presence are left with the choice to a) remain independent or b) become a third-party marketplace seller. By remaining independent, a retailer maintains control of their brand and industry knowledge, but potentially sacrifices the growth of its consumer base. By becoming a third-party seller, a retailer gains access to Amazon’s vast and loyal Prime customer base but hands over its independence and industry knowledge to its most powerful competitor.
The letter asserts that “Amazon exploits its dominance to increase its market power by contracting with businesses in certain industries to accumulate data and knowledge that Amazon will ultimately use against them. Amazon’s actions have made clear that this is its core business strategy as it strives for monopolization.”
This business strategy does not stop with the third-party marketplace. Amazon also allegedly uses this strategy in the distribution industry to compile enough information on a particular region to achieve a competitive advantage and then start its own distribution network.
The letter concludes, “Amazon is without question a burgeoning monopoly in the third-party marketplace and logistics market and is already a monopoly in the book industry. Like monopolies of the past, Amazon is forcing competitors to work with the company and then using the information it gathers from this relationship to squeeze these same competitors.”