YCD News – Recently, the FTC and 17 state attorneys general, jointly filed an antitrust lawsuit against Amazon in the District Court for the Western District of Washington, and Amazon FBA logistics is a major part of that monopoly lawsuit. The lawsuit states that Amazon sellers are forced to use its FBA logistics, bringing unfair competition to other logistics providers.
The lawsuit filed by the Federal Trade Commission against Amazon reportedly contains four allegations against Amazon FBA Logistics in terms of alleged monopolization.
1, FBA delivery costs rise to the detriment of sellers, and ultimately transferred to consumers
Amazon charges sellers four main fees, including FBA logistics service fees; sales commissions; advertising service fees; and item price commissions. The complaint alleges that Amazon’s growing FBA delivery costs are a major pain point for sellers, increasing by approximately 30% from 2020 to 2022.
The rising costs of FBA logistics have caused third-party sellers’ cost of goods sold to grow as a percentage of their sales revenue, reaching a level of nearly half. In response to the rising costs, many sellers are driving up the price of goods sold outside of Amazon’s platform by raising the price of goods that consumers shop for in other online channels.
Amazon executives don’t agree with this, stating that Amazon FBA delivery costs are on average 30% cheaper than standard shipping methods from other logistics providers.
2, Bundled with Prime labels, sellers are forced to use Amazon FBA
The FTC complaint points out that, according to Amazon’s rules, in order for a seller Listing to receive the Prime logo, it must be delivered using its FBA logistics. This means that sellers who do not use Amazon’s FBA service will not be able to obtain the Prime logo, and traffic for Prime items, is significantly higher than for non-Prime items.
In fact, the complaint says, many sellers prefer to use a different delivery method, which enables them to sell across multiple channels in a more cost-effective manner. Without Amazon’s disguised compulsion, sellers could more easily offer their products to shoppers through multiple channels, including other online supermarkets and marketplaces.
This was denied by an Amazon spokesperson, who said that Amazon FBA has always been an optional service and, with the reopening of SFP, non-FBA sellers can still offer products with the Prime badge, as long as they meet customer expectations for fast, reliable delivery.
3, Amazon FBA logistics monopoly, squeezing the living space of other logistics providers
By bundling with Prime, Amazon FBA Logistics is now one of the largest logistics providers in the U.S. e-commerce space, the lawsuit claims, and its monopoly has limited the growth of other logistics competitors and pushed up prices in the overall logistics market.
Not only that, but Amazon has further monopolized the market by providing logistics services for orders placed outside of Amazon. For example, Amazon launched “BuywithPrime” last year, offering Prime shipping for sellers’ branded website orders. Amazon has also launched a multi-channel distribution service, which allows for bulk transfer of products to sellers’ other sales channels.
4, seller self-delivery Prime program reopens, but faces higher requirements
The Amazon Seller Self-Delivery Prime program was launched in 2015 to allow sellers to self-deliver Prime orders, but the program has since been suspended from accepting new seller registrations starting in 2019. Recently, Amazon announced that the program reopened as of October 1 to accept new seller registrations.
However, the FTC believes that sellers were reluctant to sign up for the program after SFP reopened for fear of facing stricter delivery requirements than FBA. Amazon reportedly requires a 99% on-time delivery rate for SFP sellers. In addition, the FTC lawsuit claims that Amazon’s search filters appear to exclude discounted items from participating in the SFP program.
However, in an effort to attract more sellers to the program, Amazon has announced that it will eliminate the 2% sales fee charged by the SFP program. Also in response to the FTC’s aforementioned allegations, Amazon has stated outright that the allegations are false or misleading and will be contesting the lawsuit.