What an Amazon Antitrust Suit Could Mean for FBA and Logistics
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The Federal Trade Commission (FTC) might be mere weeks away from hitting Amazon with a long-awaited antitrust lawsuit.
FTC chair Lina Khan and agency investigators have spent months refining a complaint against the e-commerce giant, alleging that Amazon wields its power to reward third-party sellers that use its logistics services and punish those who don’t, according to a Bloomberg report.
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While the report raises questions around how an antitrust suit of this magnitude would affect Amazon, such an investigation puts its evolving logistics operation and the role of its prominent Fulfillment by Amazon (FBA) service further under the microscope.
While concerns about the tech titan’s use of third-party seller data have long attracted lawmaker scrutiny, accusations of preferential treatment for merchants that use services like FBA have drawn more recent regulatory attention both home and abroad.
For example, a 2021 class-action lawsuit accused Amazon of steering consumers toward sellers that paid for the FBA services, sometimes sticking shoppers with higher prices. The plaintiffs alleged that the company linked product placement in the coveted “buy box” with use of FBA, essentially incentivizing sellers to buy Amazon’s warehousing and shipping services if they wanted to get wider visibility on the site.
Though that suit was dismissed in April, a similar class-action lawsuit is still before British courts.
FBA is a significant selling point for merchants looking to take advantage of the e-commerce giant’s major perks. Sellers use the service to store their products in Amazon warehouses, where company employees can pick, pack and ship the goods. Products under FBA are also Prime-eligible, which gives consumers access to free two-day shipping and ultimately benefits the merchant.
Last year, Amazon altered some of its logistics service practices in Europe to settle two antitrust suits levied by the European Commission. Prime sellers there are now free to choose any carrier for their logistics and delivery services, and can negotiate terms directly with the carrier of their choice. This isn’t possible for U.S. sellers as carriers can only deliver Prime parcels if they are qualified by Amazon.
Amazon also added a second buy box to its European marketplace to give independent sellers greater exposure. The FTC is currently investigating the algorithm that determines the buy box in the U.S., Bloomberg said.
Antitrust cases in Europe are notably harder for a corporation to win than in the U.S., where antitrust law is centered on how competition directly impacts the consumer.
FTC’s potential lawsuit would hit a company with a vast logistics network covering approximately 1,285 fulfillment centers in the U.S. alone, according to consulting firm MWPVL International. Amazon doubled its fulfillment center footprint over the Covid-19 pandemic to a point where it had to reverse course by dialing back warehouse space and headcount. And its last-mile transportation network of delivery drivers is now the size of UPS, with Pitney Bowes saying the firms are neck-and-neck commanding 23 percent and 24 percent of parcel delivery market share, respectively.
Interestingly enough, the company’s fulfillment strategy appears to be shifting some distribution and delivery capabilities out to third parties as part of a wider regionalization effort. Amazon recently unveiled a new Hub Delivery program where small businesses like bodegas, florists and coffee shops can deliver packages for the tech titan using their own staff and vehicles—all while Amazon pays them to do it.
And the company is reopening its Seller Fulfilled Prime (SFP) delivery program after four years on hiatus, enabling third-party sellers to ship Prime-eligible products out of their own warehouses.
While Amazon has aggressively sought to cut costs with these initiatives, the moves might also suggest that the Big Tech firm is willing to offer more favorable terms and choice for smaller businesses and third-party sellers.
Khan and her colleagues reportedly want to file the suit by August, according to Bloomberg. The FTC has already filed three cases against Amazon this year, with the most recent alleging that the online marketplace uses deceptive tactics to “trick” users into signing up for Prime subscriptions. Across the other two filings, the FTC fined Amazon $30.8 million for privacy violations related to its Alexa and Ring products.
Amazon and the FTC declined to comment on report.
Amazon executives will get a final chance to argue their case before the FTC’s three commissioners, including Khan, according to Bloomberg, but that meeting hasn’t been scheduled.
