By: Hanna Walther
As Amazon & Big Tech Face Proposed Legislation Limitations from Congress, How Will Sellers Be Affected?
The Antitrust Committee has been busy in Congress this summer — Amazon and other Big Tech companies are on their radar as Congress tries to limit the power and the anti-competitive practices of these companies.
The proposed legislation, “A Stronger Online Economy: Opportunity, Innovation, Choice,” seeks to limit power by Big Tech (Apple, Facebook, Amazon, Google). These bills show bipartisan interest in reform when it comes to large tech companies and their anti-competitive conduct online.
In turn, Amazon has begun lobbying its sellers to reach out to their representatives to help fight this legislation and the limitations it would place on them.
Their Policy team has been reaching out to high-volume sellers and expressing their concerns over how this proposed legislation could force them to remove third-party sellers from the platform in order to comply with said legislation.
Amazon claims its third-party sellers would be the ones most impacted, should this legislation pass. Coming from the world’s largest retailer (recently surpassing Walmart), we aren’t quite convinced yet... but keep reading.
Let’s get into the bipartisan bills themselves and how they could potentially affect Amazon sellers.
The American Innovation and Choice Online Act
This bill aims to prohibit discriminatory conduct by dominant platforms by preventing them from using market power to pick winners and losers, favor their own products in a marketplace, and negatively impact the marketplace.
Those supporting the bill argue that such conduct harms competition. It decreases opportunities for businesses and entrepreneurs to compete in any digital landscape and deprives consumers of valuable choices when they shop online.
How the American Innovation and Choice Online bill may impact Amazon Sellers
In Amazon’s world and in other marketplaces, product reviews and rankings are the quickest way to the top of search results. Amazon even implements special badges for particular merchants, like Amazon’s Choice and Best Sellers, which creates an incentive for consumers to purchase these products because they are popular and highly rated (by Amazon).
It’s common practice for Amazon to put their own products at the top of search results whenever they want, ahead of the competition (even if they’re organically ranking higher) and this bill would make that practice unlawful.
Without these types of Amazon-driven badges and incentives, sellers who don’t have the ratings or who don’t run major advertising campaigns (which can often boost reviews and page rank) may be able to rank higher in search results and in turn, boost sales and revenue.
The Ending Platform Monopolies Act Bill
This bill promotes competition and economic opportunity within digital markets by eliminating conflicts of interest that arise from dominant online platforms (like Amazon) and their current ownership or control of an online platform and other businesses.
By addressing the anti-competitive behavior of Big Tech companies, this bill could make it unlawful for a dominant digital platform to simultaneously own another business, if that ownership creates a conflict of interest.
In other words, this bill could require Amazon to split off its own retail sales as a separate company from the marketplace, which means Amazon would have to compete with sellers directly.
Marketplace Conflict of Interest
In an online marketplace setting, a conflict of interest occurs when the platform operator (Amazon) also owns a line of business within the platform itself (or a private-label product, like Goodthreads).
This ownership creates an incentive for Amazon to promote their goods over competitors in the same sector (Goodthreads vs. other clothing businesses). The platform operator can disadvantage the competition, like excluding them from promotions, to benefit themselves.
How the Ending Platform Monopolies Act may impact Amazon Sellers
This bill would allow federal regulations to break up companies that operate a dominant platform and own or operate a business that presents a clear conflict of interest within that same platform.
In doing so, Amazon could have to stop selling its private-label goods and products if they can’t provide sustainable revenue as a standalone brand. Amazon currently has over 150,000 private-label goods and products under its name brand.
If they do stop offering their own products, the price for those particular products may increase, which could lead to fewer consumers shopping on the platform. Fewer consumers could lead to less exposure for small businesses online and a drop in revenue and sales.
Amazon argues that in order to remain within the constraints of this legislation and to avoid any competition with sellers, they’d have to remove third-party sellers from their platform.
If this is the case, sellers would have to find a new marketplace or use brick-and-mortar stores to conduct their business.
The Platform Competition and Opportunity Act
This bill would prohibit the largest online platforms from engaging in any mergers and acquisitions that would eliminate competitors or potential competitors, or that could potentially enhance monopoly power.
When a dominant platform acquires other small firms and businesses that are direct competitors, the natural flow of competition is deterred in the process. Mergers also eliminate consumer choice and prevent new competition from entering the market.
How the Platform Competition and Opportunity Act may impact Amazon sellers
Long term, prohibiting Big Tech companies from merging with competitors will keep the market more dynamic, innovative, and competitive for small business merchants and those with unique products.
The Merger Filing Fee Modernization Act
This legislation updates filing fees (for the first time in 20 years) for mergers in order to ensure that the Department of Justice and the Federal Trade Commission have the resources and support they need to aggressively enforce the antitrust laws and to protect consumers and competition in the market.
The Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act
This bill would ensure that major platforms facilitate a simplified process when sellers are switching to other platforms. This includes the portability of user data and interoperability with competing businesses.
How the Merger Bill and ACCESS Act may impact Amazon sellers
As Amazon continues to buy out any potential competition at every turn, sellers have few options when it comes to an alternative marketplace to run their business. Simultaneously, the experience as an Amazon seller continues to get worse.
The negative experiences sellers have on Amazon are unfortunate, but they continue putting time and effort into this marketplace because Amazon still accounts for nearly 50% (and growing) of all online sales. Sellers have a strong incentive to stay on the platform in order to access that customer base and meet their revenue goals.
Long term, these two bills could help combat the negative impact that mergers have on sellers and the competition in the market. They will also facilitate an easier migration to other marketplaces, so sellers can switch with the peace of mind of knowing they can take their customer data with them, and not start over from square one.
What Actions Should Amazon Sellers Plan to Take?
Regardless of what happens with this proposed legislation, this is a great opportunity for sellers to research available options and marketplaces where they can expand their businesses. In doing so, the value of these companies will increase and will serve as a legitimate backup plan should Amazon make any drastic moves.
For sellers, building an ecommerce store on platforms like Shopify is a viable option, but requires some heavy lifting and a massive shift in traffic (consumers) would have to occur. Advertising campaigns from other Big Tech companies like Facebook and Google would be essential for exposure to a new marketplace and to continue bringing in sales and revenue.
As a whole, brick-and-mortar is still a huge opportunity for all companies in the market. Finding reliable brick and mortar distributors can be a great option for any business with a unique product offering, even prior to this proposed legislation.
Nearly 60% of Amazon’s gross revenue merchandise comes from third-party sellers.
Amazon claiming they would have to remove all third-party sellers from their platform seems like a stretch as it would cost them upwards of 300 billion dollars per year, but we’ll have to wait and see what happens.
Final Thoughts
While this isn’t the first time Congress has taken steps to prevent monopolies in the market, these bills cover a wide range of relevant issues and occurrences that Amazon and other Big Tech companies create with their anti-competitive behavior.
As third-party sellers remain one of Amazon’s most dominant revenue sectors, it’s no surprise they are lobbying Sellers to get in touch with their representatives and voice their concerns and disapproval of these bills.
Exactly how Amazon Sellers will be impacted should this legislation pass is still up for debate. We’ll be keeping an eye on this story, so stay tuned for updates along the way.