Amazon Ends Price Parity With Third Party Sellers

 

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  The pricing ban that Amazon had for third party sellers that kept their products from selling on other marketplaces at a lower cost is now ending. Lawmakers have been looking at Amazon policies and believe this is hurting their market competition. Lina Khan is a Yale graduate who came into the public’s eye after her article in the Yale Law Journal in 2017 gave great impact on businesses and the effects of monopoly law.“ Khan argued that the current American antitrust law framework, which focuses on keeping consumer prices down, cannot account for the anticompetitive effects of platform-based business models such as that of Amazon. She proposed alternative approaches for doing so: "restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties."  

 

 According to the Federal Trade Commission, the first antitrust law was passed in 1890 aimed at preserving free and unfettered competition as the rule of trade. There are three main cores of the antitrust law:

1. The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize.The penalties for violating the Sherman Act can be severe. Although most enforcement actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it may be prosecuted by the Department of Justice.

 

2. The Federal Trade Commission Act bans "unfair methods of competition" and "unfair or deceptive acts or practices." The Supreme Court has said that all violations of the Sherman Act also violate the FTC Act. Thus, although the FTC does not technically enforce the Sherman Act, it can bring cases under the FTC Act against the same kinds of activities that violate the Sherman Act.

 

2. The Clayton Act addresses specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorates (that is, the same person making business decisions for competing companies). Section 7 of the Clayton Act prohibits mergers and acquisitions where the effect "may be substantially to lessen competition, or to tend to create a monopoly." As amended by the Robinson-Patman Act of 1936, the Clayton Act also bans certain discriminatory prices, services, and allowances in dealings between merchants.

 

  

 Selling ecommerce or on the marketplaces is very competitive. More than likely when you find a product to sell there are already at least 20 other sellers with that product. When selling on different platforms, sellers tend to price their items higher to try to increase their gross margins. By doing so, it will usually cause less performance on these platforms. Instead, if you sell on multiple platforms, it is a good idea to keep your prices the same across the board.  This is known as price parity.

 

Since Amazon has dropped the ban, it is only natural to wonder if Walmart will fall in line.  Here are a few conditions from Walmart’s Seller agreement:

1. Price Parity Rule: This rule will automatically unpublish items from Walmart Marketplace if a customer would save by purchasing the same item from the same Seller on a competing website, including the cost of shipping.

 

2. Price Leadership Rule / Reasonable Price Not Satisfied: This rule will automatically unpublish items from Walmart Marketplace if a customer would save drastically by purchasing the item on a competing website, regardless of the Seller. This calculation also considers the cost of shipping.

 

3. Parity. You will maintain parity between the Products you offer through any other online sales channel and the Products offered on the Walmart.com Sites by ensuring that at all times: (a) except for in connection with Excluded Offers, the purchase price and every other term of offer and/or sale of the Products (including associated shipping and handling charges and options, any “low price”.

  

Basically with this new development this should help third party sellers set their prices without fear of Amazon deactivating their listings. Let's hope other marketplaces such as Walmart follow suit.  As a seller always remember, you make your money on how you buy products not how you sell them.

 

                                                                                  Reference:

 

Khan, Lina M. "Amazon's Antitrust Paradox". Yale Law Journal. 126 (3). Retrieved 8 September 2018

 

 

 

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