Amazon Antitrust Report Reveals ‘Strong-Arm’ Negotiating Tactics With Brands

Home / Amazon Antitrust Report Reveals ‘Strong-Arm’ Negotiating Tactics With Brands

This week, the US House Judiciary antitrust subcommittee published its final report as part of a 15-month inquiry into antitrust concerns in Big Tech – Amazon being one of the four companies under investigation. 

Many brands who have 1st party (“1P”) relationships with Amazon are currently entering their Annual Vendor Negotiations right now. This process is high stakes as it dictates the profit margins, available product assortment, and marketing budget for the upcoming year. Similarly, third party sellers – referred to as ‘partners’ in Amazon marketing materials but as ‘competitors’ behind closed doors – experience their own challenges. 

The report from the Subcommittee vindicates many brands who have felt a power imbalance at play in their relationship with the retail giant. Congress has spoken: you’re not alone, and this is not fair. Here are some of the themes from Tuesday’s report that are relevant to brands that sell products on Amazon. 


Amazon uses its market power to negotiate better terms. 

The Subcommittee says that Amazon employs ‘strong-arm tactics’ in negotiations with Vendors. 

One brand was told by Amazon that the retailer has the power to de-stock the brand’s products on Amazon, as a “bargaining chip to force terms”. 

A form of retaliation that Amazon has used against book publishers (but I have seen also play out with physical products) is to suppress the “Buy” button, which makes it difficult for the customer to buy the product. Advertising campaigns on that product also stops, effectively causing sales to grind to a halt. 

Most favored nation pricing (MFN
) reduces competition.

Amazon previously included a clause in its terms to guarantee that the retailer will always receive the best prices and terms. This was replaced in 2019 with a “Fair Pricing Policy” which according to the Subcommittee, has the same effect of blocking sellers from offering lower prices to consumers on other sites. 

Amazon scans other retail sites and can use the Buy button suppression tactic mentioned above, or suspend a seller’s account. In its report, the committee says that “Amazon’s “Fair Price Policy,” which has been described as a “thinly-veiled MFN restriction,” is likely anticompetitive with respect to blocking competition from other marketplaces, and does not result in lower prices for consumers as Amazon has claimed.”

Amazon dictates the distribution model.

Some brands with a 1st Party (1P) relationship with Amazon believe that the grass is greener under the Third Party (3P) seller model. After all, with a 3P model, the brand itself can control inventory positions, pricing, marketing spend, and product assortment. 

But Amazon is known to force certain brand manufacturers that would prefer to be third-party sellers into being wholesalers.

The Subcommittee report states that in 2016, Sebastian Gunningham, then Senior Vice President of Amazon Marketplace, commented on a list of proposed seller tenets, “I would add that there are x,000 suppliers around the world that do not get this choice… I am talking about the apple, nikes and p&g, etc… We don’t want to open that door, relationship has to be reseller.”

This foots with my own discussions with brands who have wished to change their model to 3P seller, but have been told by Amazon Vendor Managers that they would not be allowed to. 

According to the Subcommittee report, a former Amazon employee confirmed that “it was not uncommon for Amazon to use its brand standards policy to shut down a brand’s third-party seller account and force brands into an exclusive wholesaler relationship.”

Minimum Advertised Price (MAP)

Amazon’s leverage over suppliers allows it to disregard MAP rules set by national brands. This is standard retail practice in the United States and allows brands to ensure that no one retailer is creating a race-to-the-bottom with bargain prices. The report says that Amazon 3rd party sellers must abide by MAP, but Amazon does not fear repercussions from retail partners. 

One example that the Subcommittee gave was from CEO and Founder of PopSockets, David Barnett, who stated that after the two companies decided on a minimum price at which Amazon would sell PopSockets, Amazon sold the products for a lower price and then demanded that PopSockets pay for the lost margin. 

Can’t Realize A Profit (CRaP)

Products with no profit margin are inserted into a “CRAP-Out Process,” whereby attempts are made to make these products profitable through raising delivery fees, requiring vendors to repackage products, but most commonly – asking the brand to lower their wholesale prices. 

Amazon requires brands to sell their assortment in a first-right-of-refusal basis, but then can exert further downward pressure on pricing certain items. This leaves the manufacturer unable to sell the item on Amazon because it is unprofitable to do so, opening the door to 3rd party resellers who might misrepresent the brand or offer prices that are wildly out of synch with the recommended retail price, causing a different kind of brand damage. 

What’s next? 

In its report, the Subcommittee landed on a new definition of Amazon’s market share: 50% or more of all digital shopping transactions. This is somewhere between an aggressive calculation by  Jumpshot of 74% (which is based on a percentage of transactions by retailer, not GMV) and an understated 38.7% by eMarketer (which includes auto vehicle sales). 

With Amazon’s dominance of the ecommerce market, many brands simply feel like they do not have a choice but to play the game. With millions of sellers on Amazon, there’s another company ready to take their place if a brand decides to pack it in.

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