According to the Federal Trade Commission (FTC), Amazon penalized its own sellers to limit Walmart’s reach as Walmart entered e-commerce.
In addition to making $1 billion by using a secret algorithm called “Project Nessie” to drive up prices for U.S. households, Amazon may also have managed to curb Walmart’s ambitions.
In 2014, Amazon’s launch of Jet.com sparked fears that Jet.com might offer lower prices to shoppers online, the FTC said Thursday, kicking off Amazon’s strategy of blocking sellers’ offers from the Remove Buy Box if shoppers could find the same products at cheaper prices on Jet.com. The Buy Box is the button that allows buyers to purchase directly from a seller.
Walmart acquired Jet.com in 2016.
“Given Amazon’s size and scale, their quantitative analysis capabilities, and especially given that they had not made a profit in the first 20 years of (Amazon.com), it is not surprising that they would resort to such tactics against competitors said retail consultant Burt Flickinger.
Like Amazon, Walmart operates a third-party online marketplace with goods from thousands of independent sellers. Millions of independent retailers on Amazon currently sell goods through their marketplace. Both Walmart and Amazon charge fees and commissions from retailers on their platforms.
By not charging seller commissions, Jet.com could offer prices that are 10 to 15 percent lower than Amazon’s advertised prices, the FTC said in a less redacted version of an earlier complaint against Amazon. Amazon realized this could lead to sellers passing those savings on to customers, the FTC said.
To weaken Jet.com, Amazon removed some third-party sellers’ offers from its Buy Box. The complaint cites an Amazon seller who, due to pressure from Amazon, adopted a policy of “absolutely ensuring that our products are not priced lower at Walmart than at Amazon.”
Amazon also used algorithms against Jet.com’s most popular products that the FTC described as anticompetitive, causing Jet to revise its strategy to compete with the lowest prices elsewhere, the FTC said.
Amazon spokesman Tim Doyle said the FTC was “completely mischaracterizing” the pricing tool and that the company stopped using it several years ago.
Walmart closed Jet in 2020 and integrated it into its broader e-commerce business.
Walmart declined to comment because it is not part of the FTC litigation, a spokesman said.
By Siddharth Cavale and Arriana McLymore; Editing by Vanessa O’Connell and Lisa Shumaker
Learn more:
The FTC’s antitrust lawsuit against Amazon is before a US court
The company is also fighting claims from another private civil lawsuit that said the company stifled competition in shipping and fulfillment services.
Comments are closed.