From Parity Clauses to Algorithmic Control: Amazon's Price Suppression Tactics

a. Amazon penalizes sellers when Amazon finds lower prices off Amazon

272. Amazon’s anti-discounting strategy has taken several forms. Amazon originally included a clause in its Business Solutions Agreement—a contract every seller must agree to— that explicitly prohibited sellers from offering lower prices elsewhere. From at least as early as (redacted) until March 2019, this contract required each seller to “maintain [price] parity” between Amazon and other online sales channels. This meant that a seller could not offer lower prices on other online stores without breaching their Amazon contract, even when their selling costs were lower on those stores.

273. After European competition authorities launched multiple investigations into Amazon’s price parity clauses, Amazon dropped this requirement in Europe in August 2013.

274. In December 2018, U.S. Senator Richard Blumenthal sent public letters to the Federal Trade Commission and the U.S. Department of Justice expressing “deep[] concern[] that the price parity provisions in Amazon’s contracts with third-party sellers could stifle market competition and artificially inflate prices on consumer goods.” Three months later, Amazon quietly stopped its practice of applying this particular contractual price parity provision to all sellers.

275. Despite making this particular change, Amazon never abandoned its strategy of preventing sellers from offering lower prices elsewhere. Instead, Amazon (redacted)

276. An internal Amazon document written weeks after Amazon dropped its contractual price parity requirement acknowledged that Amazon intended to use (redacted) to enforce its “expectations and policies,” which “ha[d] not changed.” Whether done contractually or algorithmically, Amazon requires sellers to keep prices off Amazon as high or higher than prices on Amazon. Amazon uses (redacted) “not only trivial but a trick and an attempt to garner goodwill with policymakers amid increasing competition concerns.”

277. (Redacted) If Amazon disqualifies every offer for a given product from winning the Buy Box, Amazon removes the Buy Box itself from the product’s Detail Page.

278. (Redacted)

279. (Redacted)

280. (Redacted)

281. Today, Amazon tells sellers that they will be punished if Amazon detects a lower price on any other online store. In 2022, for example, Amazon explained to thousands of sellers that a “pre-requisite” to “win[ning] the ‘Buy Box’” is to ensure that lower prices are never available off Amazon.

282. (Redacted)

283. Today, Amazon (redacted) by wielding a suite of penalties to bury products (redacted) including:

(a) demoting them in search results;

(b) (Redacted)

(c) (Redacted) and

(d) (Redacted)

284. (Redacted) Amazon itself recognizes that removing a seller from the Buy Box causes their sales to “tank.” Offers outside of the Buy Box comprise less than (redacted)% of all purchases on Amazon.

285. Amazon’s penalties effectively deter sellers from offering prices elsewhere that are lower than their prices on Amazon, even where their costs are lower through other online sales channels. That in turn limits the ability of other online superstores to offer prices lower than those on Amazon, hindering the growth of would-be rivals and denying them the scale necessary to compete.