Amazon's FBA Mandate: A Chokehold on Competition and Seller Choices

3. By forcing sellers to use FBA for their products to be Prime eligible, Amazon raises sellers’ costs of selling on multiple marketplaces, stifling competition in both relevant markets

364. By tying Prime eligibility to FBA, Amazon restricts sellers’ choices about which fulfillment provider they use, stifling multihoming and thus harming competition in both the online marketplace services and online superstore markets. Many sellers would prefer to use a single fulfillment network for all their online orders, on and off Amazon. Indeed, as Amazon’s Vice President of Worldwide Selling Partner Services reportedly recognized recently, “[a] seller doesn’t want to have two sets of supply-chain services, one that’s for Amazon and one that’s for someone else.” By forcing sellers to use FBA for their products to be Prime eligible, Amazon functionally forecloses that option for sellers.

365. Without Amazon’s coercion, sellers could more easily offer their products to shoppers via multiple outlets, including other online superstores and marketplaces. They could also use a single fulfillment provider of their choice and pass associated savings on to their customers across all online sales channels, including Amazon. Amazon’s rivals, in turn, could gain scale by attracting new sellers to their marketplaces and offering new selection to shoppers. Amazon fears that world, and so it uses Prime eligibility to foreclose it from coming to pass.

366. Amazon’s conduct blocks competition for sellers and the ability of online superstores to gain those sellers’ product selection in two interrelated ways. First, Amazon forces sellers who want to make Prime-eligible offers on Amazon and to sell through other sales channels to use two duplicative fulfillment operations instead of saving costs by consolidating inventory with a single fulfillment provider. Second, Amazon forecloses a significant volume of orders from independent fulfillment providers by making FBA effectively the only fulfillment option available for Prime-eligible orders. By essentially forcing sellers to use FBA, Amazon deprives independent fulfillment companies of an important source of scale that is necessary to develop efficient fulfillment networks. Sellers are less likely to commit inventory to independent fulfillment providers that do not have the scale to efficiently serve their needs, and without cost effective and efficient fulfillment operations, sellers are less likely to sell across multiple online marketplaces. Thus, Amazon’s tying of Prime eligibility to FBA usage raises the cost of multihoming, making it harder and more expensive for sellers to sell on alternative online marketplaces and more difficult for online superstores to attract sellers and expand their product selection.

367. These twin mechanisms harm competition in the online retail fulfillment services market while also stifling competition in both relevant markets. They do so by raising the costs Amazon sellers must incur to do business with other online superstores and online marketplace services providers. Some sellers cope by simply not selling anywhere other than Amazon. Others are pressured to pass on higher costs in the form of higher prices, slower shipping speeds, or both. As a result, by tying Prime eligibility to FBA, Amazon reduces product selection available to Amazon’s rivals, thereby degrading quality for shoppers and raising sellers’ costs, which can lead to price increases for shoppers.