The Federal Trade Commission (FTC) claims that Amazon.com Inc. (AMZN.O.) penalized its merchants for curtailing Walmart’s influence when the latter entered the e-commerce space.
Apart from amassing $1 billion through a covert algorithm known as “Project Nessie” to escalate costs for American consumers, it’s possible that Amazon also restrained Walmart’s aspirations.
The concern that Jet.com would be able to offer customers lower pricing online in 2014 led to Amazon’s policy of removing merchants’ offerings from the Buy Box if customers could find the same items for less money on Jet.com, according to the Federal Trade Commission (FTC) on Thursday. The button that lets customers buy straight from a vendor is the Buy Box.
In 2016, Walmart purchased Jet.com. “Given Amazon’s size and scale, their quantitative analytical might, and particularly, against the background that they had not made a profit on (Amazon.com) for the first 20 years, it’s not surprising that they would resort to such tactics against competitors,” Burt Flickinger, a retail consultant, said.
Like Amazon, Walmart has an online marketplace for third parties that features products from thousands of independent vendors. Currently, millions of independent retailers offer items on Amazon’s marketplace. Walmart and Amazon collect fees and commissions from the retailers who use their platforms.
In a less-redacted version of a prior lawsuit against Amazon, the FTC said that Jet.com could offer prices 10% to 15% cheaper than what Amazon stated because it was not collecting seller fees. According to the FTC, Amazon understood that this may lead to retailers passing those savings forward to customers.
Amazon took some deals from third-party merchants out of its Buy Box to hurt Jet.com. One Amazon seller is mentioned in the lawsuit as having implemented a policy to “absolutely sure that our products are not priced lower on Walmart than they are on Amazon” in response to pressure from the online retailer.
Additionally, the FTC said that Amazon used anti-competitive algorithms to target Jet.com’s best-selling items, forcing Jet to adjust its business plan to match lower pricing elsewhere.
The FTC “grossly mischaracterizes” the pricing tool, according to Amazon spokesperson Tim Doyle, and the business ceased utilizing it some years ago. In 2020, Walmart closed Jet and folded it into its larger online store. According to a spokesman, Walmart declined to comment since it was not involved in the FTC lawsuit.
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