Last November, Amazon, and Apple made a deal that allows the online retailer to sell iPhone, iPad and Apple Watch directly from the manufacturer. MLex, which covers regulatory agencies, stated earlier this week that the FTC has issued citations in court seeking sales data for certain products that Amazon does not sell directly. The problem here is that the deal between Apple and Amazon could have made it difficult for third-party vendors to download their accumulations of new or restored Apple devices.
The Verge was in contact with a man named John Bumstead who once sold reconditioned MacBooks on Amazon. Bumstead said he was questioned by the FTC’s legal eagles and one of the agency’s economists about how the Amazon deal with Apple influenced his business. One of the FTC members who spoke with Bumstead appears to be a member of the agency’s tech task force. For those unfamiliar with the letter soup of US regulatory agencies. In the US, the FTC, also known as the Federal Trade Commission, is responsible for promoting fair business practices and will sue companies it considers anti-competitive. We must remember that this is the agency that brought Qualcomm to court earlier this year and won the case. Now awaiting appeal, this decision could force Qualcomm to make some drastic changes to the way it sells chips to phone manufacturers and others.
According To An Antitrust Expert, Amazon Has Acted illegally After Agreeing With Apple
Bumstead received a two-month notice after the announcement of the Amazon deal with Apple and is no longer allowed to sell its restored MacBooks on the site unless it meets some new conditions, such as buying $10 million in inventory year. This is beyond the reach of someone like Bumstead. In other words, Amazon’s deal with Apple led to the elimination of the platform of small third-party merchants selling Apple products. And this must be bad for Bumstead’s business considering Amazon’s third-party market is the largest platform of its kind in the US.
If you’re thinking that what Amazon has done here is illegal, you may be right. Antitrust expert Sally Hubbard, who is the director of enforcement agency at the OpenMarkets Institute states that the deal between Amazon and Apple smells like this which you call brand-gating. This occurs when a platform makes a deal with a brand to prevent third parties from selling brand products (or counterfeit versions) at lower prices. As a result, the price of used Apple devices or reconditioned on Amazon has increased by hundreds of dollars, says Bumstead, and since the American consumer is the one affected by what appears to be anti-competitive behavior, the FTC is now involved.
“You put a gate around the brand and say all the third-party sellers of whatever that brand is get a notice saying you can no longer sell this product on our platform unless you get authorization from the brand. But of course, the brand is not going to let you sell if you’re under the [minimum advertised price]. Problem is that it’s illegal under antitrust law.”- Sally Hubbard, Antitrust expert, Open Markets Institute
Amazon has already been named for this behavior in Europe and an investigation began earlier this month. The e-commerce giant is responsible for defining the priorities of its products and the use of its proprietary sales data compared to its competitors. Local regulators in Germany have already forced Amazon to make changes to the terms of service so that external suppliers like Bumstead can continue to sell on the site in that country.
The issue with the FTC’s approach to “Big Tech” is that even when you have a simple case, like the one you had against Facebook for violating a 2011 consent decree, the fines are not big enough to affect the business of the company. The Cambridge Analytica scandal revealed that 87 million Facebook users have collected their profiles without their authorization in violation of the aforementioned consent decree. The $5 billion fine that the FTC collected last month could have been the biggest punishment I have ever charged, but it represented less than 10% of the company’s revenue in 2018 of $55.8 billion. Such a fine will not motivate Facebook to make real changes.
(Via: The Verge)
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