Not every company has access to your sales numbers and revenue on those sales. They know very well how much revenue you're bringing in, it's child's play to them to price out your product and see that if their amazing supply chain network can undercut you while they still make a profit or break even just to increase market share.
Plus, if you're doing "fulfilled by Amazon" they know you're paying an extra 30% on your cost of goods for fulfillment. They can price all that in and figure out if they can sell it for cheaper, also fulfilled by Amazon.
But when you have actual sales numbers and you already know what they're paying for fulfillment (fulfilled by Amazon) you can do way better math.
"He's selling 10k of these a day at 20 bucks, and he's giving us six bucks per sale. Can we sell the same thing at 15 bucks? Then it'll sell better and rank higher in the search results"
I'm failing to see a problem with this. You're literally selling goods in someone else's store. Is it also a problem when grocery stores undercut and prominently feature their own brands?
Plus, if you're doing "fulfilled by Amazon" they know you're paying an extra 30% on your cost of goods for fulfillment. They can price all that in and figure out if they can sell it for cheaper, also fulfilled by Amazon.