[saltking112]

but some industries clearly needs economies of scale in order to provide the consumer with cheaper and better products.

Can you truly argue just because a firm is large they are no longer allowed to offer the same product for cheaper simply because they have a strong foothold in distribution?

[jdmichal]

It's not about being scaled. It's about using your scale in one place to force scaling in another. If Amazon provides a marketplace, where people pay them to list and sell products, then using the strong position of that marketplace product to then leverage and scale up their own products is potentially troublesome.

[Beached]

I mean, Walmart is also mega huge, and also allows 3rd party sellers on their website. is it troublesome that Walmart also promotes their own items or the items where they make the most profit first?

[jacobr1]

I think the bigger problem that people have in general with moves like this is the _change_. If Walmart previously didn't promote their brands, and now did so aggressively, you'd hear complaints as well.

The other complaint seems to be "fairness." If you operate a platform, people expect it to be fair. But what is "fair" probably has more to do with historical cultural norms than actual abstract fairness, again it is the change the causes the issue. If Walmart started putting "see our generic option for cheaper over here" on end-caps that manufacture were paying top billing to place, they'd complain. But Walgreens has already been doing this in their OTC sections for years, just not with paid-to-place products.

As a consumer, I personally like the Amazon brands, because I can at least trust them to be real products with a reasonable quality expectation, not a switchout from some crappy seller or comingled inventory with fakes.

[mthoms]

>As a consumer, I personally like the Amazon brands, because I can at least trust them to be real products with a reasonable quality expectation, not a switchout from some crappy seller or comingled inventory with fakes.

What irony. Amazon's co-mingling is actually benefitting them in ways other than lowering costs — It's actively driving people to their house brand(s).

Amazon is pure (evil?) genius.

[jacobr1]

I'm not sure. How can it not be the case that being the global platform for the "everything store," and having people search on amazon for purchases even before google is a bigger business than selling your own white-label goods? The extra margin gained with cost-reduction from co-mingling products surely can't replace that strategic advantage, can it?

I suspect Amazon just overreached. And not because of an intentional decision going sideways, but because of having many independent teams, with smart people, each optimizing for their own area. Frankly, it is actually amazing how much cohesiveness in action and strategy actually exists, as opposed to the mistakes we see (I'm looking at you AWS console).

[jdmichal]

I don't know if Walmart promotes their own brands over others on their website. If they do, then yes I would consider that under the same hazard.

Do note that this is all speculative anyway... There's been no ruling. Just some people pointing out problematic behaviour.

[saltking112]

Walmart eCommerce is relatively small, so not really comparable in terms of anti-trust concerns.

[curryst]

In the physical space, Walmart is still king though, so the same concerns that apply to Amazon's ecommerce would also apply to Walmart's in store product placement.

The anti-trust concerns would also apply to Walmart's own ecommerce. They're effectively leveraging their brick and mortar presence to establish their ecommerce business (which is presently the 2nd largest in the US). The 3rd largest is eBay, which leaves one to wonder how much of the hole left by Amazon would be absorbed by Walmart.

[JumpCrisscross]

> some industries clearly needs economies of scale in order to provide the consumer with cheaper and better products

This isn't an economy of scale.

The component that has scale is distribution. A third-party seller selling through Amazon gets those advantages the same as Amazon. What's different is the sourcing and manufacturing of the product.

Amazon has an edge. But it's not one of economies of scale.

[shubb]

They have a data advantage- Amazon basics are just white labeled goods from some Chinese factory, warehoused and dispatched from an Amazon warehouse just like everything else on Amazon Market. The only difference is Amazon but the stock (and bet on it selling).

Amazon has much better visibility on sales, margins, user behaviour than their market sellers. Where risk is high they allow sellers to take the risk, where it is low they enter directly and take more margin.

It's a great business model, like a hedge fund running an exchange with no separation of information. It would be illegal the financial sector.

[User23]

> It's a great business model, like a hedge fund running an exchange with no separation of information. It would be illegal the financial sector.

Maybe I'm misunderstanding, but wasn't Glass–Steagall repealed?

A lot of people don't realize, but hedge funds are the small fry. I mean sure a few hundred million or even a billion or two dollars sounds like a lot of money, but once you realize how much the Fed is pumping through the primary dealers it's literally pocket change. It's outfits like Goldman or BlackRock that are playing heads I win tails you lose.

[JumpCrisscross]

> wasn't Glass–Steagall repealed?

Glass-Steagall banned federally-insured banks from competing with investment banks. Information walls, which have to do with insider trading, are a separate beast.

[robertlagrant]

I hadn't thought of it like that. But is it any different than if they paid for analysts to provide them that info?

[saltking112]

With commoditized products the brand/manufacturer has no pricing power, so in order to go down the cost curve the firm would need to deploy more capital. This means making things in bigger batches, more efficient shipping, more advertisement investment taking ads out on Amazon to get initial reviews etc...

In each of these components Amazon Basics has an advantage over third parties whom are often mom and pop and are undercapitailized.

The points of contention are

1) If amazon competes fairly in Ad bidding so Basics products shows up first on the paid search results, is this anti-competitive?

I don't think so. They just have more capital. Any other well capitalized firm can do the same.

2) Is it fair for amazon to display their products more prominently?

I don't think so. How is this any different than Walmart refusing to carry a product? Or putting their private labels more prominently?

[JumpCrisscross]

> Amazon Basics has an advantage over third parties

Totally agree. But this isn’t an economy of scale advantage.

SoftBank-backed companies had a capital advantage over their competitors. That isn’t per se an economy of scale. Amazon’s products have a distribution advantage over smaller competitors. Again, not an economy of scale.

[jacobr1]

On the sourcing side, they have a scale advantage of placing larger orders which can get them better OEM pricing. Depending upon the product category their probably are manufacturing efficiencies of scale that enable better pricing. And in particular, their purchasing departments have more efficient analytics numbers to make product entry decisions that benefit from the scale Amazon has reached. So the efficiency in which they are likely to operate in making JIT purchases, or predictive purchases, and avoiding costly inventory mistakes and markdowns is only possible with the large market reach and ability to hire a technical depth of analysts (or tools makers for analysts) enabled by their size.

[throwaway_USD]

>Can you truly argue just because a firm is large ...

1. I am not arguing anything, I did not develop Anti-trust law nor did I argue for or against it.

2. I never mentioned the the size of the Firm, because that isn't the legal standard. As I said what matters is unfairly forcing competition out of the market.

What Amazon does is has other businesses develop products and markets for those products on the Amazon marketplace. Then Amazon uses its data to determine which products are selling and what Amazon shoppers are looking for, then Amazon copies the product and uses all kinds unfair practices to force out the market incumbents...and in many case once the Amazon has forced out the market incumbent (again to the detriment of consumers), then Amazon has a history of raising their product price (again to detriment of consumers).

But we get it, to you Amazon hasn't done anything wrong and the consumers are better off and should be thanking Amazon. I'm not argue otherwise, just simply saying that is inconsistent under Anti-Trust laws.

[saltking112]

So suppose Amazon shared sales/behavior data with other sellers/companies, such that everyone is competing on a even footing with regards to product research. Do you still think what Amazon is doing is anti-competative?

In other words, if other well capitalized players had the same data, same ability to manufacture at the same scale, advertise etc... and Amazon's sole advantage is product placement, is it still problematic?

[throwaway_USD]

>and Amazon's sole advantage is product placement, is it still problematic?

Potentially, but stop focusing on the act and focus on the result.

You brought up retailers and their shelf space. First no grocery store puts "Grocery Store O's" in a better placement than Cherrios...but fine lets assume they did. Does putting "Grocery Store O's" force Cherrios out of the market? No. However, seems to be no shortage of examples of a successful vendor on Amazon being forced out of the market altogether after Amazon copies their successful product.

[saltking112]

I agree that the results are important, but in the amazon vs third party vendor the difference between the two parties are large.

One is much better capitalized than the other and enjoy many cost advantages. On product and price alone, many consumers would choose Amazon, all else being equal, including product placement. In short, since we haven't seen Amazon crushing equally well capitalized and competent white-label players like Anker, Amazon is only out competing inefficient firms.

Similarly, Walmart's "Grocery Store O's" are competing against P&G, which is a equally well capitalized firm. That is, the Cereal market is efficient and competitive, and winners win through distribution and market positioning. This is why P&G O's aren't getting destroyed.

The results you are witnessing - smaller firms getting taken out, is just a phenomenon of competition. I suspect as consolidation takes place, many large firms like Anker will be able to offer competitive product at competitive prices vs. Amazon Basics.