Amid probes into its pricing policies, Amazon is testing a new program for sellers on its third-party marketplace that would take pricing control out of their hands and give the company the ability to cut prices at will.
Sold by Amazon (SBA) rolled out last week with a small number of sellers who agreed to give the online marketplace the authority to slash prices on goods to ensure Amazon remains competitive with other e-commerce retailers. In exchange, the seller is guaranteed a Minimum Gross Proceed (MGP) amount to protect their margins.
Sellers can choose which products they enroll in the program, according to an invitation that was sent to sellers and seen by CNBC. An Amazon representative told the news outlet the automated program would save sellers time and generate sales by ensuring consumers always find the best price for goods on Amazon.
The rollout of this new feature comes amid increased scrutiny from lawmakers. Amazon is one of four major tech companies (including Apple, Facebook and Google) that is currently subject to anti-trust investigations by the U.S. government. Last December, democratic Senator Richard Blumenthal wrote a memo imploring the Department of Justice and the Federal Trade Commission to look into the requirements for possible antitrust violations by Amazon.
Blumenthal specifically referenced price parity provisions that require marketplace sellers to offer their products for the lowest price on Amazon, a practice he said “could stifle market competition and artificially inflate prices on consumer goods.” Amazon’s price parity provisions, he added, “limit the discounts that third-party merchants can offer to customers through any site other than Amazon’s online marketplace.”
Amazon, according to Blumenthal, reportedly enforced these guidelines by threatening to remove third-party sellers who didn’t comply.
A recent report from Bloomberg also asserted that because of these price parity provisions, sellers have been forced to raise product prices on other retail sites or risk blowback from Amazon. The company has reportedly made a practice of scanning rival retailers’ selections for Amazon sellers. If a seller happens to offer a product at a lower price on another site, they will be penalized on the Amazon marketplace. According to Bloomberg, offending sellers’ products are buried within the site’s selection, making it difficult for consumers to find and purchase them.
Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.