One of the central arguments in the Federal Trade Commission’s (FTC) antitrust case against Amazon is that the online retail giant stunted the growth of potential competition by forcing small businesses and other independent sellers to route their products through Amazon’s own internal distribution system . .
Much of that argument appears to rest on a single statistic — one that top FTC officials have cited in interviews and on Twitter and that surfaces in a new, unredacted section of the FTC’s lawsuit. There’s just one problem: that statistic doesn’t say what the FTC continues to claim.
To understand what it is do Say, first you need some background information.
Amazon would have deprived potential competitors of the “ability to gain the scale and momentum necessary to compete effectively online,” as FTC Chair Lina Khan told Bloomberg TV in a Sept. 26 interview.
The argument goes that Amazon was so determined to stifle that potential competition that in 2019 it ended the so-called “Seller Fulfilled Prime” (SFP) program – an arrangement where independent sellers could offer free shipping to buyers with Amazon Prime subscriptions, but where salespeople remained responsible for getting orders out accurately and on time. Since the SFP program was closed, all independent sellers using Amazon Prime are forced to go through Amazon’s own distribution network (known as the ‘Fulfillment by Amazon’ or FBA system).
That’s evidence of anticompetitive monopoly power, said Khan, who called the scheme a “coercive plan” during the same Bloomberg TV interview.
“At several points, Amazon has experimented with giving sellers more leeway to use Seller Fulfilled Prime,” she explains. “But once Amazon recognized that this would threaten its monopoly position, it turned it off, even though sellers actually met the same standards as FBA.”
In the newly redacted portion of the lawsuit, the FTC repeats this claim – and puts a figure on it: 95 percent. This is the most important statistic.
“Amazon shut down SFP because they said deliveries weren’t on time. But new information shows that sellers using SFP met Amazon’s delivery requirement more than 95% of the time,” said Douglass Farrar, director of public affairs of the FTC. , tweeted Thursdayalong with a screenshot of the lawsuit.
Amazon shut down SFP saying deliveries were not on time. But new information shows that sellers using SFP met Amazon’s delivery requirement more than 95% of the time. 12/15 pic.twitter.com/7uTB4WORvn
— Douglas Farrar (@DouglasLFarrar) November 2, 2023
In a nutshell, the FTC’s argument is that sellers who used the SFP program met their delivery goals 95 percent of the time, but Amazon ended the program anyway to consolidate power and limit competition (even competition that already came through came his own way). front door).
But more importantly, that’s not what the 95 percent statistic actually says.
Just read the sentence in the FTC’s own lawsuit, as helpfully depicted in a screenshot from Farrar: “Sellers who participated in SFP met their promised ‘delivery estimate’ requirement that Amazon imposed more than 95% of the time in 2018.” (Emphasis added.)
That doesn’t mean those sellers met the requirements of Amazon’s Prime program. It means they met the shipping standards they set for themselves when setting up their Amazon seller account.
“It was correct to say that salespeople met their own estimates, but those delivery estimates could be days, weeks, or even months away,” points out Carl Szabo, vice president at NetChoice. “Customers who bought from these sellers would get their stuff on the ‘promised delivery date,’ but that date could be several days, weeks or months later, not the two days promised under a ‘Prime’ badge.”
How many of those sellers actually met Prime-level shipping standards? According to Amazon spokesman Tim Doyle, the figure was about 16 percent.
“The misleading figures cited by the FTC in the complaint misrepresent how we work with merchants to meet the high expectations of our customers,” Doyle said. Rode. He says Amazon made the decision to pause new enrollments in the SFP program in 2019 because fulfillment rates were “well below our customers’ high standards and expectations for Prime.” Since then, Amazon has restructured and reopened the program.
Rather than trying to squeeze the competition and harm consumers, Amazon appears to have taken proactive steps to ensure its customers got the Prime level service they paid for. This is not evidence of a monopoly; it’s a demonstration of how Amazon has become so successful: by putting customers first.
This is in some ways similar to the FTC’s bizarre claim that Amazon is making it too difficult for users to cancel their Prime subscriptions — a process that takes six clicks, one time fewer beyond what it takes to file a complaint with the FTC, such as Rode Previously reported.
That was at least an accurate statistic, albeit a funny one, and a rather silly one to base an antitrust case on. By comparison, the FTC’s inaccurate use of this statistic about Amazon’s SFP program goes to the heart of the agency’s lawsuit. It suggests that Khan either fundamentally misunderstands the claim she (and the FTC in general) is making, or that she is lying about what it means.
“By presenting this as some kind of ‘gotcha’ moment, the FTC is trying to imply that SFP outperforms FBA, which is simply not true,” wrote Carl Holshouser, senior vice president of TechNet, a nonprofit that advocates for the so-called “innovation economy,” on Twitter. “By mischaracterizing the facts of this case and continuing their efforts to undermine consumer preferences, the FTC is once again undermining their own credibility.”
Amazon didn’t kill an alternative that worked for consumers as a way to further entrench its monopoly. It shut down a program that was clearly flawed and that threatened to undermine customers’ trust in the Amazon brand, reconfigured it and has now reopened it with better controls.
Then again, it’s probably no surprise that the federal government is unfamiliar with that process.