The authoritative news source for communications regulation
‘Major Problem’

Warren, Racine Target Amazon's ‘Inflated’ Prices

Amazon artificially inflates consumer prices by charging third-party sellers exorbitant and unavoidable fees, Sen. Elizabeth Warren, D-Mass., and District of Columbia Attorney General Karl Racine (D) said Tuesday during a Senate hearing.

Start A Trial

Amazon’s revenue from third-party seller fees grew from about $11.7 billion in 2014 to more than $80 billion in 2020, and the company expects to collect $120 billion in third-party seller fees this year, Racine told the Fiscal Responsibility and Economic Growth Subcommittee, which Warren chairs. Racine sued the company earlier this year (see 2109130028). Amazon is entirely focused on using its market power, controlling 50%-70% of the online retail market, to extract every cent of profit from the market, said Warren.

Amazon charges as much as 40% of the product price, said Racine. So a product that’s selling for $100 on a company website might be inflated to $140 on Amazon, said Racine: Due to agreements with Amazon, a company would have to raise the price of its product on its own website. Amazon didn’t comment.

Warren told us she’s particularly interested in two potential antitrust proposals. She would like Congress to make it easier for antitrust agencies to define market dominance by giving them better guidance and tools. The FTC’s monopoly case against Facebook was initially dismissed because of market definition issues (see 2108240059). Warren wants to remove the consumer welfare standard from antitrust statutes. On the potential for Republican support, she said, “There are Republicans who don’t like seeing this kind of market control. There’s at least the possibility that we could move in a bipartisan direction.”

Racine alleged in his lawsuit Amazon practices “anticompetitive restraint” by barring third-party sellers through a “price parity provision” in its contracts from offering products at lower prices on competing platforms. State enforcers have options, he said, but Congress could help through legislation.

Warren said she plans to reintroduce the Pandemic Anti-Monopoly Act, which would impose a “moratorium on risky mergers and acquisitions.” Fewer and fewer markets in the U.S. are “truly competitive,” she said during the hearing: Regulators and courts look the other way while every market is dominated by one or two competitors.

Ranking member Bill Cassidy, R-La., focused on privacy concerns for data brokers. Congress should have a conversation about what data is appropriate to collect, limits on groups collecting and restrictions on selling or sharing the data. He asked why it’s so easy for data brokers to acquire mass amounts of information on consumers. It's very easy to find information online and purchase it because data brokers aren’t regulated, said Duke University data broker researcher Justin Sherman. Data brokers know everything about every American because they can “dance around” the few U.S. privacy laws, said Sherman. It’s a “major problem that needs to be addressed” through non-sectoral, comprehensive privacy regulation, said Future of Privacy Forum Senior Counsel Stacey Gray.

Sen. Ron Wyden, D-Ore., said he’s working on legislation, to be introduced “shortly,” that would address the “sleazy, unregulated world of data brokers.” He suggested Congress enact legislation to limit the export of U.S. data to high-risk nations and companies. He referenced his Fourth Amendment Is Not for Sale Act (see 2104210053) and the Mind Your Own Business Act (S.1444).

Sen. Sheldon Whitehouse, D-R.I., targeted Facebook and Google for profiting from fringe websites pushing disinformation on climate change. Open Markets Institute Executive Director Barry Lynn called platforms like Facebook and Google the communications corporations of this century, comparing them to AT&T and Western Union in the 20th century. The difference is that AT&T and Western Union weren’t able to “manipulate how people communicate,” said Lynn. Social media platforms are designed to set people against each other with false information and determine how people vote, he said.