Business

Amazon Reverses 2% Fee on Merchants Amid Escalating Antitrust Scrutiny

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Amazon has made an abrupt reversal in its decision to impose a 2% fee on merchants who don’t utilize its shipping services, according to documents examined by Bloomberg. This unexpected move suggests that the company is exercising caution in extracting additional revenue from online sellers, especially as it faces an escalating antitrust investigation.

Background:

Amazon initially announced the 2% fee on merchants in August, with the fee slated to take effect on October 1. This levy was met with considerable scrutiny and perceived as a bold move by Amazon, given that the U.S. government is preparing to file an antitrust lawsuit against the e-commerce giant. The pending federal case is expected to focus on Amazon’s alleged efforts to compel merchants into using its logistics services.

Amazon’s Decision:

An Amazon spokesperson stated, “The 2% Seller Fulfilled Prime fee was intended to cover our costs, but after careful consideration, we’ve made the decision not to implement this program fee to ensure seller sentiment related to the fee does not impact program participation.”

Antitrust Scrutiny and Seller Power:

Amazon has been under increasing scrutiny for wielding significant influence over the approximately 2 million merchants who rely on its platform. The e-commerce giant captures nearly 38% of all online spending in the United States. The Federal Trade Commission (FTC) is expected to file an antitrust case against Amazon in response to concerns about its market power.

Fee Impact:

The 2% fee would have applied to thousands of third-party merchants who use Amazon’s Seller Fulfilled Prime program, which guarantees fast delivery while Amazon doesn’t directly handle shipping. This fee would have been added to the commission, typically around 15%, that merchants already pay to Amazon for selling products on its platform.

Merchant Feedback:

Amazon did not provide an explanation for the fee when it was first announced in August. However, it has now begun notifying merchant partners of the fee’s cancellation, attributing the decision to merchant feedback.

Increasing Seller Fees:

In recent years, Amazon has raised fees on merchants, who typically incur costs for advertising and logistics to boost their sales. These fees have become increasingly vital to Amazon’s business, particularly as growth in its core online operations has slowed. In the second quarter, seller services generated $32.3 billion in revenue, surpassing the profitable cloud services business. This shift has led to seller fees consuming a significant portion of each sale’s cost, making it more challenging for merchants to maintain profitability.

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Seller Fulfilled Prime:

Amazon introduced Seller Fulfilled Prime in 2015 as a way to expand its inventory without overwhelming its fulfillment centers.

Antitrust Focus on Seller Fees:

Amazon’s seller fees have drawn the attention of regulators and lawmakers since at least 2019, when a merchant accused Amazon of using its e-commerce dominance to coerce sellers into using its logistics services. This allegation has since become a focal point of the FTC’s antitrust case against Amazon, according to individuals familiar with the situation.

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