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It's generally not illegal to raise your prices or set your prices at what your competitors are charging. There are variety of factors that influence a price of an item.
The issue is that the FTC is alleging that the algorithm artificially boosted prices and keeping the prices that high when competitors matched the price.
While it's not outright collusion on price fixing, it does reek of using monopolistic practices to fatten the bottom line.
I really can't believe its legal to charge more or less based on a customers location, or probably other data about us. This seems like such a fucking problem.
Really, it's super legal. If you buy a textbook in America or you buy the same textbook in India, the price difference can be 90%, and I recall the publishers legally going after people for having the gall of buying the cheaper textbooks.
And yet, no one says anything when landlords use the same basic tools to price fix rents.
I am also certain that any retailers competing with Amazon -- at least those of sufficient size -- have their own data scientists banging away on optimizing pricing too.
According to the Journal, Nessie would inflate prices and monitor whether other retailers, like Target, would follow suit. If the competing retailers maintained the lower price, the algorithm would automatically revert Amazon’s to its normal price.
Isn’t this how retail pricing always works?
That basically sounds like automated price fixing
Price fixing is when sellers conspire to increase prices beyond what normal competition would support. The fact that the algorithm reduces the price below competitors’ when it detects they are not following a corresponding increase means it’s not price fixing.
what normal competition would support.
Maybe it's the overall price of something else that's not shown
Tech Giants Settle Wage-Fixing Lawsuit
That did happen.
What's perceived as competitors can be allies to accomplish common goals. Though they settled the lawsuit, it's not like this got put out of practice. They refined it
emails from top executives including the late Mr. Jobs, Google co-founder Sergey Brin and then-CEO Eric Schmidt surfaced, showing the executives conferred on hiring plans
This is the defining characteristic of price / wage fixing - out-of-band collusion of price setters to discourage competition. There isn’t even an allegation that this is happening here.
That's why it's so brilliant. If you can develop an in-band system to coordinate arbitrary price increases between firms then you have plausible deniability. Who needs price fixing if you can just temporarily increase price, see who's price matching algorithms follows, and act accordingly using an algorithm that acts so fast that consumers are none the wiser when the "negotiation" to increase price fails.
The fact that the impetus for the price increase is nothing more than to test if other firms will raise their prices to match an increase and has nothing to do with supply or demand of the product makes it transparent that this strategy achieves the effect of price fixing without the smoking gun of explicit negotiation and plausible deniability that they are simply engaging in "price leadership".
What happens when another retailer runs the same algorith? One tests the waters with a price hike, the other sees it and matches. The first detects the corresponding increase and maintains the increased price. Rise repeat.
I'm other words, this could be price fixing because making a temporary increase and seeing if competitors will match the increase is sending a signal to competitors that Amazon is willing to increase price if others match. The fact that they revert to a lower price doesn't absolve them from price fixing, it just means the negotiation to collude failed.
The fact that the only factor in play is whether the competitors also increase price makes it blatantly obvious that the increase has nothing to do with supply and demand.
I don't think you understand what price fixing is. Adjusting prices to market competition is not price fixing. This same concept can also lower prices if another vendor is selling the same item for less.
For instance, Amazon frequently will lower prices to match chewy and Walmart
I don't think you understand what's happening. Amazon's algorithm is not just increasing price to match competitors. They are temporarily increasing price beyond competitors to see if competitors will also increase their price. This is different because there is no original market force impetus for the price increase, they are just seeing if both they and a competitor can coordinate to make a permanent price increase.
Arbitrarily interesting a price to see if you're competitors will also increase is not adjusting to market competition. It's testing the waters for colluding on price. It's literally sending a signal that Amazon is willing to increase if others will match. Whether the agreement is made in secret or done in public using "plausibly deniable" price increases makes no difference.
Yes, market pricing is reactionary. Other sellers might also see increased sales when Amazon raises prices.
Probably why Amazon stopped using this pricing model.
Only issue is the automated fashion in which it’s done. It means they can easily push prices up and up and up to extract every last penny they can from buyers.
Greed is no longer something that you have to work at, if you have a desire to fuck people over you’re just a button away from doing it.
Most people don't know how retail pricing works, so when they read an article like this, they're shocked and offended
At the scale of Amazon, it's much less reasonable.
Meanwhile secret algorithm: price *= 1.1
Scamazon
How would this be enforced? Also, can we rely on the FTC to do their job quickly and effectively when we’re just now hearing about something that’s reported to have ended four years ago?
Of course... That's their whole business model
It's literally anyone's business model in a capitalistic market, it's hilarious that people are shocked and offended
It's still shocking and offensive to be confronted with the truth of something you already knew.
Everyone knows that the rich would happily stab you in the face for your pocket change, but actually seeing rich people commission sophisticated software designed to do just that is still confronting.
I guess? I always just assume that's what's going on all the time. But there's also people that are going to be massively hyperbolic like yourself too, which I also assume is going on all the time. Everyone is just trying to get money.
Also I wouldn't call this software sophisticated at all, its pretty rudimentary. It's just comparing numbers and adjusting them by an offset. They also stopped using it, I assume because it wasn't sophisticated enough to account for the myriad of market forces at play.
Secret or standard?
Is it the scale of sales that matters? Like if I make an Etsy shop and set my prices based on competitors, is that illegal?
No, you're doing capitalism just like Amazon and everyone else. And if you don't want to do it personally feel free to write a script to do it just like Amazon
Is this really a surprise?
I'm shocked, I tell you, SHOCKED!
Ive bought through amazon three times in my life. Each time i regretted my purchase because the absolute lowest quality shit arrived. Why the fuck would anyone buy anything from there?
Because you bought from shit sellers, amazon is just the marketplace
amazon basics entered the chat
Amazon is also the only marketplace where ive seen products from such recognizable companies as ghutxcl
I've seen this famous global brand on ebay and aliexpress.
For me, it's simply that there's stuff I can't find without driving 4h to another city, and even then only maybe.
Another city hasn't discovered post services yet?
Right? People will very readily make up fictional scenarios in their defence of amazon. It is trully bizarre how effective they have been at convincing some people in believing that they are the only internet retailers in existence.
Is Amazon really your only internet retailer, or have you just not bothered looking for other online alternatives?
It's often the only one where the shipping costs won't be 30% of the item's price. I've had lots of times where I was gonna buy something somewhere only to find the shipping would double the price. Etsy is the worst for this. Lots of stuff where the price tag is just barely what I can justify paying, but the shipping (and often duties) would make it comically expensive. Those things I would buy locally for sure, but finding them locally is hard.
It’s often the only one where the shipping costs won’t be 30% of the item’s price.
Ok, so it is not about amazon being the only player on the market, but of you not wanting to pay the actual cost of things.
In a lot of cases, not even that. Look at stuff like a "raspberry Pi CM4".
Pretty much EVERY single retailer I've checked in Canada is waiting on stock. You can't get them from anyone here, period, and I've been on a bunch of wait lists.
Even Amazon's stuff is coming from overseas but they do help handle logistics, currency conversion, and have some guarantee of a real product. Throw in shipping AND duties+fees and you could be paying 3x from an OOC store.
Other choice would be AliExpress, but if I receive a lump of metal with a chip glued to it at least Amazon makes it easier to get my money back.
Because you have like 3 weeks to decide you want to keep that purchase or not for a full refund
If the items were shit, why didn’t you return them?
Because it's convenient when I often can't get out, it has a good return policy, and your experience is radically different from my own. Mainly that last bit.
It used to be decent, but in recent years it's basically become wish.com with better logistics.
Verge is back publishing bullshit.. like in good old times. "Secret algorithm". So prices have been raised and? No one told us... yeah... wow.. is it unusual? They used a tool to do that and it was secret. And wallmart publishes their IT on Github? Prices usually grow, if they can't or goods sell bad, they need to reduce them again. That's how market works.
An items worth is what someone is willing to pay. It's kind of the whole point of capitalism. If you don't like it, don't buy it.