Brand Enforcement / 04.30.2020

Amazon’s Pricing Policy Is Suppressing the Buy Box

By Jon Groza & Kyle Stroup

Amazon pricing policyEarlier this year, Amazon implemented a new pricing policy that is causing many sellers fits. Titled the “Amazon Marketplace Fair Pricing Policy,” the new policy seeks to provide shoppers with the lowest prices possible. To do so, Amazon now regularly monitors prices of products on the Amazon Marketplace and compares those prices with other prices available for that same product on multiple platforms, including those on the Amazon Marketplace. If Amazon finds a price for a product on the Amazon Marketplace that it determines is too expensive, it can remove the “Add to Cart” option—better known as the Buy Box—for that product. It can also remove the listing entirely, suspend the shipping options or, in serious or repeated cases, suspend or terminate selling privileges. Amazon reasons that this policy will promote and uphold customers’ trust that they can find the lowest prices on the Amazon Marketplace. It also, not surprisingly, will increase Amazon’s online market dominance.

Amazon identifies certain pricing practices that it believes harm customer trust. Some examples of those practices include:

  • Setting a reference price on a product or service that misleads customers;
  • Setting a price on a product or service that is significantly higher than recent prices offered on or off Amazon;
  • Selling multiple units of a product for more per unit than that of a single unit of the same product; and
  • Setting a shipping fee on a product that is excessive. Amazon considers current public carrier rates, reasonable handling charges, as well as buyer perception when determining whether a shipping price violated our fair pricing policy.

The policy facilitates Amazon’s ability to provide the lowest prices to its shoppers. But the Amazon Marketplace Fair Pricing Policy also frustrates Amazon Marketplace sellers because it fails, in many instances, to account for critical price differentiating factors, including but not limited to warranties and customer service.

How does the policy work? Amazon uses an algorithm to analyze all of a specific product’s listings across the Amazon Marketplace, other websites and e-commerce platforms. Amazon then uses that data to determine if a seller’s listing is at a price-point too high when compared to other listings of that product that Amazon’s algorithm identifies. Products considered to be listed at excessive prices can then be masked, suppressed or removed from the Buy Box entirely.

Shoppers have become familiar with the Amazon Marketplace’s features—one of the most basic features of which is adding a desired product to the shopper’s cart. Now, instead of allowing a shopper to easily add products to their carts, Amazon has added another layer for shoppers to sift through to buy a product. The “Add to Cart” button shoppers have come to know and understand when buying a product is replaced by a “See All Pricing Options” button. The new “See All Pricing Options” button then shows the shopper all sellers listing the product at various price points. This directly puts a seller’s listing up against another seller’s listing, such that a shopper can select either seller’s product despite a shopper never having visited the other sellers’ listings. Presumably, this persuades a shopper into purchasing the lower-priced listing.

While the “See All Pricing Options” function displays all of the sellers’ listings, it does not adequately display all of the information important to consumers when making a purchase. Instead, the policy assumes that the only relevant information is the product’s price-point. This confuses the shopper into believing that all of the listings are identical when this is not the case. The removal or suppression of the Buy Box from a listing fails to account for critical features associated with a seller. For instance, the “See All Buying Options” does not distinguish between authorized and unauthorized sellers. One seller’s price may be higher than another because that seller is authorized by the manufacturer or distributor to sell the product. Or, in other instances, the higher-priced product comes with important product warranties or direct to manufacturer customer service rather than a third-party. Products may also be listed at higher prices because of quality controls in a seller’s supply chain.

Because Amazon is an e-commerce juggernaut—responsible for 49% of all U.S. online retail sales—the new policy affects many businesses and consumers. Amazon’s sellers need to be able to set their own prices for their product listings without being forced into certain price-points. To enable this and avoid removing and suppressing the Buy Box, businesses can do a few different things. First, manufacturers and distributors need to remain vigilant in enforcing their unilateral minimum advertised price policies. Businesses need to actively monitor who is selling their products on the Amazon Marketplace and, if necessary, demand unauthorized sellers cease selling those products if they are violating intellectual property rights or not adhering to unilateral minimum advertised pricing policies. Additionally, sellers may want to advertise key benefits from buying a product from an authorized seller, such as product warranties or quality customer service.

If you have any questions or would like to discuss further, please reach out to Jon Groza at jwg@kjk.comr or 216.736.7255 or Kyle Stroup at kds@kjk.com or 216.736.7231, or contact any of our Brand Enforcement professionals.

 

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