Last year, Amazon cut a deal with Apple to bring direct iPhone sales to the platform for the first time. Now this agreement comes under scrutiny from the Federal Trade Commission, The Verge has learned.
The deal was first announced last fall, apparently as a way for Apple to sell on Amazon in official capacity and cut down on counterfeit or misleading promotional products. However, it had the effect of kicking off hundreds of legitimate sellers who offered affordable and refurbished Apple products that were no longer for sale by the company itself.
A seller, a Minnesota man named John Bumstead, who specializes in refurbished MacBooks, was contacted earlier this month by a group of FTC officials. Bumstead told The Verge that he was interviewed by FTC attorneys and an economist about the effect of the Amazon-Apple deal on his business. The group did not reveal the broader purpose of the interview, but at least one member of the group is listed as part of the FTC's newly created Tech Task Force, a division launched in February to police competitive behavior on tech platforms. [1
FTC officials were curious about the role that Amazon's Marketplace played in Bumsted's business and how much his business suffered from being kicked off. When Apple secured the deal in November, Bumstead received a couple of months' notice before being forced by the Marketplace platform, which is the leading US e-commerce site for third-party sellers.
"They wanted to know how Amazon works, how eBay works. I went into describing how a list works on Amazon. Amazon is interesting in that you don't necessarily create a list. You just sort the code into an existing list," tells Bumstead The Verge . "If this listing is deleted, chances are you are not allowed to sell that product. That's how Amazon did it. They created a bunch of renewed listings from the people who were certified, and they let those people sell on those lists, and they left everyone else. "
Earlier this week, regulatory news organization MLex reported that the FTC had sued data from sellers on the Amazon Marketplace about products not sold by the company itself, although it is unclear whether the two efforts are related. The FTC did not respond to a request for comment.
Still, experts say the Apple-Amazon deal could easily be the basis for an antitrust complaint. According to Sally Hubbard, an antitrust expert and Enforcement Strategy director at the OpenMarkets Institute, the process of cutting a deal with a brand to shut down third-party sellers who might go on fake products or just low-cost versions is "Brand gating." It's lush on Amazon, and that may be illegal, she argues.
"You put a gate around the brand and say that all third-party sellers of the brand are notified that you will no longer be able to sell this product on our platform unless you obtain authorization from the brand," says Hubbard The Verge . "But of course the brand will not let you sell if you are under [minimum advertised price]. The problem is that it is illegal under the antitrust law."
Hubbard believes the specific Amazon-Apple agreement could be a violation of antitrust laws that deal with anticompetitive conduct such as pricing. and illegal market distribution. "You are not allowed to agree with another company to put a floor on your prices," she says. "When you have these brands and a dominant retailer like Amazon, and Amazon says, & # 39; We're going to make sure that anyone who sells below your prices can't get authorization to sell on your platform anymore, & # 39; it's basically a pricing deal between a dominant retailer and a brand. And it's illegal under section 1 of the Sherman Antitrust Act. "
Amazon's deal did not completely pressure third-party sellers of the Marketplace, but the set conditions that made it impossible for smaller renovators to stay on the platform. Amazon still offers refurbished Apple products sold through the company's "Amazon Renewed" program, but according to Bumstead, the program is limited to buyers of about $ 10 million in inventory a year. He was never able to qualify for the program, and like many other upkeepers, he has left the Amazon Marketplace as a result.
Now, says Bumstead, a significant amount of affordable Apple products have disappeared from Amazon. "When they deleted these listings, they deleted consumer access to most old Macs," says Bumstead. "[Amazon] created only the revamped entries for newer machines." In other words, the lowest price of a used or refurbished Apple computer on Amazon suddenly jumped by hundreds of dollars.
The investigation comes amid an unprecedented antitrust control by Amazon to prioritize its own products and by using proprietary sales data to target competitors. European regulators opened a survey on these issues earlier this month. In Germany, the company has already changed the terms of service for sellers like Bumstead, possibly as a license to local regulators.
The FTC is also stepping up its regulatory giants of tech giants, led by the Tech Task Force. Earlier this month, Facebook settled with the FTC over privacy violations for a $ 5 billion fine, and the commission is also investigating the social network for antitrust violations. According to The Washington Post the FTC has been granted informal jurisdiction to any Amazon investigation in addition to Facebook.
Amazon declined to comment. Apple did not respond to a request for comment.
Update 8/2, 12:28 PM ET: Established that Amazon declined to comment.