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Consumers Beware: Amazon Monopoly Will Price Gouge | IBD

What do you stand to lose as Amazon’s retail competition crumbles?

Purchasing power. When competition is eliminated, so too are incentives to keep prices low as a market disrupter. By destroying its competitors, Amazon is also extinguishing any repercussion traditionally associated with price increases — that is, a customer choosing a competitor instead of Amazon.

The company is already taking steps to drown out competition. A ProPublica investigation of 250 frequently purchased products found that Amazon’s algorithm routinely prioritizes its own products on its website, as well as those of companies that pay for Amazon services. Roughly 75% of the time, Amazon prioritized these products as “suggested purchases” — even when there were substantially cheaper offers available.

As a case study, ProPublica’s researchers analyzed listings for Loctite super glue. TheHardwareCity.com, a Texas retailer, was selling Loctite for $6.75 with free shipping. Fat Boy Tools, an Ohio competitor, offered the same product for $7.27 and free shipping.

But Amazon’s algorithm brushed aside the cheaper offers and suggested the vial of glue sold by Amazon itself for $7.80, in addition to $6.51 in shipping costs. That’s right: Amazon prioritized a product nearly double the price of competitor goods, simply because the glue was its own.

Amazon also uses its online marketplace as a laboratory to, in the Wall Street Journal’s words, “spot new products to sell, test sales of potential new goods, and exert more control over pricing.” On numerous occasions, Amazon has allowed online retailers to sell their products on Amazon.com, only to begin selling a nearly identical product as its own and giving the Amazon version preferable treatment in search results. As you might imagine, competitor sales decreased.

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Consumers Beware: Amazon Monopoly Will Price Gouge | Stock News & Stock Market Analysis – IBD.

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