SBA didn’t exactly enjoy a long run. Started in 2018, the program supposedly helped eligible third-party sellers by automatically adjusting those sellers’ prices in accordance with real-time competition and demand. If a participating seller’s product was normally listed for $20 but Amazon’s algorithms found that the same product was selling for $15 on other websites, Amazon would lower the price to help the product sell. Amazon would then issue the seller their minimum gross proceed (MGP) to ensure the seller still received a payout that would ultimately support their business.
Proponents of SBA thought the program would please customers and sellers alike, with savings for the former and increased opportunity to fulfill a potential sale for the latter. After all, the ability for sellers to pre-select an MGP would prevent them from facing significant financial loss. Skeptics, however, worried the program would be wielded as a loss leader to protect Amazon’s status as a default option for shoppers. Washington Attorney General Bob Ferguson asserts this is exactly what happened.
(Photo: Andrew Stickelman/Unsplash)
According to the lawsuit Ferguson filed Wednesday, Amazon exclusively extended program invitations to third-party sellers already “responsible for the vast majority of worldwide sales” on the Amazon website. By entering into an agreement that guaranteed the seller would receive their MGP, Amazon prevented those sellers from setting their own prices (or even enacting temporary discounts), which in turn kept those third parties from competing with Amazon itself. Ferguson’s investigation found that this also led customers to purchase Amazon’s private label products, benefitting Amazon while cutting away potential customers for the very third-party sellers the program claimed to support.
“SBA contracts were entered for the purpose of, and did, artificially raise, stabilize, and maintain online retail prices to consumers within Washington State and the United States,” the lawsuit reads. Ferguson’s filing goes on to describe SBA agreements as “injurious to the public interest” and having “unreasonably restrained trade or e-commerce,” as they inherently involved price-fixing between horizontal competitors.
The lawsuit is joined by a consent decree indicating a settlement between the Office of the Attorney General and Amazon: Amazon be required to halt the SBA program and pay a $2.25 million fine. The decree also forbids Amazon from ever creating a “new,” differently-named program with the SBA’s terms and conditions.
Fulfilling the terms outlined in the consent decree won’t be particularly difficult, given that Amazon suspended its use of SBA in June 2020, just three months after Ferguson announced his office would be investigating the program. The company says it pumped the brakes on SBA for reasons unrelated to legal scrutiny, though it hasn’t really said what the real reason was, either. Not that it matters—SBA won’t be making a comeback regardless.
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