Legal web site: "Please stop calling Amazon a monopoly"

[TimW]

Originally Posted by DiapDealer

Avoided simply? Oh, you must mean somewhere other than on the internet.

But I'll bite:

Steve, do you believe retailers who use loss-leader-, basket, or promotional-pricing strategies that result in below-cost prices on certain products in their inventory is being "predatory?"

I wonder what the FTC has to say?

Can prices ever be "too low?" The short answer is yes, but not very often. Generally, low prices benefit consumers. Consumers are harmed only if below-cost pricing allows a dominant competitor to knock its rivals out of the market and then raise prices to above-market levels for a substantial time. A firm's independent decision to reduce prices to a level below its own costs does not necessarily injure competition, and, in fact, may simply reflect particularly vigorous competition. Instances of a large firm using low prices to drive smaller competitors out of the market in hopes of raising prices after they leave are rare. This strategy can only be successful if the short-run losses from pricing below cost will be made up for by much higher prices over a longer period of time after competitors leave the market. Although the FTC examines claims of predatory pricing carefully, courts, including the Supreme Court, have been skeptical of such claims.

The reason the FTC and the courts are skeptical about predatory pricing complaints is that predatory pricing is inherently irrational. Companies that try to eliminate their competition by predatory pricing usually bankrupt themselves. Even if they don't bankrupt themselves, it's rare that they recoup their losses. Seeing as there is actually more competition in the e-book market than when Amazon entered it, the chances of the FTC or the courts finding that Amazon had engaged in predatory pricing is roughly zero.

[DiapDealer]

Pshaw. What's the FTC really know about it? *rolls eyes*

[TimW]

Originally Posted by DiapDealer

Pshaw. What's the FTC really know about it? *rolls eyes*

Very true. Anonymous internet folks are always a unparalleled source of good information. Far superior to various governmental agencies who actually enforce laws.

[taustin]

Originally Posted by SteveEisenberg

From what I read there, so long as it was family owned, A&P operated with a low everyday price policy, avoiding promotional pricing. That seems to me to mean no loss leaders.

If everyone sells a bit ticket item at or a little below cost, then you do, too. Or you stop selling that big ticket item.

That's retail 101.

Originally Posted by SteveEisenberg

There's a story related in the book where a competitor from somewhere in the Midwest wrote to the A&P home office in New York complaining that his local A&P locations were pricing some items below cost, trying to put him out of business. The home office then went to great lengths to investigate, prove the competitor correct, and discipline the local A&P managers.

I'd be more impressed if they hadn't been using loss leaders in the first place. Also, your example contradicts your claim they never did it.

[murg]

Originally Posted by pwalker8

Lawyers tend to argue a view point to make a case, not because it's necessarily true. Amazon has around 65+% of the market and the next nearest competitor is around 12%. Pretty hard to argue that doesn't meet the legal definition of monopoly (i.e. Dominate market position).

Actually, it is pretty easy. Amazon having around 65% means that 35% is non-Amazon.

And, since everyone is paying the publishers the same amount for the books, then it's up to each individual vendor to determine how best to run their business.

And don't forget, all* the PBHs have their own website that will sell you their books, so they can make even more because they aren't paying a retailer their cut.

If this kind of market-domination was considered to be a bad thing, the US government would not have approved the Random House/Penguin merger.

*I'm pretty sure about this, but may be wrong. No correspondence will be entered into.

[SteveEisenberg]

Originally Posted by DiapDealer

Steve, do you believe retailers who use loss-leader-, basket, or promotional-pricing strategies that result in below-cost prices on certain products in their inventory is being "predatory?"

In my earlier post, I wasn't, in my mind, distinguishing between loss-leader and predatory pricing.

Googling a bit, it seems that the difference is primarily intent, and that's hard to determine. What's the difference between A&P having loss-leader today or in the 1940's? Well, today it would be delusional for the chain's executives to think their loss leaders can put competitors out of business, because the chain is so weak. In the 1940's, when A&P was the world's largest retailer, would the same exact pricing strategy be predatory? Maybe, but it seems more a legal and psychological difference than something concrete.

As a consumer, I prefer everyday low prices rather than a combination of loss leader promotions with other prices that are high. Now, Amazon doesn't emphasize that items are on sale, but I notice them frequently changing prices. The eBook of J. K. Rowling's latest is now US$14.99 after having been $8.99 before. Motive? My guess is that when Amazon executives get together to decide on pricing, motives in the hearts of the various executives vary, and yet they will agree on a strategy.

[DiapDealer]

Originally Posted by SteveEisenberg

Now, Amazon doesn't emphasize that items are on sale, but I notice them frequently changing prices. The eBook of J. K. Rowling's latest is now US$14.99 after having been $8.99 before. Motive? My guess is that when Amazon executives get together to decide on pricing, motives in the hearts of the various executives vary, and yet they will agree on a strategy.

My guess would be that Amazon executives almost never get together to decide on pricing. Certainly not about individual items or books. Do you really imagine a team Flos running around with a pricing gun? I'm fairly certain Amazon's pricing game (including the loss-leader flavor of the hour/day/week) is based on complex computer algorithms and data mining that executives neither understand nor care about so long as they're producing the desired results. Perhaps with the exception of Hachette titles. I'm certain the execs are dancing around those books and poking them with their pitchforks and laughing maniacally.

[shalym]

Originally Posted by SteveEisenberg

In my earlier post, I wasn't, in my mind, distinguishing between loss-leader and predatory pricing.

Googling a bit, it seems that the difference is primarily intent, and that's hard to determine. What's the difference between A&P having loss-leader today or in the 1940's? Well, today it would be delusional for the chain's executives to think their loss leaders can put competitors out of business, because the chain is so weak. In the 1940's, when A&P was the world's largest retailer, would the same exact pricing strategy be predatory? Maybe, but it seems more a legal and psychological difference than something concrete.

As a consumer, I prefer everyday low prices rather than a combination of loss leader promotions with other prices that are high. Now, Amazon doesn't emphasize that items are on sale, but I notice them frequently changing prices. The eBook of J. K. Rowling's latest is now US$14.99 after having been $8.99 before. Motive? My guess is that when Amazon executives get together to decide on pricing, motives in the hearts of the various executives vary, and yet they will agree on a strategy.

I would much rather have the loss leader strategy, as I shop sales. I have a large pantry and chest freezer, and when things go on sale, I buy them in quantity. For instance--chicken legs are on sale this week at one grocery store for $.89/lb, and I'll buy 5 packages--the max amount that can be purchased by one person. Another store down the street has canned tomatoes and pasta on sale, and I'll buy the max of those at that store. Since these stores are all in a line on the same road within a couple of miles of each other, it won't cost me any more in gas, and not much more in time.

I can understand that if you don't have room to stock up on items when they go on sale it may be better for you if stores do the everyday low price strategy, but that doesn't mean it's better for all consumers, any more than the loss leader strategy is better for all consumers. The marvelous thing is that we have choices. Just like you have a choice to buy from Amazon or not.

Shari

[SteveEisenberg]

Originally Posted by DiapDealer

My guess would be that Amazon executives almost never get together to decide on pricing.

Pricing strategy? Yes. Pricing of individual items? No, except, maybe, if the author is a possible next President of the US. Perhaps that last is the almost in your 'almost never."

[SteveEisenberg]

Originally Posted by shalym

I can understand that if you don't have room to stock up on items when they go on sale it may be better for you if stores do the everyday low price strategy, but that doesn't mean it's better for all consumers, any more than the loss leader strategy is better for all consumers.

I agree. It might be better for society, but is not better for all consumers.

Stocking up, when prices are deeply discounted, is a good strategy for consumers with time to drive around to multiple stores, and with bigger refrigerators and freezers. My wife and I are thinking of getting one of those ginormous French Door refrigerators in the next couple months, so -- global warming or not -- this could soon be us

[crossi]

The difference between predatory pricing and a loss leader isn't intent it's overall profit. If someone discounts one popular item to get people into their store even if they sell THAT item at below cost not just at a smaller profit it's still not predatory if their store overall is making a profit. Plowing their profit back into expansion or research doesn't count as "not making a proifit" just wise use of their income.

[pwalker8]

Originally Posted by crossi

The difference between predatory pricing and a loss leader isn't intent it's overall profit. If someone discounts one popular item to get people into their store even if they sell THAT item at below cost not just at a smaller profit it's still not predatory if their store overall is making a profit. Plowing their profit back into expansion or research doesn't count as "not making a proifit" just wise use of their income.

That is my understanding as well, all though, if you are using the profits from other parts of your business as a price support for the loss leader side, that can also be predatory pricing. This is what the Standard Oil case was about. Standard Oil was big enough that they could drive a local company out of business by charging less in that area and using the other areas of the country to cover the loss. Thus, the point in the various legal documents about if Amazon was making money or not with the the ebook side of their business verses the whole business.

Anti-trust is a very iffy area of the law. The standards have changed and are changing over time. We currently are in a time where the standards are a bit looser than they were back in the 60's.

[RDaneel54]

Originally Posted by DiapDealer

Perhaps with the exception of Hachette titles. I'm certain the execs are dancing around those books and poking them with their pitchforks and laughing maniacally.

[dickloraine]

I can't imagine, that amazon makes no money with ebooks. I don't have the numbers, but the ebook business is not that small. It would be very strange, to make no money in a billion dollar business. Maybe amazon has get its initial customers through its book business, but I don't think loss leading books attract people to buy other products in such a quantity, that you forsake a whole market. When people are amazon customers, they tend to buy by amazon anyway. Of course there is some cross-marketing going on, but if I look for tvs on amazon, I get recommendations for tvs and maybe movies, blue ray players etc. but not the book of the day.

It is either to much money in the market to realy push all the competition out of it, or it is so small, that it isn't worth all this trouble, at least I am inclined to think so.

[pwalker8]

Originally Posted by dickloraine

I can't imagine, that amazon makes no money with ebooks. I don't have the numbers, but the ebook business is not that small. It would be very strange, to make no money in a billion dollar business. Maybe amazon has get its initial customers through its book business, but I don't think loss leading books attract people to buy other products in such a quantity, that you forsake a whole market. When people are amazon customers, they tend to buy by amazon anyway. Of course there is some cross-marketing going on, but if I look for tvs on amazon, I get recommendations for tvs and maybe movies, blue ray players etc. but not the book of the day.

It is either to much money in the market to realy push all the competition out of it, or it is so small, that it isn't worth all this trouble, at least I am inclined to think so.

I doubt anyone other than Amazon knows if they actually make money at ebooks, that's what the quashed Apple discovery attempts were about. For what it's worth, I tend to agree that it's unlikely that they lose money since Amazon wasn't pricing all ebooks at $9.99. Probably just the standard loss leader to get people to use Amazon.

On the other hand, it was widely reported that Amazon is losing too much money
[ http://247wallst.com/consumer-electr...ney-for-years/
and
http://www.bloomberg.com/news/2014-0...-services.html ]
which is part of the reason that Amazon is trying to squeeze it's suppliers even more. Using lose leaders as a business strategy can be expensive.