Amazon's Power Play Backfires: Merchants and Regulators Push Back on New Fees

Amazon.com Inc AMZN looks to cancel its planned 2% fee on merchants not using its shipping services. 

The company had announced the fee in August, set to take effect on October 1. Still, the move was met with resistance from merchants and consultants, especially as Amazon faces an escalating antitrust investigation. 

This decision reflects Amazon's caution in extracting more money from online sellers in between regulatory scrutiny, Bloomberg reports.

The fee was likely to apply to thousands of third-party merchants who use Amazon's Seller Fulfilled Prime program, which guarantees fast delivery without Amazon handling the shipping. 

It would have been added to the commission, typically 15%, that merchants already pay to sell products on Amazon.

Amazon decided not to implement the fee after considering merchant feedback to prevent it from negatively affecting program participation. Amazon has been scrutinized for its power over the 2 million merchants on its platform, capturing a significant share of U.S. online spending. 

The Federal Trade Commission will likely file an antitrust case against Amazon shortly.

The second quarter saw the seller services raking in $32.3 billion, up 18% from the previous year. This sum even surpassed their lucrative cloud services earnings. 

Interestingly, in the last year, nearly half of each sale's cost was consumed by these seller fees, pressuring the profitability margins of the merchants.

Seller fees have been a focus of regulatory scrutiny, with allegations that Amazon used its e-commerce dominance to compel sellers to use its logistics services. This issue is central to the FTC's antitrust case against the company.

The FTC also accused three Amazon executives of being involved in a scheme that makes it challenging for customers to cancel the company's Prime membership service subscriptions. 

Internal Amazon memos dating back to 2017 discussed concerns that the enrollment process was not user-friendly for cancellations.

Prime membership has been a significant differentiator for Amazon, helping to convert occasional shoppers into loyal customers who choose Amazon as their primary online shopping platform. 

The FTC alleges that Amazon executives were aware of the confusion and difficulties surrounding canceling Prime memberships. However, they were reluctant to simplify the process due to concerns about its impact on business performance.

Price Action: AMZN shares closed lower by 0.16% at $135.08 premarket on the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.