Competitive Price - Is it even lawful?

The Competitive Price feature that Amazon uses is counter intuitive and extremely damaging for small businesses, but also for the customers Amazon says it is trying to protect and they could actually be in breach of Competition Law in the UK.

All it achieves is a complete loss of sales for the seller/s, a loss in fees for Amazon as hardly anyone buys the item without the buy box and it pushes customers away from Amazon and to their competitors.

For example, we have just had a product have a Competitive Price limitation placed on it at a price of £5.50

Some background about the listing - it is a feminine care product, has been active since the 2nd May 2022, it has 86 ratings at an average of 4.4. It is for a pack of 4. Never had a competitive price limitation on it before.

Average selling price = £7.99
Estimated total sales per month = 900

Amazon say that they are simply matching the price of this product against the same product being sold by other retailers [eg. supermarkets etc.]

And if it was a like for like basis in terms of how the customer purchases and can get the product, the £7.99 price would be high and the limitation potentially justified.

But the competitive price algorithm is flawed, for the following reasons:

1. It does not account for the fact that other retailers will have minimum spends for free delivery, so delivery costs will be added on at checkout and not at the product page.
2. Other retailers don’t have to account for Amazon’s referral fees and FBA fees (take out the FBA fees and referral fees and we could quite easily sell at £5.50 and make a profit)
3. It does not account for the fact that customers might have to go in store to get the product at the price shown and is therefore not a fair comparison.

At £5.50 (0% VAT), the referral fee is £0.45 and the FBA fee is £2.63, leaving £2.42 before even purchasing the product (which is a pack of 4 so essentially 60p for each unit).

Our current purchase price is 86p per unit, so £3.44 for the pack. You could say that we could get the product for cheaper, but I doubt even the supermarkets can get this product for 60p when they sell for £1.50.

Including the costs of shipping into Amazon, our margin is 13% when sold at the average price (£7.99).

Amazon will be losing out on nearly £3000 in fees EVERY MONTH because of the competitive price just on this one product - perhaps those fees could have helped to pay the wages for one of the employees they’ve recently laid off!

We have just purchased 1200 packs (so 4800 individual units) based on the sales we have been doing for the past 9 months and all of a sudden, those sales will come grinding to a halt as customers simply skip over products without a buy box which is entirely because of the imposition of the Competitive Price.

It seems as though Amazon treat customers like idiots, thinking they can’t make an informed decision for themselves about whether they want to buy something at the price shown. If they don’t want to pay that price, they won’t! But that shouldn’t stop all of the other customers who are clearly content to buy it for the price shown.

Customers know that products on Amazon are priced higher than going to a shop and buying it, but will still buy because of how easy it is to order and the convenience. Many customers have a preference of the products they like to use, which may not be available in their local area and so Amazon is a preferred place to shop for those items.

And I understand that Amazon will say they are protecting customers from sellers profiteering from higher prices, but that’ simply not the case.

Our 13% margin goes towards paying the staff for the time it takes to pack the items, apply the label, box the item, create the shipment and then of course the ongoing costs of the warehouse, the utilities, insurance, advertising etc.

As we have already seen from a previous forum post, Amazon simply wants to control our prices (which the forum moderator then changed to say “monitor prices”) and do not care in the slightest about how it affects sellers. How can a business confidently plan around these sudden impositions of the competitive price when it has such a drastic impact on the sales and comes with zero warning?

You put £3-4k into restocking a product that has been selling well for months, only for this to happen - it’s not right and something needs to change.

Not that Amazon will listen to us as sellers.

And as for whether it is lawful for them to even be doing this, see the image below of the Competition Act 1998 and make your own conclusions…It’s fair to say that Amazon are in a dominant position and they are imposing unfair selling prices/trading conditions.

The are essentially giving us a Maximum Price we can sell the product at (shrouding it as a “Competitive Price”) but they incentivise us to sell at this price because if we do, we are eligible for the buy box, customers can order with the 1 click process and you are allowed to advertise the product. If you price above the “Competitive Price”, you’re not allowed to do any of these things.