Competition Bureau advances its investigation into Amazon's pricing policy

Canada's Competition Bureau is taking further steps in its investigation into Amazon to determine if the e-commerce giant's rules for sellers on the platform are an abuse of dominance under the federal Competition Act, the agency said on Tuesday.

The bureau said it's investigating the Amazon Marketplace Fair Pricing Policy, which allows the company to penalize sellers for some actions — including if they list an item for sale at a price that's considerably higher than a recent price that item had been offered at, either on Amazon or elsewhere.

Third-party sellers have to agree to the fair pricing policy, which was first instituted in 2017, in order to sell their products on Amazon.

The bureau said it has obtained a court order that requires Amazon to hand over records and relevant information for the investigation. There is no conclusion of wrongdoing at this time, the agency said.

The goal of the investigation is to determine if the policy forces sellers to charge customers more than they otherwise would for a product, if it prevents rivals from entering the market by preventing sellers from listing their prices at lower rates on sites other than Amazon, or if the policy otherwise lessens the price competition in the marketplace.

Amazon says that prices which "harm customer trust" might be removed as a featured offer by Amazon, have the shipping option suspended or, in some cases, have their selling privileges suspended or terminated altogether, under the fair pricing policy.

For their part, businesses say the policy forces them to sell products at unsustainably low rates.

Bret Nederlof, founder of Brindle Pet Supplies in Red Deer, Alta., sells animal supplies of all kinds on his own store website, as well as a line of branded dog treats on Amazon.

He said in his experience, it seems as though Amazon sets a price internally for what it thinks a product should be listed at. If he tries to list an item for more than that amount, Nederlof said, he is either told he simply can't list the item for that amount or the platform makes his product harder for customers to see.

Nederlof said that the set price is sometimes lower than what it costs to make the product. And in cases where Amazon sells a similar product to his at a cheaper price, he said he simply doesn't list his own product on the e-commerce giant because he knows his item won't sell there.

"It's not every product and it's not all the time, but it definitely happens," Nederlof said.

Amazon told CBC News that it would "continue to collaborate" with the Competition Bureau in an attempt to show the agency that its policies help consumers find what they're looking for at low prices.

"Our tools are designed to enable customers to make informed purchase decisions and maintain their trust, while supporting the thousands of Canadian businesses that sell through our store," an Amazon spokesperson said in an email.

While the bureau's announcement is a step forward in the investigation, William Wu, a partner at McMillan LLP in Toronto who practises competition law, said consumers and businesses won't see any changes yet.

"Right now ... nothing happens unless Amazon voluntarily chooses to change its practices," Wu said. And any future action will depend on whether the investigation reveals any wrongdoing by Amazon.

Wu said Tuesday's announcement is part of a pattern of greater investigation and enforcement by the agency, especially when it comes to big tech companies. He also pointed to the Competition Bureau's legal fight with Google over claims that the company used its online advertising power in a way  that hurt competition in Canada.

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Businesses hope investigation will lead to change

Red Deer's Nederlof said he hopes the agency's announcement might lead to a change in Amazon's fair pricing policy.

"There's always going to be people that try to charge too much, and Amazon wants to control that [with this policy]," he said. "But I think if this could spark Amazon to change [the policy] or have it managed by somebody who actually understands the challenges of selling products or running a business in Canada, I think it would be a great thing."

Michelle Auger, senior policy analyst with the Canadian Federation of Independent Business (CFIB), said she also welcomes the next step in the Competition Bureau's investigation. Nederlof's situation is unfortunately not unique, she said, and sometimes small businesses in Canada end up selling their products on Amazon at a loss.

"Amazon really is one of the main ways for a retailer to access and tap into ... the online markets. So a lot of business owners kind of feel like they have no choice but to be on there [in order] to be able to compete with all the other products that are being sold," Auger said.

The CFIB released a report in 2023 that found small and medium-sized businesses in Canada were struggling as a result of Amazon's dominance in the online marketplace. Specifically, about half of the small businesses polled for that report said they were dissatisfied with their experience using Amazon's marketplace.

While the investigation's next step is only an incremental change, Auger said she's glad to see the federal agency taking action, and she hopes it might lead Amazon to be more transparent about some of its policies and pricing mechanisms in the future.

The Competition Bureau opened an earlier investigation into Amazon to determine if some of the company's marketing practices violate deceptive marketing rules. That investigation also hasn't found any wrongdoing at this time.

The U.S. Federal Trade Commission has also investigated Amazon for multiple reasons, including looking into whether the company has an illegal monopoly.

The new court order also comes on the first day of Amazon Prime Day, which this year runs from July 8 to 11 — an annual event where Prime members get access to big discounts on the selling platform.