Apple, the Cupertino based tech giant last year entered into an agreement with Amazon. This allowed Apple to sell it’s products directly to the users over Amazon’s platform. Also, Apple gets a step closer to their end-users and eliminate the middle man. But this Apple Amazon deal is in trouble.
The deal lead to a major hard to independent Apple resellers. The concerns started rising right after the deal was announced publicly.
Apple-Amazon Deal Problems
It’s not just that smaller retailers will now be competing with Amazon, but most of them will now be completely barred from selling Apple products. Part of the deal is that only authorized Apple resellers will be allowed to sell through Amazon from January 4, 2019.
CNET reports that authorized resellers will be limited to those ‘who handle millions of dollars in Apple products,’ which will eliminate small businesses and individual sellers.
The Verge, reports that the Federal Trade Commission is trying to talk to the resellers to know about the damages caused. This will help the case and lead to a better judgement.
One seller, a Minnesota man named John Bumstead who specializes in refurbished MacBooks, was contacted earlier this month by a group of FTC officials. Bumstead told The Verge that he was interviewed by FTC lawyers and an economist about the impact of the Amazon-Apple deal on his business. The group did not disclose the broader purpose of the interview, but at least one member of the group is listed as belonging to the FTC’s newly formed Tech Task Force, a division launched in February to police anti-competitive behavior on tech platforms.
The FTC officials were curious about the role Amazon’s Marketplace played in Bumstead’s business and how much his business suffered from being kicked off.
One of the antitrust expert says the deal is likely to be illegal.
According to Sally Hubbard, an antitrust expert and the director of enforcement strategy at the OpenMarkets Institute, the practice of cutting a deal with a brand to shut out third-party sellers who may be peddling counterfeit products or simply just lower-cost versions is called “brand gating.” It’s rampant on Amazon, and it may be illegal, she argues.
“You put a gate around the brand and say all the third-party sellers of whatever that brand is get a notice saying you can no longer sell this product on our platform unless you get authorization from the brand,” Hubbard tells The Verge. “But of course the brand is not going to let you sell if you’re under the [minimum advertised price]. Problem is that it’s illegal under antitrust law” […]
It’s basically a price-fixing agreement between a dominant retailer and a brand. And that’s illegal under Section 1 of the Sherman Antitrust Act.
Amazon’s policy, which allows resellers to sell refurbished Apple products on Amazon lower than the original price. But there is a threshold of US$ 10M to get eligible, which does not include the independent resellers.
Apple has been falling into trouble for the deals it gets into. But we yet do not know about this deal, there is a huge possibility the result can be the other way round.