Paul Rafelson of SellerBasics talks about Amazon Antitrust Legislation and Effects on Sellers. In this episode of Sellernomics Paul Rafelson will also talk about What is Antitrust legislation? How did we get to this point? What could this legislation mean for Amazon?
About Paul Rafelson – ecomlay.com, sellerbasics.com, and onlinemerchantsguild.org Paul Rafelson is a founding partner in one of the Nation’s leading eCommerce law firms, Rafelson Schick, PLLC (“RS”). As the world of eCommerce has changed the landscape of what it means to be a small business, and in fact, creating for the first time in history what Paul refers to as the “Global Small Business” Paul focuses his practice on providing small and mid-market clients a unique blend of the most up-to-date eCommerce insight mixed with Paul’s “big law” legal experience.
Specifically, Paul’s practice focuses on providing clients with advice on matters pertaining to tax, litigation, intellectual property matters, and representing both buyers and sellers in mergers and acquisitions, all with an eCommerce mindset.
Paul’s practice motivation is based on his firm belief that all business owners deserve competent, constitutionally minded, legal counsel who think about their business with a worldview, not just a local view. In addition to his law practice, Paul is the founder of an online trade association called Online Merchants Guild (“OMG”), where he volunteers as the executive director. As the executive director of OMG, Paul fights to make sure eCom sellers’ voices are heard and that their rights are protected by writing and submitting amicus briefs to the Supreme Court; advocating for business owners as the Supreme Court decides cases that affect online merchants worldwide. Led by Paul, OMG recently filed a lawsuit in Federal Court against California’s Department of Tax and Fee Administration challenging the CDTFA’s prolonged illegitimate pursuit of eCommerce Sellers for uncollected sales tax. Also spearheaded by Paul, OMG was recently granted a preliminary injunction by a United States District Court Judge which blocked Kentucky’s Attorney General from investigating Amazon sellers for price gouging pricing, which the court ruled was unconstitutional since Amazon was the only party that could control prices on a state by state basis. And, in the recent congressional antitrust investigation of Amazon, Paul/Online Merchants Guild was one of, if not the most, cited committee resource in the final report. Paul’s reputation as an advocate for the eCommerce community has led to him being regularly featured in articles in major publications such as Bloomberg, The New York Times, the WSJ, CNN, and many others, as reporters regularly reach out to Paul for his opinion on matters impacting Amazon sellers.
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Find the Full Transcript Below
Welcome to the Sellernomicspodcast, sharing valuable tips and information in the Amazon and e-commerce space. Each week we deliver the best interviews with some of the top Amazon personalities in the industry to help you grow your business. Today’s episode is brought to you by GETIDA the global leader in FBA, auditing, and reimbursements. And now, here’s your host, Rob Scanlon.
Rob Stanley 0:31
Hey everyone, welcome back to the Sellernomics podcast. I got a really, really good one today. We got Paul Rafelson. Hey, Paul, how’s it going? And this is Sammy. How are you? Not too bad. So just give you guys a quick background on Paul. And if I missed something, Paul, let me know. So Paul’s a partner of Rafelson PL LLC, founder of Seller Basics, executive director, and volunteer online Merchants Guild. Did I miss anything there Paul?
Paul Rafelson 0:57
Rafelson Schick PLC.
Rob Stanley 0:59
Yeah. I’m sorry. I didn’t mean to leave Jeff out of there. I love Jeff. He’s a great guy we’ve had him on. So well, we haven’t on the new podcast. I’ve had him on before. So we got a really good one today this is a really hot topic going on. We have Amazon antitrust less legislation if I can get it out correctly, and affects on seller and kind of what’s going on with that. So, Paul, I’m going to give you a quick kind of understanding from I mean, I’ve been trying to read up on this, stay up on it. I jumped on clubhouse when you’re on there the other day and was able to tune into most of it. So correct me if I’m wrong, but there is some stuff going on kind of gonna go high level here, though. There’s some stuff going on with legislation that is basically going to affect Amazon, which will in turn affect sellers. Is that right? And maybe let us know, what is the antitrust legislation going on?
Paul Rafelson 1:56
You’re absolutely right, there is a package of legislation. So you got a number of different bills that were introduced, mainly in the house, that got through the committee. And these bills are very targeted towards Amazon in sort of their dominant, with a kind of deem as their dominant position and targeting some of the business practices of Amazon that you’ve heard, you know, criticized over the years, whether it’s, you know, how Amazon competes against sellers, right, or, you know, forces you to use certain services to, to get benefits on the platform. These bills are basically going after, you know, basically going to make it much easier for antitrust enforcement, when it comes to Amazon. It’s very targeted. I mean, obviously, the bills are specifying a certain size that they start with sort of a definition of the online platform. And, and we’ll get into that later. But you know, the point is, like, there’s a certain size of scale, number of users number of dollars, you have to be running through. So it’s very, sort of very targeted towards Amazon, although technically any platform that meets that criteria could theoretically be targeted. But there just aren’t any others out there. So we’re not really talking about eBay right now. We’re really just talking about Amazon. And so that’s what this legislation is about.
Rob Stanley 3:14
Yes. So they’re specifically going after Amazon, is that correct? I mean, which obviously, is gonna affect the entire community that we’re all part of.
Paul Rafelson 3:24
Hugely, absolutely. This legislation. While there’s a lot of things that I view is, you know, that could be really positive for the seller community. You know, I spent, you know, almost, what, 12-13 years in corporate working in big corporations like Amazon, I work for Microsoft, Walmart, General Electric, you know, so I’m looking at this, you know, we’ve we, we’ve been plugged in, so the online merchant’s field is a nonprofit, you mentioned the beginning, it’s sort of the advocacy arm of what we do, it’s my way of giving back is to help run the thing. But it’s basically we advocate for sellers. And one of the things we were doing early on is we were engaged with the antitrust committee during their investigation of Amazon. So there, they were investigating Amazon, Amazon’s business practices, and needed to hear from people who had experience and so we submitted documentation. And actually, Funny enough, we were the most cited resource in the report. So we, you know, really did give the interested committee a nice flavor for what was going on. And it was important that we did because, you know, to the extent, you know, anything’s happening in Congress, it’s always my view that you know, those who should control the dialogue should be those who are affected, right. We don’t want special interest groups that have really don’t care about us. Like there’s a lot of anti-Amazon sentiment in the world right now. Right? Whether it’s because the wages are the treatment of their workers or whatever the reason, it’s out there, but that anti-Amazon sentiment doesn’t necessarily mean it’s pro seller. It’s not pro us. It’s just you know, they want to See Amazon take down a peg, they don’t really care how it’s done. That’s not what we do, what we do is we fight for the community of online shops, we view that every, you know, the 500,000, Amazon sellers, the United States that make a living, according to Amazon, on Amazon, according to Amazon’s latest release, might need representation to make sure their voices heard, and that, you know, decisions are gonna be made about their future, it needs to come from us and be accurate and not spawn to for other reasons. And that’s kind of what we’re here to do. And so anyway, as a result of that any trust investigation, you may remember Jeff Bezos testifying for Congress last year, and there was testimony about a year before that involved in one of Amazon’s lawyers. Anyway, the long, you know, end result of that is that we now have these breakup bills. Well, various legislation, one of which is an Amazon breakup bill. Right now pending going through Congress.
Rob Stanley 6:00
Yeah, so you missed out on a couple of things there. Paul, I want to touch on real quick. So if I remember correctly, I think your name come up on some of the paperwork that was mentioned? And then also kind of go a little bit back on? Like, what kind of lead up to this? Was there, has this been something that just happened recently? Because I mean, it made the news quickly. And we all kind of took notice. Because obviously sellers, you know, we’re all done with the seller community? Or is this something that started quite a long time ago, and then took time to get to where it is today?
Paul Rafelson 6:33
Now, this has been an over two-year process, right. They’ve been, this has been over two years. And it’s funny when I talked to committee members, staff or congressional staff about this in a while this is, you know, this is moving a little fast, you know, especially when we sort of first started getting in, they said, No, it’s been going on for years. What are you talking about? You? You know? Yeah, we were mentioned. I mean, only my personal name was mentioned, you know, I submitted everything on behalf of the online merchants. So, you know, we, we made these documents and submissions, which are available on, you know, the various websites, if you go to the antitrust subcommittee and look up, you know, the Jeff Bezos testimony, you’ll see a submission by Online Merchants Guild. That’s me. And so when the committee, basically, so what happened was, you know, there was this congressional committee led by, you know, basically investigating Amazon’s market dominance. They were also investigating, you know, Apple, right, Google, there were other tech companies, Facebook, they were investigating in different ways. But with Amazon, you know, it’s their market dominance. And what led up to this is just the history of reports, right? The stories of how sellers have been mistreated on Amazon, right, you’ve had your account shut down for no reason, you’ve had your inventory destroyed. You started a brand and the next thing, you know, Amazon basics, or some other Amazon brand is competing against you. How Amazon, you know, controls the buy box if you’re a reseller. Right. So, because I want to emphasize that point because a lot of people think when we’re talking about Amazon competing, sellers are thinking, Well, you know, it’s just the private label. There’s not a whole lot to it, right? I mean, by the numbers, I think Amazon private label is not very much, right. It’s like its batteries, and then other things. But if you look at the data, it’s like, it’s not a lot. But we’re not just talking about Amazon private label, we’re talking about Amazon, selling branded products, right? We’re talking about, you know, arbitrage, wholesale, right? Anytime you’re selling a product when Amazon is also the seller of the same product, right. And then they dominate the buy box, we’re talking about that kind of behavior. So it’s all those reports of the ways. Amazon has sort of treated the sellers over time and sort of achieved this market dominance. Now Congress is concerned they’ve done their investigation. The investigation was led by the FCC chair, the counsel for the antitrust subcommittee very famously wrote this law review article about Amazon’s dominance. And here we are sort of years later, now Congress is ready to take action against the various platforms that they were investigating. And we have this legislation now, that’s basically designed to take away a lot of Amazon’s ability to be dominant. And we can get into what that means. I’m just trying to space it out.
Rob Stanley 9:25
I appreciate that. So maybe let’s break this down a little bit, because I want to get a little bit better understanding. So what could this legislation mean, kind of for Amazon? And then what about also for the seller and just to go a little further with that, like, could it have an effect on Amazon that helps sellers, or is it kind of were in line with Amazon-like if it negative negatively affects them? It will negatively affect us, but don’t answer that quite the second we need to break for a quick commercial break.
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Rob Stanley 10:13
Yeah. So good here is obviously a sponsor of ours, head over to getida.com/sellernomics. Joe just asking Paul Robison about how this could affect Amazon and also affect sellers. Is it related? Or maybe if it negatively affects Amazon have positive effects on the seller? Go ahead, Paul.
Paul Rafelson 10:32
So so the intent is exactly sort of, as you just said, The intent of the legislation is to negatively affect Amazon positively impact sellers. And the way the legislation cuts that that is, there’s this sort of over overreaching theme of fairness in the marketplace. And what they deem to be unfair is that Amazon, which they view as an online platform, right, has an unfair advantage, because not only is it the owner of the online platform, it’s also the player, it is the largest player, right, it is the largest seller in its platform. So it’s always going to be under an incentive, whether it’s an incentive, it’s always gonna be able to maybe a little too easily, you know, rig the system so that it always works for Amazon, right? Not necessarily the sellers. And the way, the anti, trust sort of uses, hey, this is the dominant platform in the world. Now, certainly, the United States needs to be fair and equitable for everybody. So the various bills have different rules about, you know, what a platform can do, and what how it must sort of be equal to all so for example, you know, obviously, the biggest concern, and this is kind of gets to the breakup element, they don’t really want the platform to be owned by a seller. In other words, you’re either the platform or you’re the seller, so they kind of almost imagine they want to take Amazon retail, and push it away. That’s sort of one extreme and other extremes. It’s more about, you know, sort of building a wall between Amazon. And, you know, making it so that it effectively is competing on par with everybody else. And it has no special advantages, no access to data that other people don’t have access to no unfair advantages. But it’s not just, you know, who sells on the platform, I mean, take, take the sponsor, right? Take a diner, right, it’s gonna want to make sure that, you know, the platform should not be allowed to sort of favor, one vendor that relies on its API over another, right, everybody should have equal access to the API data, and the right to use it in the same way. You can’t make preferences. So it’s really about creating and sort of an equal platform that just you know, serves its purpose, almost like a utility, you can in the way that they’re doing it. But it’s just like, you know, the purpose of your internet service provider is to deliver broadband, right not to choose which companies get better broadband versus others, right, like, that would be bad if, you know, I could pay my broadband company to, you know, cut the internet speed of my competitors, right, that would be a bad thing. So it sort of like, almost like, turns it into this online platforms, this idea of a utility, that it’s just serving the sort of utility, you know, it is the gateway to the national economy, and everybody has to play, but it has to be fair and equal rules for everybody, whether you’re selling on the platform, whether you’re a service provider that provides services to users of the platform, it should all be fair and equal. But the one with the most bite is the bill, Congresswoman from Washington State 3825, which actually says it’s an illegal conflict of interest for an online platform to be owned by a seller. So by virtue of basically what she’s saying is like, not only are these things conflicts of interest, but it’s illegal to have them. So the only way to therefore resolve this is to break apart Amazon and say that Amazon, the store will be its own entity and Amazon, the platform will be its own entity, FBA and they have to be its own thing, and maybe liberalize the market to create competitive fulfillment companies that that will offer the same service to be prime. But the idea is that they want to just liberalize the whole platform, just make it open for everybody, and not have ownership be conflicted. Now, does that mean PPC will go away? No. I spoke to them that this case of PPC will stay the platforms are allowed to do PPC, as long as the methods are transparent and fair, and there are no preferences. So like, you know, one could argue that Amazon being Amazon, you know, one, if they’re going to give themselves the buy box, do they even need to pay for PPC when they’re competing against sellers on certain products. And if they do, it’s not a real cost, like I mean, it’s like even as an internal charge, it’s kind of bogus, but it’s not, you know, they don’t have to play by that rule. So they’re already operating an advantage but But in this world that they’re envisioning may view, PPC is being allowed in the same way it’s allowed on Google or anywhere else just has to be fair and equal treatment for anyone who wants to use it, they can’t prefer, you know, certain people over others. Just a fair bidding process. So that’s the idea. So one could say, yeah, if you look at this legislation that does sound like that could be really great for sellers like this is this could be a win, right? This could be, you know, fair and equal treatment. That’s what we want. We don’t want these things to happen. We want transparency. But that’s not the whole story. And that’s kind of the concern we have.
Rob Stanley 15:38
Yeah, so a couple of quick questions regarding that. And not to get off-topic, because obviously, Amazon is the big platform. But there are other platforms out there, right, like eBay. Now, I don’t think eBay sells their own products could be wrong. It’s been a while since I’ve been deep into eBay. But I’m thinking of something like Walmart, Walmart does have some of their own brand labeled products. And they’re letting third-party sellers sell on their platform also. And now maybe they’re putting them evenly. I don’t know. It’s been a while again since I’ve been on Walmart. But, you know, wouldn’t some of these other marketplaces be affected by these possible decisions coming up? Paul?
Paul Rafelson 16:17
Well, it’s interesting, you said, so it kind of goes back to my point, originally how this was sort of, you know, it’s not, they’re not saying they target Amazon, they’re just targeting certain numbers. But they’re viewing like, if you’re a platform at a certain number, you’re sort of in this dominant position. And that’s, that’s where this becomes a problem. So eBay, as far as I know, does not sell eBay branded products. So they’re probably you know, less, even if they were subject to this, they wouldn’t be necessarily impacted by it as much. Walmart, it’s interesting how you look at Walmart, but I think, you know, looking at some of the testimony that’s been given, I’m under the impression that no, Walmart would not be impacted by this yet. But if Walmart were to grow, and you know, become as big as Amazon, but I think part of it too, is because the way they’re looking at Walmart is they’re looking at its marketplace separately from its retail. I mean, if you put them together, right. You know, in terms of like sales, because how do you distinguish when you go to Walmart.com now, between, you know, it’s kind of like Amazon, like, you see a mix of stuff from Walmart stuff from sellers, right. So could be an argument. I don’t I don’t honestly know, I just know what the President they’re not thinking about Walmart. Because they view that the reality is, and this is true with a lot of our clients, right? Like, we see this all the time. It’s like, okay, you know, where do you make your money? It’s like, 80 – 90%, Amazon, if not more right, and there’s 95%, Amazon, and then it’s like, you know, I just kind of do Walmart, eBay, Shopify, but it’s, it’s without Amazon, I’d be dead, right, like without prime without Amazon. And that’s the reality. And so I think as long as that reality just remains to be true, in most cases, like there just aren’t that many, really successful Walmart sellers, as there are Amazon sellers, right are just like, wholly dependent on Walmart, the way they aren’t Amazon. It’s just not a concern. So I think it’s designed not to necessarily impact Walmart. But you segway into a good point. Because this is where the concern that we have started because we’re starting to wonder about the differences between, you know, Walmart, which has a marketplace where, you know, Target, which up until recently didn’t, or let’s say Costco, but you know, that sort of the difference in Amazon and stores. It’s something really interesting started happening about two years ago with Amazon’s messaging that we picked up on. And this has us concerned.
Rob Stanley 18:43
Yeah, I mean, not to get keep going on that particular thing. But you mentioned Costco, I mean, Kirkland sitting right there next to you know, Kirkland, whatever brand is sitting right next to a regular major brand. So really, it’s competing, even in this store, you know, against other brands. So, you know, could this end up having an effect on any sort of company that wants to do their own branding? I mean, a lot of the grocery stores do it. Then kind of the second point of that, Paul, though, if Amazon turned around and said, Hey, we’re going to stop selling our own products, our own brands, you know, Amazon basics go away. Does that clear this up like this opened the door to be not as big of an issue and let things kind of slide through? Or what are your thoughts on that?
Paul Rafelson 19:29
Well, you segue into exactly what led to our concern, because the first your first point and your second point, definitely a good question. Let me start with your second because that’s easy. I kind of mentioned earlier, like, the mistake that people are making about Amazon, their own brand. Amazon brands are not a big part of Amazon, as the private label brands, right. As far as I know. It’s like its batteries and some other things, but it’s not it’s not moving the needle, right. It’s not the biggest element of Amazon. But that’s not what the concern is That’s not where for it’s not that, you know when they say sellers are now I think, you know, I remember when crossed 50% a few years ago, I don’t know what it’s at right now is it like 60% of the sales are now through the third-party marketplace? Yeah, but whatever it is, it’s not as if that other 40% or 50, whatever that is, comes just from Amazon-branded products that’s coming from Amazon products that are being sold through the vendor central model. Right. So that could be, you know, anything from, you know, major, major brands like, you know, Columbia or North Bay, I’m just making it up, I don’t know. But you know, I’m saying like, just in the same way that you know, it could be from Gillette razors. And the same way that Walmart sells Gillette razors, right, like those products. So that’s the competition that’s included in that other side. So it wouldn’t be to just Amazon getting rid of their private label, it would really just be having to be Amazon, sort of separating themselves from the platform, or, like you said, potentially ceasing to sell their own, you know, their own vendor good. That, you know, being basically being in the wholesale relationship side of things, having their own brand relationships, I don’t see that happening. But your other point is really kind of where this leads down to, because you raise a really good point. And you raise a point that Amazon made, that we picked out, we told the antitrust committee, we said please, please don’t screw this up. Because this is so important because we can see what they’re doing. You said something earlier about Costco Kirkland products being sold next to the major brand. Right? And you had a really good question about that. Do you think that when Costco sees, decides to make like Kirkland branded tie, you know, laundry detergent pods, you know, the way the tide pods are? Do you think that they might look at some of the data from the tide pods before doing that? Or do you think they just guess?
Rob Stanley 21:47
Yeah, I would, my guess is that not just even Costco, the grocery stores, they look and see what’s selling, you know, so if they’re gonna do their own brand, you know, say it’s a can of corn, it’s, you know, sweetened can of corn or something like that, if that thing’s going off the shelf, their odds are they can see the sales data, they’re gonna say, we’re gonna make the I think Costco would do the same thing. They see a particular brand of what XYZ going through the shelf, they would probably go out there and do their own brand. Now I’ve heard Costco though, a lot of times, we’ll go to the brand that’s doing well and asked to do like their own, you know, version of it. I think even the grocery stores do that. So but is that any really different than what Amazon is doing? I mean, Amazon if there’s a factory producing something, and they and they see it’s doing well, and they go to the factory and ask them to produce it for them? Yeah, you know, it gets sticky there.
Paul Rafelson 22:40
No, you raise the point that I think that you basically raised Amazon’s point. So I mean, this was something that Amazon sort of made a point of in their original testimony from 2019. And sort of saying, Hey, this is a sanctioned practice. This is something that retail has been doing for, you know, century This is what retail does, we look at, you know, you have a store, and the store owner looks at competing data from what’s going on. And you basically, you know, decide whether to create a private label product. So, like any store, Amazon do the same thing, right? We’re like any other store. And that’s the issue because that’s where, like, my brain started turning into this really, really attentively because for me to hear Amazon admit that they are saying that they are like a store and then they do it more, by the way, they can say, oh, pricing, we’re not allowed to set pricing? Well, I mean, as any store can reject a vendor whose prices are too high, right? Like, we don’t have to feature that product that they don’t want to sell at a good price. So it was really shocking to me because as you know, I started in this space like I started on an issue, you know, I was big corporate law worked for really big companies, and pivoted into this space. years ago on an issue about sales tax. And the issue was, you know, are Amazon sellers liable for sales tax? Write that, for me, that happened on Amazon, and my position has always been no, it’s a violation of state law, the federal law, constitutional law, and the main reason why I mean, putting the constitutional law reason side but just sort of logical, you know, realities is that at the end of the day, it is Amazon store, right? Like when we sell on Amazon, we’re not really retailers. You can’t say that being a seller on Amazon is comparable to being a store at the Mall of America, right? There’s a lot of differences, right? It is for Amazon, right? But it’s not like it’s not my customer, right? We talk about ownership of the customer, right? That’s a key difference. And in many ways, we as Amazon sellers, are just supplying the Amazon store, right? It’s Amazon’s checkout Amazon store, credit card, Amazon’s extended warranty Amazon’s return policy and it’s all the things that