Small businesses and online marketplaces alike are accusing retail giant Amazon of trying to quash competition by backing a new California bill.
AB 3262 is a consumer protection bill that would hold online retailers accountable if the dangerous products they sell end up injuring consumers. The bill was originally designed to hold Amazon accountable for selling harmful goods from second-party sellers in other countries. But now, Amazon may be using the opportunity to hurt smaller retailers.
AB 3262 will put forth a handful of new, expensive safety measures for online retailers. Under the law, e-commerce services would have to abide by the same liability standards as physical retailers. But thanks to Amazon’s lobbying, the legislation makes compliance extremely costly and tedious.
Critics argue that while Amazon will be able to incur the costs, small businesses, and even big competitors like Etsy and Shopify, could crumble under the added expense. But would Amazon really try to hurt its own bottom line just to push others out of business?
Actually, it’s a fairly common anticompetitive practice. Predatory pricing is the cornerstone of monopolies and cartels. Large companies practice this when they sell products at a loss in order to push out smaller companies that can’t afford to compete. Customers flock to the cheaper option and the competitor either fails to draw in customers or bankrupts themselves trying.
In fact, the entire antitrust movement of the late 19th and early 20th centuries aimed to end such practices. A “trust” was a collection of subsidiary businesses controlled by a powerful parent company. By building a wall of low prices around an independently-owned competitor, a trust could put the rival out of business. Congress enacted Antitrust laws to prevent such predatory behavior by monopolies.
But many now view Amazon’s efforts as a page from the old monopoly handbook.
Amazon’s support of a bill that will harm its bottom line is clearly an anticompetitive move. But the push seems even more malicious when one considers that the new law is redundant.
Amazon public policy chief Brain Huseman argues that “Injured consumers should be able to seek compensation regardless of how a particular online marketplace makes money.” But that’s already the case. In fact, recent court rulings have already closed legal loopholes that allowed online retailers to wiggle out of liability.
For example, inBolger v. Amazon, the court decided that Amazon was liable for product safety because it acted as a retailer. The case cites the company’s warehouse, their shipping system, and seller communications as the basis for that claim.
That means that the consumer protections in AB 3236 already exist. But the new bill makes complying with the rules much more expensive.
Etsy Slams Amazon
Etsy CEO Josh Silverman criticized Amazon for lobbying for this law:
“Amazon’s goal is to be the only place to buy stuff online, hobbling mom-and-pops that sell unique items in their own shops, or, more frequently since COVID, through marketplaces like Etsy. Small businesses, struggling now more than ever, will ultimately bear the brunt of the overbearing burdens of AB 3262.”
Still, the California Assembly has already provided the go-ahead for the bill, and the State Senate will vote on it soon. And with Amazon’s wealth of resources, the bill is likely to pass.