Seller Trade Group Accuses Amazon of Scare Tactics

Amazon is threatening to shut down its third-party seller marketplace if certain proposed legislation is passed, according to the trade group Online Merchants Guild (OMG). It pointed to a site Amazon set up called Support Small Sellers where it invites merchants to sign up to receive updates about proposed legislative.

The Amazon website states that proposed bills would jeopardize its ability to operate a marketplace for sellers, which would potentially result in "hundreds of thousands of American small and medium-sized businesses losing access to Amazon’s customers and services."

Online Merchants Guild COO Matt Colvin said Amazon is within its rights to get sellers to work with them to lobby Congress, "but how it happens is what you have to be concerned about." He said threatening sellers' livelihoods so they will then approach members of Congress is concerning.

The OMG organization does not want Amazon to go out of business - in fact, Colvin said he doesn't want to see Amazon fundamentally change - but "we want members to be able to compete fairly." 

"We don't want to build a path that will blow up everything for our merchants, but there needs to be accountability," Colvin said.

OMG believes that if Congress passes certain legislation, Amazon could shift from a "marketplace platform" model to a "store" model that would allow it to "easily wriggle out of."

The merchant guild believes Amazon could pivot to a store model that would in effect turn third-party merchants into "vendors," allowing it to dictate terms and set prices, and ultimately put greater pressure margins.

With a pivot from a marketplace model to a store model, third-party merchants would become "just suppliers."

Ironically, the OMG is not advocating for the legislation Amazon is fighting. (See update below.) That's because it believes there are some defects in the legislation that "promotes the fantasy of a fair marketplace" but could lead to consolidating Amazon's power, OMG founder and Executive Director Paul Rafelson said.

Rafelson also took issue with the fact that Amazon received enormous government subsidies and avoided paying sales tax for over a decade while building an "ecommerce railroad" while retaining ownership of that railroad that is a "portal to our national economy."

So what does the OMG want? A "Merchant Bill of Rights & Responsibilities" that establishes clear guidelines for acceptable behavior of platforms that compete against their merchants and the responsibilities of those merchants. That would be a more beneficial way forward than the current legislation being considered by Congress, it said.

Rafelson raised another issue of concern: he said OMG members are in large part fearful of speaking out. When you sell on Amazon, your business could be gone with a flip of a switch, he said. "Our members are scared to talk" - they don't want to be quoted - "not even anonymously," he said.

Update 10/21/2021: Paul Rafelson clarified that the Online Merchants Guild continues to support the original legislation proposed by the House but remains concerned with the Senate Bill. The purpose of its position statement was not to claw-back its support of Congress’ efforts, but to sound the alarm that it believes the laws as proposed do not go far enough.  

"We believe there is this gigantic loophole that would render the laws toothless, especially when the world's largest company seeks to avoid the law via the courts, if passed, or may simply get out from under the legislation by rebranding itself as a store.  This is exactly what Amazon's messaging has been, it's a signal of what's to come and we want Congress to be aware, so they can head it off at the path."

Rafelson also said the Seller Bill of Rights concept was something that OMG members want, no matter what the outcome of legislation. "It's time we get some rules of the road for both the platform and the seller," he said.

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