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If this were an HFT algo, there would absolutely be an investigation by the SEC. You cannot place orders with the intent to artificially manipulate the price. T

If this were an HFT algo, there would absolutely be an investigation by the SEC. You cannot place orders with the intent to artificially manipulate the price. This is obviously not a regulated exchange, but the end result is similar, so I understand why it is an issue.

lannisterstark 3y ago
This isn't HFT, and Amazon isn't placing any orders. Going "I'm gonna lower my prices so competitors have to do it too to remain competitive" is not illegal iirc, and I don't think it should it be. This part in specific only benefits consumers.
- munk-a 3y ago
  Loss leader pricing when used to force other businesses to close is quite illegal in the US[1] - when used for other reasons the legality varies on a state by state basis in the US... it is illegal in quite a few places. I'm not particularly familiar with international laws here. 1. https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost-pricing https://www.ftc.gov/advice-guidance/competition-guidance/gui...
  - nofunsir 3y ago
    There was a pretty big fight over this not too long ago.
  - sokoloff 3y ago
    Is there evidence that Nessie was used to sell items below cost?
    - paulddraper 3y ago
      Given Amazon's retail profit margins....the answers must be yes, right?
      - Schiendelman 3y ago
        Why?
        azemetre 3y ago
        Because Amazon is using AWS to literally carry every division they have. I don't think retail has ever been profitable for them, happy to be proven wrong; but some of their newer ventures in hardware: Alexa, Kindle, Fire TV, Ring, and Echo have all been losers. If each were normal companies they would all likely be going out of business, bankrupted, or chopped up for parts for PE. It's no different than Google using ads to subsidize failing ventures in order to gain market share.
        yowlingcat 3y ago
        I think "literally carry every division they have" is incorrect; on a margins basis, Ads are significantly more performant than AWS, although AWS wins on volume of profits and still has great margins. Beyond that, I don't think this kind of analysis is meaningful because it fails to account for second order effects. For example, even if retail is breakeven on a net basis, it still subsidizes a gigantic fleet of machines used to power retail from which AWS came from. Negotiating in bulk to build data centers with a significantly larger internal customers leads to better unit economics for the AWS side of the build out even if retail is break even on a first order basis or even has losses. The same argument can be made for ads as well. Amazon is great at monetizing infrastructure /because/ they can sell not just significant volumes of the end product, but and the infrastructure used to deliver it. I think you could make the same argument for Google, which is that technically, they should be able to use the second order effects of assets they've needed to put together to run search and ads to sell better infrastructure. Theoretically, this should mean that GCP is king, but it doesn't. I'm not sure there's an obvious answer to this question, or even a great clue behind first mover advantage AWS had in cloud.
        munk-a 3y ago
        It is certainly my gut feeling that Amazon is evil as hell but I think that I'd really like to see an actual investigation by folks who study this stuff to know whether Amazon was using their pricing predatorily or not. People, especially executives, are dumb - there's bound to be an email somewhere about John congratulating Fred about managing to shut down Plug's Stuff Hut a small family business if that was the intent and these actions were being made to accomplish this goal. However, I thing that your last point is not relevant. What-about-ism has no place in the law or it necessarily creates a slippery slope. If Google is also able to do this and purposefully did it in a predatory manner to accomplish a market advantage they both need to be legally pursued - and GCP not succeeding doesn't necessarily mean that Google didn't try underhanded actions to get it to succeed - it either means those actions weren't enough or they were incompetent (but still malicious). Either way each case needs to be judged on its own.
- epylar 3y ago
  An offer to sell at a particular price is equivalent to an order.
  - WillPostForFood 3y ago
    You should run a sales team where you pay commission on how many offers to sell they make.
- Jka9rhnDJos 3y ago
  It’s called predatory pricing. Pricing products to eliminate competition is illegal. If you sell Widgets and Sprockets, but you have a competitor that only sells Widgets, you can price of your Widgets so low (on 1-2% margins, for example) that the competitor is unable to compete and goes out of business because you can use Sprocket sales to keep your company in business during that time. Now that the other company is out of business, the price of your Widgets doesn’t matter because you no longer have competition in the market. You’re getting 100% of the potential sales and despite selling on a lower margin, you’re sales volume is now way up making those margins acceptable. You don’t have to worry about making a better Widget, or improving the Widget making process, because you have no competition. And you’ve priced yours so low, no other company can come in and attempt to enter the market because they can’t compete at your volume and margins. If there’s a high-demand material needed to make a Widget, you can put pressure on the producer to lower material prices since you are now their primary customer, or purchase the company that produces it and prevent access to the material. Predatory pricing consolidates market control and can be used to prevent access to the market. Anti-trust laws were designed to prevent this.
  - username332211 3y ago
    > Now that the other company is out of business, the price of your Widgets doesn’t matter because you no longer have competition in the market. You’re getting 100% of the potential sales and despite selling on a lower margin, you’re sales volume is now way up making those margins acceptable. Please don't re-define words. This is not what's normally called predatory pricing. Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition. The thing you are describing is nothing more than having a low margin strategy. Is every dropshipper undermining brand-name (high-margin) apparel?
    - paulddraper 3y ago
      > Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition. That is not necessary for the definition of predatory pricing.
    - 3y ago
charcircuit 3y ago
Price discovery isn't manipulation.
- FeepingCreature 3y ago
  Price collusion, however, is. The goal of price discovery is to find the price that the market will bear; it is not to find the price that your so-called competitors will agree to match.
  - axus 3y ago
    Under what conditions should a business be allowed to change their prices? I'm OK with a computer making the pricing decision, but like HFT it's the frequency that leads to problems. It's a bit sad that the "free market" has to be regulated like this, but beautiful theories break down when you get to the quantum level.
    - lotsofpulp 3y ago
      > , but like HFT it's the frequency that leads to problems. What problems?
  - jjk166 3y ago
    Collusion requires the other party to be in on it. Simply reacting to your competitors' actions, or lack thereof, is not collusion.
    - phkahler 3y ago
      >> Collusion requires the other party to be in on it. The other party is being tested for cooperation. Amazon raises the price and then reverts if competitors don't follow suit. They didn't revert after seeing sales drop or something, it sounds like they reverted based on a lack of "cooperation" from competitors. This is tricky stuff to define wrong doing. What if a company wants to see the going rate for a product and just looks to Amazon to get an idea? You know, because a lot of people will shop at Amazon by default unless there is a reason not to, like saving a bit of money. These kind of algorithms become anti-consumer the more they get automated, but they may seem reasonable on the surface or in isolation. If two algorithms are fine in isolation, but when used together cause overall market prices to rise what should we think of that? In the above example, Amazon would raise their price and the competitor would follow but not quite to the level of Amazon. Then if markets really are competitive (and fast) someone else may step in at a lower price than either, but I don't believe a lot of markets are fast or efficient when it comes to lowering prices.

lannisterstark 3y ago

This isn't HFT, and Amazon isn't placing any orders. Going "I'm gonna lower my prices so competitors have to do it too to remain competitive" is not illegal iirc, and I don't think it should it be. This part in specific only benefits consumers.

munk-a 3y ago
Loss leader pricing when used to force other businesses to close is quite illegal in the US[1] - when used for other reasons the legality varies on a state by state basis in the US... it is illegal in quite a few places. I'm not particularly familiar with international laws here. 1. https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost-pricing https://www.ftc.gov/advice-guidance/competition-guidance/gui...
- nofunsir 3y ago
  There was a pretty big fight over this not too long ago.
- sokoloff 3y ago
  Is there evidence that Nessie was used to sell items below cost?
  - paulddraper 3y ago
    Given Amazon's retail profit margins....the answers must be yes, right?
    - Schiendelman 3y ago
      Why?
      - azemetre 3y ago
        Because Amazon is using AWS to literally carry every division they have. I don't think retail has ever been profitable for them, happy to be proven wrong; but some of their newer ventures in hardware: Alexa, Kindle, Fire TV, Ring, and Echo have all been losers. If each were normal companies they would all likely be going out of business, bankrupted, or chopped up for parts for PE. It's no different than Google using ads to subsidize failing ventures in order to gain market share.
        yowlingcat 3y ago
        I think "literally carry every division they have" is incorrect; on a margins basis, Ads are significantly more performant than AWS, although AWS wins on volume of profits and still has great margins. Beyond that, I don't think this kind of analysis is meaningful because it fails to account for second order effects. For example, even if retail is breakeven on a net basis, it still subsidizes a gigantic fleet of machines used to power retail from which AWS came from. Negotiating in bulk to build data centers with a significantly larger internal customers leads to better unit economics for the AWS side of the build out even if retail is break even on a first order basis or even has losses. The same argument can be made for ads as well. Amazon is great at monetizing infrastructure /because/ they can sell not just significant volumes of the end product, but and the infrastructure used to deliver it. I think you could make the same argument for Google, which is that technically, they should be able to use the second order effects of assets they've needed to put together to run search and ads to sell better infrastructure. Theoretically, this should mean that GCP is king, but it doesn't. I'm not sure there's an obvious answer to this question, or even a great clue behind first mover advantage AWS had in cloud.
        munk-a 3y ago
        It is certainly my gut feeling that Amazon is evil as hell but I think that I'd really like to see an actual investigation by folks who study this stuff to know whether Amazon was using their pricing predatorily or not. People, especially executives, are dumb - there's bound to be an email somewhere about John congratulating Fred about managing to shut down Plug's Stuff Hut a small family business if that was the intent and these actions were being made to accomplish this goal. However, I thing that your last point is not relevant. What-about-ism has no place in the law or it necessarily creates a slippery slope. If Google is also able to do this and purposefully did it in a predatory manner to accomplish a market advantage they both need to be legally pursued - and GCP not succeeding doesn't necessarily mean that Google didn't try underhanded actions to get it to succeed - it either means those actions weren't enough or they were incompetent (but still malicious). Either way each case needs to be judged on its own.
epylar 3y ago
An offer to sell at a particular price is equivalent to an order.
- WillPostForFood 3y ago
  You should run a sales team where you pay commission on how many offers to sell they make.
Jka9rhnDJos 3y ago
It’s called predatory pricing. Pricing products to eliminate competition is illegal. If you sell Widgets and Sprockets, but you have a competitor that only sells Widgets, you can price of your Widgets so low (on 1-2% margins, for example) that the competitor is unable to compete and goes out of business because you can use Sprocket sales to keep your company in business during that time. Now that the other company is out of business, the price of your Widgets doesn’t matter because you no longer have competition in the market. You’re getting 100% of the potential sales and despite selling on a lower margin, you’re sales volume is now way up making those margins acceptable. You don’t have to worry about making a better Widget, or improving the Widget making process, because you have no competition. And you’ve priced yours so low, no other company can come in and attempt to enter the market because they can’t compete at your volume and margins. If there’s a high-demand material needed to make a Widget, you can put pressure on the producer to lower material prices since you are now their primary customer, or purchase the company that produces it and prevent access to the material. Predatory pricing consolidates market control and can be used to prevent access to the market. Anti-trust laws were designed to prevent this.
- username332211 3y ago
  > Now that the other company is out of business, the price of your Widgets doesn’t matter because you no longer have competition in the market. You’re getting 100% of the potential sales and despite selling on a lower margin, you’re sales volume is now way up making those margins acceptable. Please don't re-define words. This is not what's normally called predatory pricing. Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition. The thing you are describing is nothing more than having a low margin strategy. Is every dropshipper undermining brand-name (high-margin) apparel?
  - paulddraper 3y ago
    > Predatory pricing is supposed to involve a corporation raising prices after destroying it's competition. That is not necessary for the definition of predatory pricing.
  - 3y ago

charcircuit 3y ago

Price discovery isn't manipulation.

FeepingCreature 3y ago
Price collusion, however, is. The goal of price discovery is to find the price that the market will bear; it is not to find the price that your so-called competitors will agree to match.
- axus 3y ago
  Under what conditions should a business be allowed to change their prices? I'm OK with a computer making the pricing decision, but like HFT it's the frequency that leads to problems. It's a bit sad that the "free market" has to be regulated like this, but beautiful theories break down when you get to the quantum level.
  - lotsofpulp 3y ago
    > , but like HFT it's the frequency that leads to problems. What problems?
- jjk166 3y ago
  Collusion requires the other party to be in on it. Simply reacting to your competitors' actions, or lack thereof, is not collusion.
  - phkahler 3y ago
    >> Collusion requires the other party to be in on it. The other party is being tested for cooperation. Amazon raises the price and then reverts if competitors don't follow suit. They didn't revert after seeing sales drop or something, it sounds like they reverted based on a lack of "cooperation" from competitors. This is tricky stuff to define wrong doing. What if a company wants to see the going rate for a product and just looks to Amazon to get an idea? You know, because a lot of people will shop at Amazon by default unless there is a reason not to, like saving a bit of money. These kind of algorithms become anti-consumer the more they get automated, but they may seem reasonable on the surface or in isolation. If two algorithms are fine in isolation, but when used together cause overall market prices to rise what should we think of that? In the above example, Amazon would raise their price and the competitor would follow but not quite to the level of Amazon. Then if markets really are competitive (and fast) someone else may step in at a lower price than either, but I don't believe a lot of markets are fast or efficient when it comes to lowering prices.