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Federal Gov’t pressure on Amazon rolls downhill to sellers

Why regulatory crackdowns on Amazon are hurting small sellers – and what you can do to protect your business

The phone rings at Riverbend Consulting dozens of times a day. But this call was different. On the other end of the line was a lawyer from the U.S. Federal Trade Commission (FTC).

The regulatory agency was looking for experts to explain Amazon to them. They wanted to know how the Buy Box works, how the FBA programs affects sellers, and other details of the Amazon ecosystem.

This was a paid consulting gig. We turned it down. Why? Because the federal government is not protecting the best interests of third-party sellers and vendors to Amazon.

Federal Gov't pressure on Amazon

Proof point number 1? The phone call detailed above came into our offices in March. But the FTC originally filed its lawsuit against Amazon last September. You’d think they would have bothered to learn how the Marketplace works before trying to dismantle it. Unfortunately, this is representative of the FTC’s behavior against Amazon over the last year.

The FTC wants to break Amazon into pieces, forcing a divestment or division of the third-party Marketplace from Amazon’s own retail operation. They are not alone. Multiple federal agencies including the Environmental Protection Agency (EPA), the Food and Drug Administration (FDA), and the Consumer Product Safety Commission (CPSC) are hell-bent on taking Amazon down.

You should care for three important reasons:

  1. This enforcement rolls downhill. When the government puts pressure on Amazon, sellers see more ASIN and account suspensions. That’s an active, painful trend happening right now, and it could affect you.
  2. Every resource Amazon devotes to complying with government demands takes resources away from actually improving the seller and buyer experiences.
  3. The more that government agencies push, the harder the third-party marketplace gets for Amazon to manage. That makes third-party sellers less attractive to the e-commerce giant, which then becomes harsher and more difficult to deal with in the enforcement process.

Keep reading to find out how to protect your business from the heavy hand of Uncle Sam via Amazon.

The lawsuit that ratcheted it all up

In March, the FTC quietly filed an amended version of its “monopoly” lawsuit against Amazon. The trial is currently scheduled for October 2026.

As in the original version of the suit, the government claims that Amazon has monopolistic market share of online sales. But that’s based on lies and twisted statistics. The FTC pegs Amazon’s market share at more than 70 percent by defining the market as “online superstores.” It does not include grocery stores, boutiques, specialty stores, Shopify stores or even large stores devoted to single industries. For example, Nike.com outsells Amazon.com in the Sports & Outdoors category. But because Nike isn’t an “online superstore,” the government says Amazon isn’t competing with them.

So when the FTC defines Amazon as a monopolist, it is only comparing Amazon’s market share with that of Walmart, Target and eBay. You can’t make this stuff up. What’s more, the government says that brick-and-mortar stores don’t compete with Amazon. Seriously.

Now for the really fun part. The amended version of the lawsuit says that Amazon is a monopoly for online marketplace services. In other words, Amazon controls too many third-party sellers. The suit continually compares Amazon’s full-service FBA fee structure with fees on other platforms – where sellers have to provide their own inventory storage, picking, packing, and shipping. It also ignores the uptick in sellers using Walmart’s fulfillment services, instead claiming that it is “impossible” for other marketplaces to attract sellers.

My favorite part of the lawsuit? The FTC paints Walmart as a hapless, powerless and idiotic competitor that falls victim to Amazon’s predatory tactics. This despite the fact that Walmart has a greater or equal total market share of retail revenue as Amazon. How can the government target Amazon, and yet leave Walmart to its own devices? Nobody knows.

I am the first person to stand up and explain the real problems with Amazon and its treatment of sellers. The most important bad acts by Amazon that hurt sellers? They aren’t in the lawsuit. Permanent funds holds. Security and data breaches. I could go on. The government’s depictions of Amazon’s operations, and the solutions it proposes, are completely out of line in a capitalistic society. And worse, they put a target on small sellers’ backs.

Following the lead of the FTC are other government agencies making life miserable for third-party sellers and vendors right now. This is the dirty secret of Amazon sellers. They blame Amazon for enforcing against them when oftentimes, Amazon has no choice at all.

Fun with the FDA

Amazon sells countless products in the Health and Personal Care arena. So for just a moment, consider the special challenge of offering an open marketplace where hundreds of thousands of sellers have the power to create a listing for a new product. What if a supplement has an illegal ingredient? What if a topical causes redness, pain or swelling for buyers?

Not all sellers are saints. They don’t all follow the rules. Heck, some of them don’t even bother to learn the rules – nor do they care about the rules.

As a result, Bad Things sometimes happen. We see it at Riverbend:

– Products with prohibited ingredients
– Listings with prohibited claims, such as “cures diabetes”
– Products that have no testing
– These three Bad Things can add up to real consumer injury, so Amazon has to act.

So if you were Amazon, and the FDA was after you with warning letters, what would you do?

  1. Beef up your technology to find listings that break the rules. Amazon has changed its enforcement, which results in more false-positive ASIN and account suspensions for sellers.
  2. Require more testing documents up front – and only from approved labs.
  3. Demand that brands use manufacturers with certain qualifications and certifications.

Unfortunately, Amazon acts precipitously and without warning. What’s a seller to do?

– Have relevant testing documentation on hand. Don’t know what tests you need? Ask your contract manufacturer.
– Avoid medical claims and forbidden keywords on listing detail pages – including in the back end and on images.
– Ensure you’re following FDA regulations, so you can fight back if Amazon over-enforces.

Enforcement from the EPA

Remember when everything was a pesticide? Did you have to take that pesticide class?

Good times, y’all. Well, Amazon is still asking for EPA certifications and requiring pesticide “class” for sellers. Want to sell a workout that has anti-bacterial fabric? How about a shower curtain? You can still expect Amazon to take down your listing at the most inopportune time, claiming you are violating the EPA’s regulations.

But this is not Amazon’s fault. The EPA has issued multiple consent decrees against Amazon, requiring the smack-down of terms like anti-microbial or anti-bacterial – even when the words seem appropriate to the average Joe or Joanne. It started with a settlement in 2018 and has continued with additional threats, warnings and explanations of what the EPA considers a disallowed claim or language.

What’s a seller to do?

– Be extremely careful if you choose to sell legit pesticides. Even resellers must provide an EPA registration number if Amazon doesn’t already have it on file.
– Do not sell pesticides that aren’t approved by the EPA. That can get both you and Amazon sued.
– Watch those words in your listings. The word “antibacterial” can be dangerous. So can anything that implies you’re keeping away or killing off vermin of any kind.

Again, you can see why Amazon’s enforcement against sellers seems like Amazon being a bully. But it’s really Amazon trying to satisfy the folks at the EPA. Sometimes, that requires over-enforcement to avoid missing out on listings they should have suppressed.

A shout-out to the CPSC

Lest you think I’m a conspiracy theorist, I must mention the proposed heavy-handed enforcement the CPSC has proposed against Amazon. If a product from a third-party seller has a safety issue for consumers, the CPSC wants to make Amazon liable. Why? It’s FBA program makes it a “logistics provider.”

This is confusing. I don’t see other logistics providers in the country being held liable for consumer product safety. Amazon is a big target, and the current Administration is determined to hit it as many times as possible.

But just like all these other actions, in the end, they make targets of brands, sellers, and vendors to Amazon.

What can stop these trends – or at least make Amazon’s enforcement less draconian and more reasonable? A change in Administration in November might help. Otherwise, the over-regulation train can be expected to flatten seller after seller. They will look like victims of Amazon. They will be victims of the heavy-handed state.

Amazon Solved.

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