Amazon's supply deal with Apple could be illegal; FTC will investigate

Amazon's supply deal with Apple could be illegal; FTC will investigate
Last November, Amazon, and Apple agreed on a deal that allows the online retailer to sell iPhones, iPads and Apple Watches sourced directly from the manufacturer. MLex, which covers regulatory agencies, noted earlier this week (via The Verge) that the FTC has issued subpoenas seeking sales data for some products not sold directly by Amazon. The issue here is that the agreement between Apple and Amazon might have made it difficult for third-party sellers to unload their hoards of new or refurbished Apple devices.

The Verge has been in contact with a man named John Bumstead who once sold refurbed MacBooks on Amazon. Bumstead said that he has been questioned by FTC legal eagles and one of the agency's economists about how Amazon's agreement with Apple has affected his business. One of the FTC members who spoke with Bumstead appears to be a member of the agency's Tech Task Force. For those not familiar with the alphabet soup of U.S. regulatory agencies, the FTC, aka the Federal Trade Commission, is in charge of promoting fair business practices and will sue companies that it feels are anti-competitive. Need we remind you that this is the agency that took Qualcomm to court earlier this year and won the case. Now pending appeal, this ruling could force Qualcomm to make some drastic changes in the way it sells chips to phone manufacturers and others.

Amazon has acted illegally after agreeing to the deal with Apple says one antitrust expert

Bumstead was given a two months warning after the Amazon deal with Apple was announced, and he is no longer allowed to peddle his refurbished MacBooks on the site unless he meets some new conditions, such as purchasing $10 million in inventory a year. That is well out of reach for someone like Bumstead. In other words, Amazon's deal with Apple has led to the removal from the platform of smaller third-party merchants hawking Apple products. And that has to be bad for Bumstead's business considering that Amazon's third-party marketplace is the largest such platform in the U.S.

If you're thinking that what Amazon has done here is illegal, you just might be correct. Antitrust expert Sally Hubbard, who is the director of enforcement strategy at the OpenMarkets Institute (a publication that fights back at companies it believes are committing antitrust violations) says the Amazon-Apple deal smacks of what she calls "brand-gating." This occurs when a platform makes a deal with a brand name in order to stop third parties from selling the brand's products (or counterfeit versions) at lower prices. As a result, the price of used or refurbished Apple devices on Amazon has gone up hundreds of dollars in price Bumstead says. And since the U.S. consumer is the one affected by what appears to be anti-competitive behavior, the FTC is now involved.

Amazon has already been called out for this behavior in Europe, and an investigation started earlier this month. The e-commerce giant is charged with prioritizing its own products and using its own proprietary sales data against competitors. Local regulators in Germany have already forced Amazon to make terms of service changes so that third-party sellers like Bumstead can continue to sell on the site in that country.

The problem with the FTC's focus on "Big Tech" is that even when it has an easy case, such as the one it had against Facebook for violating a 2011 consent decree, the fines are not large enough to make a dent in the company's business. The Cambridge Analytica scandal revealed that 87 million Facebook users had their profiles collected without their permission in violation of the aforementioned consent decree. The $5 billion fine that the FTC collected last month might have been the largest punishment it ever collected but represented less than 10% of the company's 2018 revenue of $55.8 billion. A fine like that is not going to motivate Facebook to make any real changes.



1. Subie

Posts: 2427; Member since: Aug 01, 2015

The richest of the rich helping the richest of the rich - get richer. Screw that little guy...

4. oldskool50 unregistered the one who started this, Amazon simply accepted. Jeff Bezos like Tim Cook is a POS. Apple sent a cease and desist letter to a guy on YT for him refurbishing and repair Apple hatdware. I wish I was in a situation where Ape sent me some rap like that. I would be on the first plane to Cupertino and Tim Cook's face would be splattered from one end of town to the other. What a POS company, which is why they will never get another dime of support from me. I hate $hady greedy companies!!!!

8. sgodsell

Posts: 7594; Member since: Mar 16, 2013

Apple did this so they can ultimately control the pricing of both new and older Apple products. Since Apple hasn't been selling as many iPhones. Then they need to flog their products onto others, some how. So what better than to control all aspects of who buys and how much they buy from you. Apple already now controls all aspects of their service. They stopped third party parts from coming in. Plus Apple has a great insurance racket going. It's called Apple Care. They control a lot of the media as well. No wonder why they say Apple's stock is a don't buy. Apple bought back over a $100 billion of their stock in less than two years.

2. Venom

Posts: 3824; Member since: Dec 14, 2017

That is a pretty scummy move of Amazon and Apple if this is true. I hope Amazon and Apple get investigated especially Amazon.

9. sgodsell

Posts: 7594; Member since: Mar 16, 2013

Both are wrong. But it's Apple that sees an opportunity to flog more of their products that haven't been selling. Especially since Apples iPhone sales have slumped. So they are using crappy tactics to flog their products. Both new and used. So it's more to blame on Apple's part. Amazon sees an opportunity to sell more and make more money. But try to remember Apple is the one that sets the prices. Not Amazon.

3. oldskool50 unregistered

Yea telling someone they can't ok sell something unless they purchase $10M worth of product, is complete BS and certainly anti-competitive. There is a guy who fixes Apple hardware on YT who talked about this, and this is certainly illegal an anti-competitive. Apple is a POS and I'm so glad that that are losing sells in almost everything. The sooner they are have zero leverage in this industry, the better all consumers will be. Bye Apple. You are most certainly gon a lose this one. In fact every seller effected by this should be filing a class action lawsuit again Apple for 100 times that $10M. Yet all the stupid fan is on this site will defend them to the death. Apple trying to force all sales through them. What a dirty f'n company. I hope the FTC fines the $**t out of you!!!!

5. berns

Posts: 36; Member since: Jun 07, 2014

What a sleazy move from both of them to take on Android, Amazon could have agreed on this deal, because its fire tablets are pale in comparison with others in terms of sales, what a greedy companies. FTC should fine them right away, a cut-throat competition against small sellers to eat them up.

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