By Lauren Riddle
According to Amazon.com, the “Buy Box” is the box on a product detail page where customers can add items to their shopping carts immediately. A key feature of Amazon.com is that multiple sellers can offer the same product. If more than one eligible seller offers a product, they may compete for the Buy Box for that product.
Amazon calculates who can win the illustrious Buy Box with its state of the art algorithms that factor in price, availability, performance excellence, and the customer’s shipping address. Typically, Buy Box placement leads to increased sales, so buyers competitively lower their price to get (or keep) the Buy Box. The battle for the Buy Box makes amazon.com different than any other retail spaces. Amazon.com has created an entirely new wave of buying and competing against sellers, and with that comes new legal implications.
Antitrust implications, specifically, violations of the Robinson-Patman Act (“RPA”), come into question when discussing any form of price discrimination in marketplaces. The RPA is a federal price discrimination law enacted in 1936 as a New Deal regulation, which makes it illegal for a manufacturer to sell the same or similar products at different prices to competing purchasers. Enacted in response to the emergence and explosion of chain supermarket stores, the RPA was designed to protect small, neighborhood grocery stores. Because chain stores began purchasing in unprecedented quantities, manufacturers began rewarding them with lower prices than those offered to competing “mom and pop” stores. The RPA prohibits price discrimination in the form of volume discounts or rebates between purchasers of goods of like grade and quality where the effect may be to substantially lessen competition or create a monopoly. When it was originally created, Congress considered it to be “an evil” that a large buyer could secure a competitive advantage over a small buyer, solely because of the large buyer’s quantity purchasing ability.
Amazon’s algorithm for deciding who holds the buy box might be discriminating against smaller sellers, and giving more opportunities to larger sellers. Sellers who have the ability to lower their price, have large quantities of goods, and have better seller ratings are more likely to hold the buy box in specific products. Once a seller holds the buy box, they essentially have a monopoly on that specific item, since users typically would just click the “add to cart” button, buy the goods, and not open the next window, which lists all current amazon sellers of that product. Because of this, the buy box appears to be toeing the line in what could be a violation of the RPA.
However, in today’s world, the RPA appears antithetical to many antitrust principles, such as a free market. Its repeal or substantial overhaul has been recommended for years, due to the changing platforms in which citizens purchase goods. The RPA protects competitors over competition and punishes price discounting and innovation in distribution methods that should be otherwise encouraged. As an antiquated law, it is not clear that the RPA effectively protects the small business constituents that it was meant to benefit.
Lawmakers should reconsider whether policies behind the Robinson-Patman Act even apply to new retail channels like Amazon.com. When the Act was originally implemented, price discrimination was thought to be stifling competition. In today’s economy, concerns about price discrimination are significantly less. RPA is now an outdated law that was passed to protect small businesses rather than protect competition. While lawyers and manufacturers fight over the applicability of RPA today, the rest of the world will continue to be clicking “add to cart” on Amazon, blissfully unaware.
Student Bio: Lauren Riddle is a fourth year evening student at Suffolk University Law School. She holds a Bachelor of Arts in both communication and philosophy from Boston College.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
