Merchants want lower fees, need Amazon’s ads as US FTC files suit

By Arriana McLymore

RALEIGH, North Carolina (Reuters) – Merchants who sell on Amazon.com (NASDAQ:) want the online retailer to cut back on fees while some also worry the U.S. Federal Trade Commission’s lawsuit filed on Tuesday could hit its advertising business, harming their ability to reach potential shoppers.

The FTC’s long-awaited antitrust lawsuit asks a court to consider forcing the online retailer to sell assets as the government accuses Big Tech of monopolizing the most lucrative parts of the internet.

More than 9 million merchants sell their wares on Amazon’s marketplace and also supply it with steady streams of revenue. Amazon collects advertising fees for touting their products, fulfillment fees for delivery in addition to less specific “sellers’ fees.”

Now, the FTC along with 17 state attorneys general want Amazon to get rid of fees which they say force the merchants to depend on Amazon, including the company’s costly advertising fee.

Some merchants welcome the potential of relaxed seller and advertising charges, while others worry that completely dissolving Amazon’s advertising services would harm their ability to reach shoppers. The FTC found that the company’s fulfillment fees increased approximately 30% between 2020 and 2022.

An Amazon spokesperson said in a statement: “If the FTC gets its way, the result would be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small businesses — the opposite of what antitrust law is designed to do.”

Rick Dieterle, who runs party supply company Street Taco Brands, said he has been frustrated by the increase in sellers’ fees including charges for fulfillment, shipping, advertising and storage services. Dieterle relies on Amazon’s fulfillment and advertising services to boost merchandise sales.

“There’s no way you can get traction on Amazon without paying a lot of money for advertising,” Dieterle said on Tuesday.

The FTC alleges that shoppers are inundated with sponsored content in their search results because of Amazon’s advertising strategy, creating hurdles for customers who want organic results.

Lindsay (NYSE:) Windham, co-founder of accessory merchant Distil Union, is happy with the FTC’s move and hopes it will keep more money in her business’ pocket.

“While seller tools have improved since we started about a decade ago, the increasing cost of ads and fees do cut into profitability,” she said at a press conference.

Bryan Croft, chief executive of HC Brands, which sells personalized products under the brand name 904 Custom on Amazon, said blocking Amazon’s advertising business “doesn’t seem to be the correct direction” for the FTC.

Croft said 904 Custom would be less impacted by the possible changes in fulfillment and storage fees because it does not use Amazon’s service, but that 25% of his company’s marketing budget goes to the e-retailer.

The founder of skincare company Big Crazy Buffalo, Jason Hince, said he worries that if the FTC completely blocks Amazon from having fulfillment and advertising services, his Buffalo fat lip balm business will cease to exist.

“If you’re gonna spend $1 advertising, you do it with Amazon because that’s where the consumers are,” Hince said. He said that when advertising with other platforms including Meta Platforms (NASDAQ:)’ Facebook and Instagram, and Alphabet (NASDAQ:)’s Google, he has lost money and has seen better returns with Amazon ads.

Big Crazy Buffalo depends on Amazon to advertise, package, hold and ship the skincare brand’s merchandise, services that Hince said would be too expensive if he had to use outside contractors.

Stacy Mitchell, co-executive director of nonprofit advocacy group the Institute for Local Self-Reliance, said on Tuesday the FTC’s lawsuit will “make Amazon much more cautious about what it does now” regarding merchants.