You almost have to wonder if Amazon.com Inc is baiting antitrust regulators.
The e-commerce giant reportedly sent a message to third-party sellers on Dec 15 instructing them to stop using FedEx Corp’s ground-delivery network for Prime shipments. While Amazon earlier this year abandoned FedEx as a carrier for its own packages in the US, third-party merchants had still been able to work with the company, and they make up more than half of the merchandise sold on Amazon’s website, the Wall Street Journal reported. That loophole to Amazon’s FedEx freeze-out is now closed.
Amazon reportedly blamed the change on a decline in the performance of FedEx ground services amid the typical deluge of holiday shipments. In the days after Black Friday, Amazon Prime members flooded the company’s Twitter and Facebook accounts with complaints of delayed packages, Recode reported earlier this month. It’s unclear if these two events are connected, although it seems plausible. FedEx said the impact of this change on its business is minuscule but criticised the fact that the policy will limit "the options for those small businesses on some of the highest demand shipping days in history”.
Amazon’s role as both friend and foe to the third-party merchants that list on its marketplace and the delivery firms that it initially relied on to fulfill its promise of speedy shipping has drawn increasing scrutiny from lawmakers. To that end, it looks horrible for Amazon to be essentially blacklisting FedEx from anything to do with one of its key services while all the while ramping up its own logistics arm.
This feels like what could have been a rational effort to protect Amazon’s promises to customers but is the regulatory equivalent of poking itself in the eye with a sharp stick and will draw only more questions about the influence the company has over its vast commerce network.
The US$119 (RM493)-a-year Prime membership is a key driver of sales for Amazon and the company has been spending heavily to reduce the standard delivery time for its most loyal customers to just one day. The company’s own logistics operations will be tested like never before this holiday season, given its decision to cut ties with FedEx for its own shipments and the fact that the number of days between Thanksgiving and Christmas is the smallest since 2013. It can’t afford a holiday flop.
Customer loyalty is Amazon’s most valuable asset and one of its strongest shields against calls in Washington for a breakup, as my colleague Joe Nocera has written. It’s hardly a perfect company and criticisms about overworked employees and counterfeit goods still resonate, but Amazon is beloved by consumers in a way that other tech giants simply aren’t. That can also be a crutch, a way of excusing unfair competition that would otherwise draw significantly more scrutiny.
Cutting off FedEx from all of its Prime deliveries is an audacious move. If all of Amazon’s customers have a Merry Christmas, that may be a trade worth making for the company. But lingering antitrust issues may make for a New Year’s hangover. – Bloomberg
(Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.)