Amazon The Capitalist
Amazon is a fierce competitor, and like most great capitalists in history, uses first-mover to its full advantage before subjecting others to rules that it never had to deal with on its rise.
After a recent lawsuit "Bolger v Amazon," which says that Amazon must be held accountable for defective products because if it "looks like a duck and quacks like a duck," Amazon must be a retailer. In any other scenario, Chinese sellers using FBA on an Amazon marketplace would never have liability. True enough.
Remember when Internet businesses used to not pay sales taxes, and Amazon had all manner of tricks to avoid nexus? And then famously, it supported tax legislation after it had exhausted full advantage and achieved scale? Precisely what is happening here.
The recent marketplace law CA AB3262, which Amazon is fully advocating for, would kneecap any other marketplace who attempts to replicate its fully spinning flywheel. Amazon decided now is the right time to get on the side of fraud, fakes, consumer protection, etc.
In the press, it's a no-win. Heads, Amazon loses for being a greedy capitalist if they opposed it. Tails, Amazon loses for supporting legislation which undercuts its competition.
Press be damned, that's why this is their best strategic path.
Tim Reilly is a bit more optimistic on the press front, saying “I think the main-stream press will generally cover this as a positive by Amazon (not the strategic part, rather the "on consumers' side" part). Now, industry-specific or more business oriented press might hit on the angle you've outlined, re: knee-capping competition, but the super majority of consumers won't ever see that or care about that. They'll just hear, ‘Amazon thinks web retailers should back the products they sell’ and think that's a good thing.” Which is another strategic reason Amazon chose this option. They know - long term - it is good for the consumer.
Tim also shared his thoughts on the nitty-gritty of how this might shake out:
What this should end up doing is cause Amazon to push for stronger indem language, liability insurance coverage (naming Amazon as an additional insured), etc. from 3P sellers, especially no-name international sellers. That will raise the cost of selling for those sellers, but would remove some financial risk for Amazon while also protecting the end consumer more. Amazon has the market power to require that, but start-up MPs won't. On the insurance piece, it'll be interesting to see if Amazon takes a one-size fits all approach (e.g.: all Sellers need a $1M policy), a how-big-are-you approach (e.g.: Sellers doing < $100k need x, $100k-$500k need y, etc.), or a product category approach (e.g.: electronics that can burn a house down, baby stuff that could kill a kid, etc. require $2M, but sneaker sellers need $250k...). Time will tell, I guess.
Time will tell indeed!
