Amazon Faces Accusations of Exploiting Small Businesses With Increased Fees and Advertising Costs

Online retail giant Amazon is facing accusations of exploiting small businesses after a recent report claimed that the company was significantly raising fees and advertising costs for sellers.

According to The Guardian, the report, spanning from 2017 to 2022, found that Amazon had tripled its earnings from fees charged to independent sellers in Europe, surpassing the growth in sales, which only doubled during the same period.

'Captive Clientele'

An examination of the costs associated with delivering and storing goods for sellers in the UK, France, Germany, Spain, and Italy revealed that prices in certain categories had more than doubled between 2017 and 2023.

Margarida Silva, a researcher at the Amsterdam-based Centre for Research on Multinational Corporations, also known as Somo, alleged that Amazon is exploiting a "captive clientele" by expanding its control over online shopping in Europe.

Based on Somo's analysis of accounts for the group's European arm, Amazon EU Sarl, the income derived from sellers' fees increased 6% last year, reaching €23.5 billion, despite a 1% decline in retail sales. Notably, these fees do not include the charges sellers paid for advertising on the platform.

Amazon's overall advertising revenue has experienced remarkable growth in recent years, rising from €0.3 billion in 2017 to €5.4 billion in 2021. The report estimates that independent sellers contribute approximately 51% of this advertising revenue, amounting to €2.75 billion.

Amazon Online UK's advertising revenue in the UK surged from €0.3 billion in 2018 to €1.9 billion in 2021, a sixfold increase driven by bidding competition. According to Somo's report, Amazon sellers face increasing costs due to network expansion and digital services taxes.

Concerns also arise as fees, including advertising, represent almost 40% of pre-VAT prices for some UK independent sellers, who also express dissatisfaction with service quality.

Amazon Under Investigation

UK's competition watchdog is investigating Amazon for alleged preferential treatment, while the European Commission conducted a separate probe, which prompted commitments from Amazon to address concerns.

In response to the accusations, Amazon claimed that its revenue growth stems from European sellers expanding their businesses through its platform.

The company stated that it invests extensively in supporting the growth of its selling partners and highlighted the optional nature of services such as storage, picking, packing, delivery, and advertising. Amazon emphasized that these services are chosen by sellers who see incremental value in their business.

While Amazon vehemently disagrees with the characterizations of its market position as monopolistic, small businesses feel compelled to pay the increasing costs due to Amazon's high market share, reaching as much as 70% in Germany, France, and Spain, according to a European Commission report.

Despite Amazon's refusal to disclose sales values on European marketplaces, the company shared that independent and third-party sellers sold over 2.2 billion products worldwide in 2021, a 65% increase over two years. The report's findings indicate that revenue generated from sellers' listings has risen by 85% during that same two-year period.