Amazon's fees and Fair Pricing Policy lift prices everywhere, Not-Ship argues

The piece is the second part of a two-part series in the Not-Ship newsletter by an author who signs as Amanda. The first part covered how Amazon's search page is designed against shoppers: the top row trap, the swamp of ads, the discount-washing. This part explains what happens behind the scenes and how Amazon's rules, the author argues, keep prices high not just on Amazon but everywhere you shop. The author says this is not just a personal theory: the system is at the heart of the US Federal Trade Commission's upcoming antitrust case against Amazon.

Step one is the fees. Amazon relies on independent sellers and charges them to be on the site. In 2014 its take was about 19% of sales. Today, the author says, many sellers hand close to half of every sale to Amazon. The basic commission, the referral fee, is 15% of the sale price in most categories, in line with what eBay and Walmart charge. What pushes the cut higher is the stack on top: the fulfillment fee for having Amazon pack and ship from its warehouses, plus advertising, meaning the sponsored spots in the top row. The "close to half" picture rests on an example of an apparel seller that uses Amazon fulfillment, storage, returns and advertising. Only the referral fee is mandatory. Sellers could ship orders themselves or skip advertising, but the author says that in practice it is not much of a choice: the real choice is between making sales or not. The FTC calls Prime eligibility, which effectively requires Amazon's fulfillment service, "a virtual necessity for doing business on Amazon", and says the same of advertising.

Step two is the pass-through. When roughly half of a seller's revenue goes to Amazon, the other half is not profit; it has to cover making the product, shipping it to Amazon's warehouses, paying staff and everything else. Most companies cannot absorb the fees, so they raise prices. Because the referral fee is a percentage of the price, every increase also raises Amazon's cut.

Step three is the lock. Amazon's Fair Pricing Policy lets it remove the Buy Box (the "Add to Cart" button) or even suspend a seller who offers the item cheaper elsewhere. A seller who raises prices on Amazon to cover fees therefore has to raise them everywhere else too, even on its own website, or risk losing Amazon sales. The author's conclusion: shoppers pay Amazon prices even when not shopping on Amazon.

The author cites several examples. In 2024, Amazon sellers told CNBC they lost the Buy Box after Target put their products on sale. In an ongoing lawsuit, California's attorney general alleges Amazon pushed brands to get Walmart, Target and other retailers to raise their prices. And progressive media outlet More Perfect Union found an Amazon seller suspended over a one-cent price gap with Target. Normally competition would push fees down as high prices send shoppers elsewhere, but when sellers cannot charge less anywhere else, there is nowhere cheaper to go.

Why don't sellers just leave? Because Amazon accounts for about 40% of all US online retail sales. On the regulatory side, in 2023 the FTC and 17 US states sued Amazon, arguing that it illegally maintains its monopoly power by, among other things, punishing sellers who offer lower prices elsewhere, effectively forcing them to use its warehouses and charging ever-higher fees. Amazon denies any wrongdoing, and per the author the case is set to go to trial next year. In Europe, Germany ordered Amazon earlier this year to stop controlling its sellers' prices, though the decision is not yet final.

The author addresses a reader's objection that plenty of online stores push ads and fake discounts. That is true, the author replies, but what differs about Amazon is its reach: when prices rise on Amazon they tend to rise elsewhere too. The closing line is conditional: you can choose not to shop on Amazon, but if the FTC is right, you may be paying Amazon's prices anyway. The author also discloses having spent two years at the Washington Post, which Amazon founder Jeff Bezos owns, and credits Cory Doctorow's enshittification concept, seen at a talk at the Edinburgh International Book Festival in August, as the inspiration for the series.

Key facts

Amazon's take from sellers was about 19% of sales in 2014; the author says many sellers now hand over close to half of every sale once referral, fulfillment, storage, returns and advertising are stacked.
Only the 15% referral fee (in most categories) is mandatory; the author says fulfillment and advertising are optional in name only, and the FTC calls Prime eligibility "a virtual necessity".
Amazon's Fair Pricing Policy lets it remove the Buy Box or suspend a seller who sells cheaper elsewhere, so sellers who raise prices on Amazon must raise them everywhere.
Amazon accounts for about 40% of US online retail sales, so most sellers cannot leave.
The FTC and 17 states sued Amazon in 2023; Amazon denies wrongdoing and, per the author, the case is set for trial next year.

Why it matters

The article offers a mechanism for how one marketplace's rules could set prices across the wider internet. Fees are passed into prices, the referral fee grows as prices grow, and the Fair Pricing Policy discourages sellers from undercutting Amazon anywhere else, even on their own sites. If that holds, ordinary price competition between retailers does not work as it should, which is the heart of the FTC's antitrust theory that the author describes. The author also notes that Germany ordered Amazon earlier this year to stop controlling its sellers' prices, though the decision is not yet final.

Who it affects

Shoppers, who per the author may pay Amazon-level prices even when buying elsewhere. Independent sellers, who face stacked fees and a rule against pricing lower on other channels, and who have little option to leave when Amazon accounts for about 40% of US online retail. Competing retailers such as Walmart and Target, which California's attorney general alleges Amazon pushed brands to get to raise their prices.

How to use it

This is an explainer rather than a product or tool, so there is nothing to adopt. For readers, it is a lens for reading Amazon price comparisons and the coming FTC trial: the author notes you can choose not to shop on Amazon, but argues that if the FTC is right, prices elsewhere may still reflect Amazon's. For sellers, the piece lays out where the money goes in a sale, with referral fee, fulfillment and advertising as the main layers.

How solid is it

This is an opinion-led newsletter explainer, not original research. The argument is mechanism-based and cites no measurement of how much consumer prices actually rise. The "close to half" figure applies to many sellers and rests on an apparel seller example using fulfillment, storage, returns and advertising, not to all sellers. Supporting examples are secondhand: sellers' accounts to CNBC in 2024, a More Perfect Union report, and California's attorney general's allegations in an ongoing lawsuit. The FTC and state claims are allegations in a case that Amazon denies. The author discloses two years at the Washington Post, which Jeff Bezos owns.

Risks and caveats

The FTC's case has not been decided, and the California claim is an allegation, not a finding. The article gives no exact trial date, only "next year". The German order is described as not yet final. The piece is a persuasive argument, and a reader who wrote in objected that ads and fake discounts are common across online stores; the author concedes this and answers that Amazon's reach is what differs. The closing claim is conditional: prices may follow Amazon's only if the FTC is right.

“We pay Amazon prices, even when we're not shopping on Amazon.”

— Amanda, Not-Ship