In politics now, there is a bipartisan push against large tech companies, where names such as Bernie Sanders, Josh Hawley, Tom Cotton & Liz Warren have tried tackling large tech firms such as Google, Apple, Facebook and more for a variety of reasons.

A new bill is coming from Minnesota senator Amy Klobuchar in what seems to be an attempt to make an anti trust case against Amazon, with new legislation.

The bill is called the “American Innovation & Choice Act” and will do the following.

Prevent Amazon from labelling products as prime eligible or given them preference in search results.

What this means is if someone wants to buy a shirt, Amazon couldn’t offer preference to shirts which are prime eligible and let them be the first result people see.

Which doesn’t make a lot of sense, because Amazon search results are meant to show people the highest reviewed, fastest shipping and cheapest product first. All of which falls with Amazon products.

Merchant fees can’t cover shipping.

Amazon Prime is currently $119 a year.
149 million Amazon Prime subscribers are in the US.
17.7 billion dollars in revenue for Amazon.

That sounds like a lot of money, but Amazon made 386 billion in 2020 and over 400 billion in 2021.

Prime memberships won’t even be 5% of Amazon’s total 2021 revenue.

For Amazon, the funding of the logistics, shipping and all of that are sellers fees, which range product to product and go from as low as 6% to 45%.

Which in 2021, it was estimated service fees hit 34% of sellers earnings.

That sounds like a lot and is, but it’s the price to get a product on prime, have 2 day shipping and be able to sell to far more customers.

If Amazon couldn’t do this, Prime memberships would have to go up heavily, where they could be 3-4x as much money, or even more.

The bright side would be costs on the actual goods go down, but unlikely many people would subscribe to Prime in the first place.

Amazon likely can’t offer fulfilment anymore

There’s a proposal in the bill, which denies Amazon the ability to offer fulfilment to companies, if it’s found it gives an unfair advantage to others.

Amazon being extremely efficient at shipping products for other companies could be deemed unfair, because other companies selling on Amazon won’t be as good.

What could be the negative consequence to this bill?

It likely won’t ever pass, but my guess would be if it did, Amazon would move to try and just only sell to Prime members going forward and only sell Prime products.

In 2019, 65% of Amazon customers had prime and now that number is close to 75%. It’s also reported the majority of what they buy are prime products.

Likely, Amazon would just stop allowing sellers to offer products on Amazon unless in the prime program and the program is modified to act more like a traditional retailer.

Which is important to look at, because Klobuchar’s bill doesn’t impact traditional products.

An example being Target, which sells a store brand called “Good & Gather”, which is exactly the same as Amazon Prime brand.

Which a lot of people have pointed out, Target is based in Minnesota, Klobuchar’s home state and did donate $46,000 to her last campaign, just as a company.

For this bill, is it as bad as critics say?

Probably not, because I don’t think the outcome would be that bad for Prime users or even Amazon.

I could see the bigger problem being for smaller sellers, where Amazon would begin to function as a Prime only company and box out smaller sellers.

Amazon saves consumers billions every year and prime members individually hundreds, while offering faster access to goods.

It just doesn’t really seem right to intervene on something which works for over 100 million people.