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Amazon Takes Heat Over Unauthorized Low Prices

October 24, 2012

Consumers who shop on Amazon.com go there looking to get a good price on whatever they purchase. Sometimes purchases are made directly from Amazon and other times through third-party sellers. It's the 3P (third-party) deals that are causing Jeff Bezos and company some grief as manufacturers, whose products are also sold by Amazon, are complaining that unauthorized sellers on the site are low-balling goods and devaluing brands in the process.

As Reuters, points out, this is an issue that eBay has faced for a long time, but is relatively new for Amazon. For sure, the issue of unauthorized sellers extends beyond e-commerce to the brick and mortar world, as well. Gray market goods and other "holes in the supply chain" result in legitimate products finding a way into the hands of people and companies not approved by manufacturers.

Gray market goods alone, according to a 2009 analysis by Deloitte, cost manufacturers $63 billion a year. Conversely, the sale of unauthorized merchandise also saves consumers quite a bit in the process, which is why the practice continues.

Amazon, which gets 40 percent of its revenues from it cuts of 3P sales, has taken a laissez-faire approach to issue even as companies such as Guess, Hugo Boss and Ralph Lauren complain. Others have threatened to pull products from Amazon if the e-tailer doesn't address the 3P issue.

"Amazon has to work this out with its suppliers," Scott Tilghman, an analyst at Caris & Co., told Reuters. "They will say, 'We recognize third-party sellers violate rules, but we can only police it so much.'"

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