Amazon Home Services Possible Price Fixing

Amazon Home Services Possible Price Fixing

A copy of the request filed with the US DOJ and the US FTC asking to review practices of Amazon Home Services.

This is copy of the author’s request that officially asks the United States Federal Trade Commission (US-FTC), the United States Department of Justice (US-DOJ) to investigate Amazon Home Services on the grounds of alleged violation of Federal Trade Commission Act of 1914, and alleged violation of Sherman Antitrust Act of 1890, as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with possible price-fixing practices.

Attn: Citizen Complaint Center, Antitrust Division
950 Pennsylvania Ave., NW Room 3322
Washington, DC 20530
Attn: Office of Policy and Coordination, Room CC-5422
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave. N.W.
Washington, D.C. 20580

Please see information about a possible antitrust violation as described below.

What are the names of companies, individuals, or organizations that are involved? Inc.
410 Terry Avenue North
Seattle, Washington 98109
(206) 266-1000

How do you believe they have violated the federal antitrust laws?

Raked marketplaces tax transactions with added fees, known as a take rate, or the platform’s commission. These take rates can vary platform-to-platform and largely depend on the overall position of a raked marketplace in the market. For example, both Uber and Lyft take about 25% - 40% of drivers’ revenue, TaskRabbit rake is set about 15%, Booking-dot-com rake is set at 20%, UpCounsel has a 20% rake, Fiverr has a 20% rake, and Wag lives on a 40% rake. Of course, it goes without saying that a list of raked marketplaces is omnipresent. Amazon Home Services currently operates subject to a 15%-20% rake, depending on the type of service the consumer buys. Raked marketplaces claim to provide value, but the added rake undeniably hampers all efforts, leaving consumers to ask – “am I just paying junk fees here?” Therefore, some raked marketplaces actively choose to circumvent this ominous flaw by utilizing price-fixing and price parity agreements with independent service providers.

Price parity and price-fixing agreements can greatly help a raked marketplace to obscure their true commission and to avoid higher pricing or lower user disengagement. For example, Uber and Lyft both price-fix services of drivers at the lowest rates possible. Both Transportation Network Companies (TNC’s) unilaterally “decide” what the drivers are willing to take, and consumers are willing to pay. This practice conveniently allows Uber and Lyft to provide “upfront pricing” to consumers before each ride, instead of having each rider pick their local options from competing drivers.

Booking-dot-com operates as an Online Travel Agent (OTA) is an excellent example of a raked marketplace that operates solely due to a price parity clauses for booking hotel rooms. Booking-dot-com operates on a 20% rake, but it also restricts hotels from advertising a lower price elsewhere. In actuality, it is the price party clause, and not the hotel room, that Booking-dot-com sells to consumers. Without parity clauses, no consumer would possibly use such a service because it costs 20% more on average. Price parity perceived “benefits” are short-lived, however. Eventually, all raked marketplaces end up taxing the core of any transaction.

While many raked marketplaces currently operate subject to price fixing and rate parity clauses, this request focuses directly on Amazon Home Services due to an immense power this company currently holds over the Internet community. Amazon is a Big Tech enterprise.

In a free-market economy, service prices and service offerings must be defined by the service provider independently. Amazon, doing business as Amazon Home Services, systematically disregards fair competition principles because it price fixes services of independent contracts and requires service providers to further abide by price parity agreements.

Amazon Home Services requires service providers to offer a price set by Amazon even if the consumer contacts the service provider directly. "Pros are required to offer the same price on Amazon as they do if you called them directly," according to the company's web site. Such price parity agreement is an active uncompetitive mechanism that provides an online network working as a monopoly to place an exaggerate rake on services of others without the consequence of higher costs to consumers.

In contrast, Open Marketplace allows service providers to set competitive rates and operates on a 0% rake. By definition, Open Marketplace is rake-less, because it operates with the use of revenue from relevant verticals, cost-per-lead basis, independent advertisements, or pretty much any revenue source not directly tied to the monetary value of any given transaction. Despite great benefits, an Open Marketplace can never successfully enter an industry dominated by price-fixing and parity clauses until these mechanisms are fully disassembled. An Open Marketplace online user experience requires a free market economy setting to effectively outperform raked marketplaces with competitive rates offered by participating service providers.

Currently, the US housing industry is highly raked. As soon as the competitive prices aggregated by an Open Marketplace begin to outperform the raked prices of Amazon Home Services, the monopolistic tendencies will lead the Amazon Home Services to unilaterally lower the prices for independent contractors as means to gain and keep their market share for referrals. A price parity clause further allows Amazon Home Services to shift the added fee burden without immediate negative consequences to consumers. Amazon Home Services is able to set any rake it likes, but it avoids the cost of lower user engagement by fixing prices of others.

By unilaterally setting rates and pre-packaging service levels for independent contractors, Amazon Home Services operates in a direct contradiction to antitrust legislation that was designed to protect free markets in the United States.

In the United States, simple price-fixing agreements are illegal. These antitrust regulations exist because the competitive process only works when competitors set prices honestly and independently. In the case of Amazon Home Services, the company acts as a raked marketplace that subjects all service professionals to a hefty fee.

Amazon Home Services must make up for this fee in some way, otherwise, service providers will tend to increase their price to accommodate an excessive revenue share they must allocate back into the network. The only way to avoid higher prices in this scenario is to intentionally price-fix services for service providers at lower levels. In this scheme, consumers end up paying a set price, pre-negotiated for them by the network.

Raked marketplaces that operate on price parity clauses superficially decrease quality of service delivered to consumers by shifting the added fee to the service provider without giving the service provider an ability to advertise a lower rate elsewhere. For all practical purposes, a price parity agreement is an equivalent of a price-fixing agreement. By requiring service providers to advertise equivalent rates elsewhere, Amazon Home Services ensures continued domination of the housing industry, as a raked marketplace.

Amazon Home Services baits participant service providers with the fact that their services will be advertised to Amazon’s customers based on their purchases. Buyers purchasing furniture, plumbing items, or electronic devices are offered help for assembling, repair, or installation on the spot at a pre-set prices. Service providers can accept or decline a request, but the price is established by Amazon in advance.

Amazon Home Services can adjust prices upward or downward, as it best fits the network, unilaterally. For example, Amazon Home Services is much more interested in selling 100 furniture assembly orders at a discounted pre-fixed price, rather than selling 10 furniture assembly orders at a market price - the overall dollar amount of the rake is significantly higher when the service is appropriately price-fixed to maximize the volume of referrals. As a raked marketplace, Amazon Home Services is encouraged to unilaterally lower set prices to attract new users as long as service providers are willing to work for fixed rates and shoulder the referral fee burden.

What is the product or service affected by this conduct? Where is the product manufactured or sold, or where is the service provided?

Amazon Home Services allows professionals like house cleaners, handymen, electricians, and plumbers, to sell professional services to Amazon Home Services customers in their area. Trade professionals (ex. Electricians, Plumbers, General Contractors, etc.) are required to be licensed. Professionals engaged with Amazon Home Services pay a revenue share for completed jobs based on the service type and final service price.

Amazon Home Services engages in a price-fixing scheme to solicit such services using the Internet because it unilaterally sets prices and service levels for pre-packaged services on its web site. Pre-packaged services with a defined scope (for example, TV wall mounting, bed assembly, treadmill assembly, move-in or move-out house cleaning) are subjected to 20% referral fee for the portion up to $1000 and 15% for the portion greater than $1000. Recurring services purchased as a subscription plan for recurring appointments are subject to a 15% referral fee. The fees apply to all professions, all service types, in all locations. Amazon deducts the fees as a percentage of the service price, excluding any taxes collected through Amazon tax collection services.

What is the product or service affected by this conduct? Where is the product manufactured or sold, or where is the service provided?

An online marketplace is an arena for competitive dealings. Because legitimate online marketplaces aggregate services and products from a wide array of providers, wider availability and impartial offerings can be offered to consumers as a means to deliver genuine value. All well-managed Internet marketplaces are invaluable elements of a healthy economy. People tend to like excellent online marketplaces because we make products and services much more accessible with an impartial manner. On the other hand, the raked marketplace that engages in price-fixing actively abuse this process by establishing an arena for monopolistic behavior. As a lawful online alternative to competitive dealings in the housing industry, Open Marketplace and market participants are directly harmed by actions of Amazon Home Services.

What is your role in the situation in question?

I currently serve as a CEO HomeOpenly. HomeOpenly is an Open Real Estate Marketplace™ designed and built to improve the homeownership experience in the United States. HomeOpenly is a technology company that seeks to implement an Open Marketplace experience for homeowners and service providers as primary means for booking home maintenance, home repair, and similar services locally. HomeOpenly operates subject to a 0% rake as our primary competitive advantage to establish a significantly lower fee schedule than the price-fixed fee schedule for similar services provided by Amazon Home Services. Our efforts are actively hampered by anticompetitive practices of Amazon Home Services. With my request to the Department of Justice and the Federal Trade Commission, I am seeking a fair and open competitive environment to develop our service. Successful implementation of an Open Marketplace™ platform requires full enforcement of existing antitrust laws that are enacted to protect US consumers. As long as raked marketplaces are able to price-fix services of independent service providers in exchange for referral fees, an Open Marketplace™ operates at a competitive disadvantage and suffers damages as a result.

Who is harmed by the alleged violations? How are they harmed?

While prices can be successfully fixed by governments or private monopolies for an overall appearance of savings, such archaic methodology is unable to deliver value, decisively. Economic value is a subjective term, determined freely as an equilibrium between the purchasing power of a buyer and the holding power (desire to sell) of competing service providers.

Price fixing and price parity agreements implemented by the raked marketplaces aim to redefine this pricing equilibrium at the overall cost to impartial free market experience and an aggregate loss of overall value. By utilizing price-fixing and price parity clauses, Amazon Home Services operates as a raked marketplace that aims to maximize rake revenue, instead of adding value to the overall transaction.

A price-fixing practice is defined by the FTC as an agreement among competitors that raises, lowers, or stabilizes prices or competitive terms. To preserve free market forces in the modern age of online marketplaces, this definition must actively include a new breed of price-fixing agreements made by third parties on behalf of competitors that raises, lowers, or stabilizes prices or competitive terms.

As long as third parties are allowed to openly set prices for services of others, massively-funded technology companies such as Amazon, Uber, Lyft, Doordash, Opendoor, Redfin, etc. will utilize price-fixing and price parity mechanisms to successfully offset inefficiencies that come as a result of setting commission rakes for independent contractors.

This request carries a potentially irreversible outcome of how the next generation of online marketplaces are designed and built to help service the massive economy of the United States.

Today, the question before the FTC and the DOJ is simple: is the United States a price-fixed or a free market economy?

If you continue to observe the former, raked marketplaces such as Amazon Home Services will happily deliver price-fixed services of independent contractors directly to consumers.

If you are confident in the latter, immediate action is required to re-establish free market forces and to stop price-fixing and price parity practices by raked marketplaces across the United States.

If you have a question or comment about an antitrust issue, you may submit it to the Bureau of Competition at the United States Federal Trade Commission and/or to the Antitrust Division of the United States Department of Justice

Related to: antitrust, price fixing, real estate, Amazon, Amazon Home Services

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Last updated: November 03, 2019
First published: September 03, 2019