Emails Detail Amazon's Plan To Crush a Startup Rival With Price Cuts (arstechnica.com) 88
An anonymous reader shares a report: Quidsi's (parent company of Diapers.com) founders didn't want to sell their company, but Amazon's diaper price war was starting to hurt Quidsi. Growth was slowing, and Quidsi was having trouble raising additional capital to continue expanding. On September 14, the founders of Quidsi flew to Seattle to meet with Amazon and discuss a possible acquisition. As Quidsi's founders were sitting in a meeting with Amazon brass, Amazon hit Quidsi in the gut. It announced a new program called "Amazon Mom" that offered free Prime service and an additional 30-percent discount on diapers if users signed up to get them through Amazon's monthly "subscribe and save" program. This was a larger discount than Amazon offered on most other Subscribe and Save items.
This put Quidsi in an untenable situation, as Stone writes: "That month, Diapers.com listed a case of Pampers at $45; Amazon priced it at $39, and Amazon Mom customers with Subscribe and Save could get a case for less than $30. At one point, Quidsi executives took what they knew about shipping rates, factored in Proctor and Gamble's wholesale prices, and calculated that Amazon was on track to lose $100 million over three months in the diapers category alone." Amazon's losses may have actually been even larger. During Wednesday's hearing, Scanlon said that internal documents obtained by the committee showed Amazon losing $200 million in a single month from diaper products."
This put Quidsi in an untenable situation, as Stone writes: "That month, Diapers.com listed a case of Pampers at $45; Amazon priced it at $39, and Amazon Mom customers with Subscribe and Save could get a case for less than $30. At one point, Quidsi executives took what they knew about shipping rates, factored in Proctor and Gamble's wholesale prices, and calculated that Amazon was on track to lose $100 million over three months in the diapers category alone." Amazon's losses may have actually been even larger. During Wednesday's hearing, Scanlon said that internal documents obtained by the committee showed Amazon losing $200 million in a single month from diaper products."
Ooops (Score:4, Interesting)
Re:Ooops (Score:5, Informative)
This happened 11 years ago when Amazon was about 1/20th the size it is currently.
Re: Ooops (Score:4, Insightful)
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But, I am OK with the big guys remaining on top forever, so long as the guy never abuses his position on top by gouging customers with steep prices. Manufacturers are incentivized to provide multiple discounts to many resellers to get their products far and wide through multiple outlets. If they refuse Amazon's bargain (demanding exclusivity), Amazon still has to sell diapers if it wants to be in that business. Loss leaders are a common gambit for resellers, many items in your local grocery chain are loss-l
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I care more that Amazon doesn't raise prices to hurt consumers on diapers
When Scanlon asked how families benefitted from Amazon raising prices after driving out a major competitor, Bezos responded, "I don't agree with that premise."
...and let me guess, wall street bankers had no hand in causing the 2007 banking crash.
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By a response a couple down, Amazon is currently selling the diapers for diapers.com's original price. The only thing the consumer got out of this is less choice, and a hostage situation, "If you don't pay us for Prime we're going to hold your diapers for 6 days before we ship them." With Diapers.com they'd ship next day and you'd get them probably 3-4 days later.
You have less choice. Amazon offers essentially no service. Whatever options they support, those are your options. Diapers.com likely had a vested
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Last time I checked there were over 25 stores near me selling diapers and none of them are owned by Amazon. I wouldn't call that a very effective 'monopoly' by Amazon. How did all of these stores near me get around those "binding exclusive sales agreements with diaper manufacturers that prevent said manufacturers from selling to Amazon's competitors or lock in Amazon-exclusive discounts to gain access to Amazon's dominant marketplace"
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How many of them ran out of stock with the Pandemic, and did Amazon get first rights to inventory through agreements?
Re: Ooops (Score:2)
Also not a result of monopolistic practices. Imagine for a moment the opposite. Amazon who is selling these cheaper products at a loss couldnâ(TM)t get any while greedy grocery stores were taking all the inventory and marking up the price for a high profit. I acknowledge thatâ(TM)s not exactly the opposite case, but itâ(TM)s close enough. Amazon was paying and losing money to distribute diapers. Think about that for a moment
Re: Ooops (Score:5, Insightful)
You could say that about anything,
“Armed robbery sucks, but it is what it is.”
And nobody could really rebut the point, but people kind of like the government acting against armed robbers.
In this case, we’re talking about trying to eliminate competition, which the government has stated for over 100 years, harms consumers in the long run. They didn’t say “it is what it is”.
Unrestricted commerce was never part of the US economy’s design as the founding fathers felt the public interest was best served by curtailing monopolies.
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Of course screw those workers who lost their jobs and the investors who lost their investment. It is illegal to sell at a loss to specifically bankrupt competitors, that's called an anti-competitive practice and totally illegal. So how many other companies did Amazon illegaly crush with product dumping and anti-competitive practices, ohh the civil suits to follow, once that investigation starts boring deeper and deeper into Amazon. The likelihood of Amazon surviving the investigation and prosecution intact,
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So basically it's taken more than a decade for the US Government to even start thinking about the potential issues with these online mega-corporations. And, even now, they've only gotten as far as calling in the company heads to testify.
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Amazon wasn't a mega corporation 11 years ago. 11 years ago there was this company called Walmart that was about 40x bigger than Amazon was at the time. In 2009 Amazon and Quidsi were both minor players in the diaper market who decided to get into a price war with each other.
Don't project today's Amazon back onto the state of the market 11 years ago. This is just click bait trying to trigger Amazon hatred.
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Bullshit. It was obvious that Amazon could fall back on its resources and significantly outprice its competitor and operate at a net loss until the competitor folded. The key thing is that Amazon then raised prices on their diaper products and basically gouged their newly acquired diapers.com customers. It doesn't mean jack that those customers could go to a brick and mortar and pay the same gouging price or more.
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This happened 11 years ago when Amazon was about 1/20th the size it is currently.
Oh thank god. It was only a $100bn company back then. For a moment I was worried they were a big player.
These types of cases never get prosecuted (Score:5, Insightful)
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Economist: they tend not to happen, but . . . (Score:2)
I am an economics professor and lawyer, but this is neither investment or legal advice.
>We used to until reagan/reagan GOPs came to town.
Well *that* is an interesting spin . . .
The origins of Reagan's antitrust policies are marxist or socialist in origin. It changed the emphasis from protecting the competitors from one another to *gasp* protecting consumers.
It changed from a landscape where the merger between Brown Shoes (manufacturer) and Kinney shoes (retailer) which 5% and 1% of their markets on th
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I guess for them upward mobility means going from making minimum wage in an Amazon warehouse and having no health insurance to making 10% above minimum wage and having crappy insurance?
That's right, The American Dream!
*insert fireworks and patriotic band music here*
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There are laws against this but the conditions for prosecution are such that it rarely (if ever) occurs.
They conditions in the USA include proving that the general public is worse off as a result which is an incredibly high bar. In any other country or in the EU they would get royally screwed by the legal system for doing this. It is the textbook definition of marketpower abuse.
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No, there is both harm to the customer, and also harm to the ability of others to compete.
You're ignoring the larger of the two parts of the rule, which is also the one relevant here.
Microsoft got in trouble for many of their abusive contract practices.
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Re:When merchants compete, consumer wins (Score:5, Insightful)
Fantastic! I love price-wars.
Forgive my bluntness but you're a short-sighted idiot. This wasn't a price war. This was a deliberate attempt to entrench a monopoly the end result of which has never in all of history been good for a consumer. There's a reason there are laws against this behaviour in most sane countries.
Supporting this behaviour is an incredible display of either ignorance or willful self harm.
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Forgive me please, but you're an ill-informed idiot. What barriers are there to entry that Amazon might end up harming the consumer by? If it raises prices, its' going to lose its marketshare. New entrants in diaper reselling would not be hard to start. There are few barriers to entry. A monopoly harms consumers through restrictive practices or exorbitant pricing. Amazon can not maintain its position if it does either.
Re:When merchants compete, consumer wins (Score:5, Informative)
New companies don't have enough market share to get the lowest costs from suppliers
The monopolist likely has deeper pockets, which combined with likely lower prices from suppliers, allows them to temporarily reduce prices any time a new competitor comes along.
Ergo, there may be a short-term benefit for buyers every once in a while, but the overall effect is that the monopolist controls the price, with the end result that prices are higher when a monopoly is in place.
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Not necessarily. Amazon will have to recoup its losses at some point, and that will cause it to raise prices. This gives entrants a shot. If it constantly holds prices at a loss, then the harm never materializes anyway, so no big deal. Also, new entrants can opt to lose money given to it by investors to "buy" marketshare. Many startups do this.
Are you really going to argue though that no store may have a loss-leader? This is exactly what grocery stores do all the time.
Lastly, the manufacturers will at some
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Because Amazon is the marketplace that means you need *all* businesses to be an entrant, not just one, otherwise Amazon just offsets its losses with gains in other sectors. So effectively you need an Amazon to fight Amazon. Wal-Mart and Target are attempting this but (to date) they aren't even close.
Personally, I wouldn't care as much that Amazon was the only marketplac
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That was 10 years ago. Plenty of time to "raise prices" later, right?
It's tough to get an exact product comparison based on the description, but their current price for a case of pampers is $31 without any of the additional discounts.
So I guess that whole raising prices later thing didn't actually happen.
Re:When merchants compete, consumer wins (Score:4, Informative)
Not necessarily. Amazon will have to recoup its losses at some point, and that will cause it to raise prices. This gives entrants a shot.
Putting together a business plan and getting it funded are a lot harder than changing the price of something for a few weeks. Amazon can give their stuff away for free until your company is dead dead dead and then recoup the cost, supposing it's enough for them to even care about, by charging monopoly prices.
Meanwhile, no investor will touch another company like yours for years to come.
This disaster area is known as "the free market" and it always ends up costing the consumer.
Lastly, the manufacturers will at some point become weary of the single-customer model, and incentivize new entrants into the marketplace with new discounts.
Oh, I hadn't realised you believe in fairies. Never mind.
Re: When merchants compete, consumer wins (Score:2)
But this is a middleman. Worst case, the original mfg can set up their own website and sell lower. Or front a competitor so they hedge the risk of one customer.
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If it raises prices, its' going to lose its marketshare.
To whom? The company they put out of business? At least you confirmed exactly what I said, you're a short-sighted idiot who can't see past today's price-tag as to what the goal of this strategy actually is.
There are few barriers to entry.
Except for an incumbent willing to set $200m on fire to keep you out of the market. I honestly am impressed that you have the audacity to call me ill-informed in the same post where you write this utter nonsense.
Please take a basic business economics course. For follow up learning you may even take a busi
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This is illegal when dominant players do it, but not when two minor players do it. Both Amazon and Quidsi were minor players in the diaper market. Neither manufactures diapers and neither had over a 1% market share.
Two banks competing by giving away toasters is not predatory pricing in the toaster market. It's just a common price war. If one bank is dumb enough about giving away free stuff that it goes broke, that's capitalism. The first bank is not going to gain a monopoly, there are thousands of other ba
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This is illegal when dominant players do it, but not when two minor players do it. Both Amazon and Quidsi were minor players in the diaper market.
Anti-trust laws have zero to do with being dominant in a submarket and everything to do with market power in the macro market. The burden of proof is simple: Do you compete with someone yes/no, is there massive market power disparity between the two companies yes/no.
No one gives a shit (pun intended) if Amazon is some huge player in the diaper market, the only thing relevant is that they are selling goods, competing with another company, and attempting to bankrupt them by burning insane wealth.
Two banks competing by giving away toasters is not predatory pricing in the toaster market.
Indeed they a
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Forgive me please,
No, you're an asshole.
but you're an ill-informed idiot.
See what I mean?
And then you go on to explain that you have an over-simplified mental model of market pricing, and so you can't comprehend how many details their are; you're sitting on top of Mount Stupid, feeling superior.
It isn't like you're going to learn about anti-trust policy and the related economics on slashdot, so I'm not going to go into the details of non-overlapping margins. But duuuuuuude. Read a book. You're embarrassing yourself.
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How many start up companies can afford to lose $200000000 to compete with a company that treats $200000000 as petty cash?
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This behavior is the direct result of capitalism and inevitable due to the rules of the game. History has also shown that trying to prevent this is woefully ineffective. Anticompetitive prevention is fundamentally opposed to capitalistic markets. Basic game theory 101 that any idiot in Math 101 will tell you that the most effective way to win a game is to eliminate your opponent completely from the game.
Re:When merchants compete, consumer wins (Score:5, Insightful)
They are good for the purchaser in the short term, but a price war is part of a long term strategy. If a company is deliberately losing money on a product, that's because manager expects to be able to make back that expense in some other way. Sometimes the plan is to first force smaller competitors out of business, and then raise the price to a much higher level. Or, slightly less nefariously, it might be to make additional sales alongside - if the mum is ordering nappies on a regular basis because Amazon is the cheapest supplier, they are likely to start ordering other things from Amazon alongside those too. A habit that may continue once they no longer need the nappies.
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Citations? (Hint, Standard Oil was not [mises.org]...)
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Literally most anti-trust cases as this is the single most litigated form of antitrust abuse. The legal term you're looking for is "predatory pricing". And yeah Standard Oil has nothing to do with predatory pricing, but today's game is not "Let's see who can list irrelevant stuff".
Unless I misunderstood what you want out of this conversation, in which case: here's a video from 1894 of two cats boxing https://www.youtube.com/watch?... [youtube.com] which also has nothing to do predatory pricing.
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I'm looking for cases, when, having eliminated competition through "predatory" (read "lower") prices, the survivor raises them "to a much higher level".
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I'm looking for cases, when, having eliminated competition through "predatory" (read "lower") prices, the survivor raises them "to a much higher level".
It's literally in the article.
But the newly released emails contradict that claim. Herrington specifically listed the Amazon Mom rollout as part of Amazon's "aggressive 'plan to win' against diapers.com." Later in the same email, Herrington wrote that "to the extent this plan undercuts the core diapers business for diapers.com, it will slow the adoption of soap.com."
Amazon's claim is also hard to square with the company's actions post-acquisition. Stone notes that "a month after it announced the acquisition of Quidsi, Amazon closed the [Amazon Mom] program to new members." Then a few weeks later, as the Federal Trade Commission was giving the deal unexpectedly close scrutiny, Amazon re-opened Amazon Mom—but with smaller discounts. In effect, Amazon hiked diaper prices soon after the acquisition.
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You missed out on an excellent RickRolling opportunity here. What has /. come to?
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For the sake of argument, we will accept that Standard Oil was not a true example of good/needed anti trust enforcement.
A, Does that mean that there are no good examples of a need to enforce anti trust regulations?
B, With the information from the article, is there an argument that investigation is needed in this particular case?
C, Are all company heads the Randian upstanding pillars of society? Or are there some we should be wary of?
D, do you believe that Amazon is really looking out for others in this cas
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A. "Yes" is the likely answer. Your question asks to prove a negative, which is not possible. But I did ask for examples and the two answers posted so far do not contain any such...
B. Investigation of what? Despite steady growth, Amazon is not a monopoly — not in retail in general, nor in the diapers market in particular.
C. Facetious.
D. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner [and diapers -mi], but from their regard to their own self-interest.
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A, Microsoft? The action they took to use their monopoly to ensure competitors were kept out should have been ignored? ( Apple? Google? no one? )
And no, there was no request to prove a negative. A single example ( as above ) is sufficient proof.
I wish you ( and those like you ) could live, just until your eyes were opened, in a world like that you evangelize.
B, Investigation of the emails where it is claimed that Amazo
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A. Microsoft actually did have a monopoly in the personal desktop operating systems market. The government did take action, which lead nowhere — Netscape still fell, and Internet Explorer remains a part of Windows to these days.This is not a valid example, however, because there was no cost involved — IE and Netscape were both free... And remain free.
B. Please, cite the relevant law. Hopefully, that "last time you checked" was recent enough for your browser to still remember, where it was.
C. I m
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A, "Netscape still fell..." I would say that is because Microsoft was a valid example.
B, If there is no relevant law, then why is the House Judiciary committee interested?
C, Linking to an article on the Mises.org site that talks about how moral and upstanding their example were doesnt count?
D, There is claimed evidence that Amazon is up to no good. I am not privy to all the details, nor are you.
There is smoke, I say "lets go look and see", you say "nah, couldnt be, those fine
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A. It is a bad example, because, despite government intervention, Nestscape still fell. It is an invalid example, because Microsoft never raised the price for Internet Explorer after Netscape's demise.
B. So you admit, you aren't aware of any such law, and your earlier statement of having checked for it — the check having an affirmative result — was a lie. You haven't actually checked... Indeed, if there was such a law, it would be for the Executive (Justice Department) to investigate, not for th
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A, What government intervention? Nothing of any real consequence happened to Microsoft.
And it would be difficult to raise the price after Microsoft had to hide behind the "it is part of the operating system" defense.
B, No, I dont know of any such law. I still believe it exists. And "last time I checked..." is a figure of speech as you well know.
C, OK, I was unfair. My apologies.
D, It is not a crime to attempt to manipulate the market to drive a competitor out o
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D. The article describes what happened next: Amazon stopped the Amazon Mom's programme to new subscribers, and it was only the feds looking into the deal that made them re-open it, but with smaller discounts.
So Amazon did raise prices as soon as they had kicked their competitor out.
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A. "Yes" is the likely answer. Your question asks to prove a negative, which is not possible. But I did ask for examples and the two answers posted so far do not contain any such...
B. Investigation of what? Despite steady growth, Amazon is not a monopoly — not in retail in general, nor in the diapers market in particular.
C. Facetious.
D. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner [and diapers -mi], but from their regard to their own self-interest.” — Adam Smith
A. Hate to butt in here but, you're posting on a tech news site frequented by programmers. Proof by contradiction is a mathematical/logical proof that is valid especially in dealing with set theory. That's what Duhavid is asking for. https://tutors.com/math-tutors... [tutors.com] Duhavid literally asking for 1 example to prove/disprove if there are any examples of any company that needs regulation. The "can't prove a negative" is only valid when the burden of proof is on validating each example in a set of infinite (or
Re:When merchants compete, consumer wins (Score:4, Insightful)
Yea that works fine until the competition is gone and you find yourself paying twice the original price with no where else to turn to save money.
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Diapers.com may go, but there will still be numerous other merchants selling diapers, both on- and offline.
Has such a thing ever happened, actually?
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Nope. There's the whole supply chain, as well. Not only do the individual retailers go away, but so do the distributors. You can't just call up the Pampers company and say, "I want to buy Pampers and wholesale". It doesn't work that way. Amazon (and their customers) are destroying entire industries.
In theory, but that's not what happened (Score:2)
> Yea that works fine until the competition is gone and you find yourself paying twice the original price with no where else to turn to save money.
That can happen with some specific types of products.
In this case, do you think Amazon will raise diaper prices a year later? Three years later? Ten years later? How long do you think they would "lose money"?
The events this person is complaining about occurred 11 years ago. Today Amazon sells Pampers for $31. So, will they raise prices a year after beati
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A price-war shortly become a lack of quality war.
So shortly with a price war, The customer losses, because they are getting cheap crap, The companies lose because they have trimmed their magins to be too slim.
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Except we're not talking about diaper manufacturers here, we're talking about companies that buy Huggies and resell them. Middlemen fighting middlemen.
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The supply chain responds to the middlemen or the retailers. Especially for a large battle.
Back in the days where Amazon was the plucky startup we had big old evil Walmart. What Walmart does is they will go to the vendor and ask for products for a lower price, and the vendor will often cave in, just because they are such a big market that it would be foolhardy to not try. This is why often for the same brand you may get a lower quality item from Walmart vs a Higher Quality version say from Target. You s
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we're talking about companies that buy Huggies and resell them
That is not how wholesale markets on this scale work.
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That is not how the synergies leverage macroeconomic evolutionary pressures.
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See, you can't even tell the difference. You understand bullshit, clearly, but you can't turn around and also understand reality.
Pampers cost more in the U.S.A. (Score:5, Interesting)
Looking at amazon.com, amazon.co.uk, and amazon.ca for international prices for Pampers Swaddlers Size 5 (US & Canada), and Pampers Pure Protection Size 5 (UK):
U.S.A. $44.56 for 132 which is $0.3375 each.
U.K. Euro $28.13 for 132 which is Euro $0.2131 each = US$0.2512.
Canada CDN$29.82 for 120 which is CDN$0.2485 each = US$0.1830
Something's up with the pricing.
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They're about $0.35 at Walmart.com and $0.38 at Target.com so on that case Amazon is definitely the cheapest of big USA online retailers.
The international pricing may be a lot more complicated than you might first assume. Other countries frequently have price controls. Additionally other countries may have a product with the same name but which is manufactured in their own nation, effectively licensing the American brand name, so they may be cheaper simply because they make them more cheaply. And while I
U.S.A. Slaves (Score:1)
It’s like Americans love being abused.
You have have some of the poorest metrics of western countries, for health, health care, minimum wage, holidays, sick pay, unfair dismissal, homicide, jailing, police misconduct, consumer rights. They even make you vote on Tuesday and measure in imperial!
It’s like you are slaves to big business and have Stockholm’s syndrome!
I feel sorry for you guys!
Looks like there are competitors in UK/Canada (Score:2)
The UK seems to have some strong competing brands [statista.com], so Pampers' share of the market is smaller. (BTW, the UK price is in GBP, not Euros, so is about $0.28 per diaper.)
In Canada, Pampers is #3 at a paltry 8% [cadenshae.ca].
So the different pricing would seem to be consistent with how popular Pampers is in the respective markets. When you're #1 (US), you can charge a premium. When you're big but have strong competitors (UK), you need to co
I'm shocked (Score:2)
Okay, not that shocked.
Amazon is just as sleazy as Walmart, you just don't have to deal with the "People of Walmart" when shopping.
This is why to skip FACEBOOK and focus on the ... (Score:3)
These should be split into multiple companies that exist on different continents. In addition, the anti dumping rules of old should be brought back. What Amazon and Google are doing is as criminal as Microsoft was. Also, it is time to prevent outside monopolies that dump, steal patented ideas, etc; IOW, since china will not break up their government owned monopolies no reign them in, it is time to block them from America, if not the west.
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vapid opinions.
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... as criminal as Microsoft was.
was?
How devious (Score:2)
What's the market? (Score:2)
Oldsters like me recall what a shock it was in the legal and policy worlds whe
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"Predatory Pricing" isn't limited to monopolies. In fact it's designed to prevent the establishment of monopolies.
https://www.investopedia.com/terms/p/predatory-pricing.asp [investopedia.com]
the Court established that for prices to be predatory, they must be not simply aggressively low but actually below the seller's cost. That said, it is not a violation of the law if a business sets prices below its own costs for reasons other than having a specific strategy to eliminate competitors.
If Amazon emails are dumb enough to say 'we can't let diapers.com survive' then they are at risk.
This is already illegal in Wisconsin... (Score:1)
Isn't that what the free market does? (Score:2)
It's just bad if you're the loser.
The real WTF (Score:2)
The real WTF is disposable diapers. Soft cotton cloths for 6-9 months, wash them and/or compost them. Teach your kid to notify you before they can even walk. Humans develop slow compared to other animals, but not THAT slow, and our massive brains give us other advantages. Anyone who can't potty train by 9 months at the latest is a failure of a parent, or has a slower than average child.
Hopefully I won't be modded down for this, because it's true.
So what is the purpose of that? (Score:2)
Chinese economic model (Score:2)