Follow-Ups: Online Retail, Regulation/Law

We’ve had numerous items on the Wal-Mart/Amazon battle, and this article goes into depth on some of the challenges facing Wal-Mart as they try to fulfill their goal of being “the Wal-Mart of the web.” Wal-Mart’s pricing challenge to Amazon on best-sellers garnered a lot of attention, but it also pointed out a problem for a company that is primarily bricks and mortar:

The price competition highlights one of the key challenges facing any store-based chain selling online: how to reconcile prices in stores and on the web. Low web prices could undercut store visits, while high web prices mean the e-commerce site can’t compete.

Wal-Mart, after all, wants you to come into the store, where they can sell you a bunch of other stuff, not just a few loss-leader books. That same issue shows up in shipping, where Amazon emphasizes the free-shipping option of Amazon Prime, while Wal-Mart wants to persuade us to use their ship-to-store option.

The article also mentions the problem for a bricks and mortar retailer in opening up its website to other merchants – Amazon has done so very broadly, while Wal-Mart’s efforts are limited thus far to retailers who sell non-competitive products.

Speaking of which, Sears also has opened its website to other sellers, leading to this criticism from the Chicago Tribune:

Keeping quiet may work when operating elite hedge funds, but it's usually not a great strategy when running a retailer. For the past six months, Sears Holdings Corp. has been operating an online marketplace that allows third-party vendors to sell goods on its Web site. But few consumers knew about it. Sears waited until Thursday to unveil "Marketplace at Sears.com," disclosing that its Web site carries more than 10 million products, including furniture, art, cosmetics, appliances, sporting goods and shoes.

I’ve never had any problem criticizing Sears, but I think it’s the Tribune that’s at fault here. Sears has made no secret of this effort – we mentioned an item about Marketplace back in October.

On a separate note, we mentioned regulatory actions against Intel, and Intel’s settlement of its lawsuit with AMD not long ago. Now the Federal Trade Commission has announced an investigation of Intel, but is basing it on graphics chips rather than on CPUs.

To date, the antitrust actions of regulators worldwide toward Intel have focused on sale practices for central processing units, or CPUs, a market over which the company has fought heavily with Advanced Micro Devices. On Wednesday, however, the FTC spelled out a litany of allegations about Intel's alleged anti-competitive behavior in the market for graphics-processing units, or GPUs, in which Nvidia is a major player. […] Why graphics, and why now? "It would be really hard to sell the public on expending resources to take Intel through administrative proceedings when it had already paid over a billion dollars to AMD," said Joshua D. Wright, a professor at George Mason University School of Law and a scholar in residence at the Federal Trade Commission until 2008. "[The FTC] needed to be seen as doing something new."

Intel sounds rather annoyed about it:

This lawsuit is not based on claims that Intel violated the existing antitrust laws. Instead, the FTC is advocating new rules regulating business conduct. Those rules would harm, not help, competition and would reduce incentives for companies to invest in research and development and other pro-competitive activities.

And several months back, we mentioned a decision that greatly broadened the definition of ‘competing customer’ for Robinson-Patman purposes. The decision in that case, in which a distributor sued Michaels Foods for selling at different prices to food service company Sodexho, has been reversed on appeal:

The case, Feesers, Inc. v. Michael Foods, Inc. and Sodexo, Inc., was filed in 2004. In the suit, Feesers, a regional food distributor based in Pennsylvania, claimed that it competes with Sodexo, Inc., a multinational food service management company, and that Michael Foods was required to sell its products to both companies at the same price. The Third Circuit Court of Appeals today rejected Feesers' claim, holding that Feesers and Sodexo are not competing purchasers.

Presumably there will be further appeals.