Sonos: Amazon Selling Smart Speakers Below Cost is Illegal
- Paul Thurrott
- Aug 06, 2020
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In the wake of its legal challenge to Google, Sonos has finally gone after the market leader, Amazon, albeit indirectly, in claiming that the online giant sells its smart speakers below cost illegally.
But here’s the amazing bit: The Sonos claim is backed by comments that Amazon CEO Jeff Bezos made during a congressional hearing last week.
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When asked by representative Jamie Raskin whether Amazon priced its Echo speakers below cost, Bezos admitted that they did.
“Not its list price,” he said, “but it’s often on promotion. And sometimes when it’s on promotion, it may be below cost, yes.”
“That’s predatory pricing,” Sonos CEO Patrick Spence told Protocol. “That’s illegal. They just take money from their monopoly business, they just subsidize, subsidize, subsidize.”
It’s not clear why Sonos hasn’t sued Amazon, as the firm also claims that Amazon, like Google, has stolen its intellectual property. But Spence says he was happy that Amazon and Google are finally in the antitrust hot seat.
“We were encouraged by the hearing last week,” he said. “You gotta stand up to bullies.”
In related news, Sonos this week reported revenues of $249.3 million for the quarter ending June 30, a decline of 4 percent year-over-year, a falloff the firm attributes to COVID-related retail store closures, especially IKEA.
“One of the key factors in our ability to achieve this was the investments we’ve made in our [direct to consumer (DTC)] efforts,” a letter to Sonos shareholders reads. “We quickly adapted when physical retail stores started to close in the second quarter, and drove a 299 percent year-over-year increase in our DTC revenue in the third quarter.”
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Conversation 44 comments
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BrianEricFord
<blockquote><em><a href="#559344">In reply to cavalier_eternal:</a></em></blockquote><p><br></p><p>Presumably, he’s talking about their control of the online retail market.</p>
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chump2010
<p>The bad part if they are selling it below cost, is that potentially they are pricing others out of the market. It creates huge barriers to entry for other retailers. If people are not sure why a potential monopoly is a bad thing, I would point to internet providers. In many places, there are only three super large corporations offering an internet service. No one else can compete with them, because as soon as a new player comes to the market, they drop prices and lose a bit of money in the short run. In lots of places, only one major provider exists…..so it is not like you get a choice of the three major providers. </p><p><br></p><p>arstechnica.com/information-technology/2018/07/comcast-or-charter-is-the-only-25mbps-choice-for-68-million-americans/</p><p><br></p><p>So if Amazon are selling products as loss leaders (and it may not just be Sonos speakers) they are stopping other retailers from joining the market potentially. With less retailers, that means less places for suppliers to sell their goods. Which means Amazon will start to control all aspects of the supply chain. ie they can say to Sonos sell them to us at this rate, otherwise we will not stock them, which will mean your sales will drop massively. Or we will automatically put your products at the bottom of the page. Amazon control enough of the online market share (I think 38% of online commerce goes through Amazon?), for loss leading to be considered a highly dubious practice. And I would imagine an illegal one.</p><p><br></p><p>Having said all that, I am no lawyer. Enjoy the rest of your day!</p>