Last week, Amazon launched its full Australian offering on its online store, serviced by its new Victorian distribution hub. There has been much speculation regarding the likely impact of this new competitor in the Australian market. Some called for intervention by the Australian Competition and Consumer Commission, on the basis that Amazon's tactics in other locations of selling below cost was anti-competitive.
ACCC Chairman, Rod Sims, drew criticism from the likes of Gerry Harvey of Harvey Norman in his basic refusal to intervene in the business model adopted by Amazon. Mr Sims is on record regarding the likely effects of large retailers setting low price points.
"Eventually if you get your business plan right, you will make money at that price point; even if it damages incumbent firms and puts some out of business, this is in no way illegal."
"In competitive markets, there will be winners and losers" he said. The ACCC has been quite clear that its protection of the competitive process requires this hands-off approach to ensure that "winners and losers are determined by the quality of the offers firms make to customers".
Other legal issues have been raised with Amazon by the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, who has queried the online retailer's compliance with Australia's relatively new unfair contract terms legislation. Amazon was warned to review the contracts used in its small business marketplace, given US versions of these contracts likely did not comply with local requirements.
Yet further concerns regarding the effective taxation of Amazon have been raised. Amazon has a market capitalization of over A$580 billion. Most of its income is currently accounted for by a related company in Luxembourg. Local Australian accounts held by Amazon to date are reported to show the bulk of revenue as sourced from and paid by related parties offshore. These arrangements are said to be similar to those adopted by Google, AirBNB, Uber and Facebook. It is yet to be seen how the revenues derived via its new local operations will be dealt with.
Despite the above concerns, Amazon is now open for business in Australia. With the expansion of eBay, Etsy, Alibaba and others, it seems relatively clear that the local market needs to be ready to compete. Any outstanding legal issues are likely to be a mere distraction to this outcome.
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