When it enters the Australian market, Amazon will be able to roll out prices that undercut its rivals – and many of those prices could be at money-losing levels.
According to a Reuters news report, chairman of the Australian Competition and Consumer Commission, Rod Sims, told Fairfax Media that Amazon was legally allowed to set its prices low enough to beat out competitors without running afoul of any competition laws.
“In terms of misuse of market power, if you open a store in a new town and you set a common price point, you are going to lose money initially if you don’t have scale,” Sims said. “Eventually, if you get your business plan right, you will make that price point, that is in no way illegal.”
Amazon hasn’t specified when it will launch its business in Australia, although Reuters noted the eCommerce giant is building a warehouse in Melbourne, in Southern Australia. Rocco Braeuniger, the country manager at Amazon, is slated to hold a meeting in Sydney, during which he is expected to talk with more than 500 Australian suppliers.
While Amazon isn’t breaking any competition laws, Michael McCormack, minister for small business in Australia, said he will be watching the company closely to ensure that it pays the proper taxes. A spokesperson from Amazon told Fairfax that Amazon pays all taxes required by the company in every country in which it operates.
Meanwhile, Kate Carnell, the Australia Small Business and Family Enterprise Ombudsman (ASBFEO), said that her organization has not yet seen the contract to be used for small businesses taking part in Amazon’s marketplace.
When entering a market or country, Amazon’s low-cost model often raises concerns among watchdogs and potential rivals.