An association representing 97,000 of Canada’s small businesses is calling on Ottawa to do more to address Amazon.com Inc.’s dominance.
The Canadian Federation of Independent Business said in a report Thursday that it wants the federal government to tackle the e-commerce giant by modernizing competition laws to level the playing field for small businesses.
“E-commerce offers a lot of opportunity for small businesses to expand and reach more customers, but they’re facing an uphill battle trying to compete with online giants,” Corinne Pohlmann, executive vice-president of advocacy at CFIB, said in a news release.
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“Many small businesses looking to get a foothold online will sign up for Amazon’s Marketplace but a number of them report that Amazon’s business practices can make it more challenging for them to compete.”
As a result, CFIB feels the federal government should use the ongoing review of the Competition Act to stand up for small businesses.
Its recommendation comes after Finance Minister Chrystia Freeland put forward amendments in September that propose giving the Competition Bureau more power to investigate price fixing and gouging and empower the watchdog to block mergers that stifle competition.
A final proposal calls for an end to the efficiencies defence — a provision allowing anticompetitive mergers to move forward as long as they produce efficiency gains that are greater than and offset by the deal’s anticompetitive effects.
Amazon spokeswoman Barbara Agrait alleged the data in the report had been “cherry-picked to fit a false narrative.”
Some 41,000 Canadian small-and-medium sized businesses sold more than 100 million products — more than 200 every minute — through Amazon Canada’s online store in 2021, she said. During the same year, these businesses averaged more than US$85,000 in sales.
“These numbers show that our partners are succeeding when they choose to use our powerful, cost-effective services,” Agrait said.
She added that Amazon is co-operating with the Competition Bureau, which began investigating the company for abuse of dominance in August 2020.
The bureau had asked the public to provide information on Amazon policies which may impact third-party vendors’ willingness to sell their products at a lower price on other retail channels and may influence customers to buy products from Amazon instead of other sellers. It has yet to take action against the company.
“We know small businesses continue to face challenges,” Nadine Ramadan, a spokeswoman for Minister of Small Business Rechie Valdez, said in an email, noting the government has worked to reduce credit card fees and taxes for small businesses.
“We’re going to continue to be there to listen to small businesses, and we encourage Canadians to shop local this holiday season.”
CFIB sees Competition Act reforms as crucial because Statistics Canada data shows the growth rate of small businesses is on the decline, and each year fewer Canadians are choosing to start their own business.
Meanwhile, about 90 per cent of the 3,607 small and medium businesses CFIB surveyed in October 2020 reported the dominance of big e-commerce companies like Amazon, Walmart and eBay threatens Canadian small businesses.
By January 2023, 48 per cent of the 2,423 small businesses surveyed said they were finding it harder to compete with the rise of digital competitors.
The report concluded small businesses are “no match” for large corporations, which have greater power to negotiate with suppliers and can offer more products at lower prices.
Tracey Rogers, who owns White Feather Holistic Arts in Windsor, Ont., said she can compete with Amazon on the price of goods like crystals, jewelry and bath and body products, but not when it comes to Amazon’s low shipping costs.
“The reality is it’s an extremely difficult market for us to compete in because it eats away at too much of my profit to mail stuff across Canada,” she said.
“I don’t even bother with international because if I quote an international shipping quote to somebody, they get offended.”
CFIB’s report says Amazon is the most popular e-commerce company in Canada, giving small businesses “no other option” but to set up a business profile on the company’s platform to compete and stay afloat.
When they join the platform, the company’s power quickly becomes apparent, CFIB said.
“Many members stated that Amazon seemed to encourage consumers to purchase their own products over the same offered products from other businesses,” the report said.
“Small businesses have reported that when a product they sell on Amazon Marketplace becomes popular, Amazon will often start selling that product as well.”
When Amazon starts selling the same products, small businesses find it harder to obtain inventory or materials from their suppliers, CFIB reported.
The organization also described a slow complaint resolution process that favours customers over small businesses and the company’s collection and control of significant amounts of customer data.
“Amazon could be more transparent about its search algorithms and provide clear guidelines to small businesses on how to optimize their listings for better visibility,” CFIB said in a list of recommendations.
“Amazon could refine their marketplace policies to include more transparent and consistent terms for doing business, clarifying fees, providing more options for recourse, reducing the number of contested returns, etc.”
