Fulfillment by Amazon as a Strategic Lever: Anticompetitive or Welfare Enhancing?

Sellers on Amazon Marketplace can adopt Fulfillment by Amazon to fulfill orders. The Federal Trade Commission (FTC) alleges that the service harms sellers and consumers through coerced adoption and excessive fees, while Amazon defends it as helping sellers deliver superior service to consumers. Motivated by this antitrust debate, we develop a stylized model with rival platforms, where Platform A offers a qualityimproving fulfillment service (hereafter, FBA) alongside third-party logistics (3PL), while Platform B only offers 3PL. Sellers pay commissions and fulfillment fees. We define FBA as "subsidized" when it delivers a positive net fulfillment value (NFV), i.e., its logistics quality advantage over 3PL exceeds their fulfillment fee differential. Seller adoption of FBA is profitable and voluntary when the NFV is sufficiently large, but a higher commission rate makes adoption less likely. Platform A's provision of FBA is profitable under high quality advantage and moderate fulfillment fee. These conditions give rise to three equilibrium regions: 1) In the region of profitable provision and voluntary adoption, FBA always improves consumer surplus and may increase social welfare under certain conditions. 2) In the region of profitable provision but involuntary adoption, Platform A may have incentives to push FBA adoption at the expense of consumers, demonstrating the potential and consequences of coerced adoption. 3) In the region of unprofitable provision, a sufficient subsidy by Platform A induces seller adoption of FBA, leading to increased consumer surplus, which effectively turns FBA into a form of predatory pricing to erode Platform B's market share.