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Should free shipping be illegal?

1 June 2021

One of the biggest drawcards for online shopping is the promise by some vendors that you'll get free shipping.

As the effects of CV19 work to significantly increase the cost of freight around the world, the lure of "free shipping" has become even greater than it was a few years ago.

Perhaps the one thing that has stimulated the growth of sites like Banggood and AliExpress has been the fact that you can (or at least "could") get seemingly huge, heavy items delivered to your door for just $1 in international shipping charges. This gave such vendors a huge advantage over even those local merchants who could price-match because postage/courier within NZ has always been expensive.

Now there are calls for free shipping to be considered "anti-competitive".

Some countries such as France have actually banned free shipping on the basis that it distorts the marketplace and gives certain (usually much larger) retailers an unfair advantage over others.

However, it's not just the Chinese who have latched onto the immense competitive advantage that "free shipping" offers. Indeed, one needs look no further than the mighty to see a perfect example of market distortion as a result of this strategy.

Those who pay an annual fee for Amazon Prime get priority shipping at free or near-free rates and since, in many countries, Amazon runs its own delivery fleet, this might give them an unfair advantage over other etailers.

Based on this premise, the Washington DC Attorney General has filed an antitrust law suit against Amazon in the USA.

The claims are that by offering its Prime customers free/near-free shipping, Amazon is exploiting its dominance to distort the market, to the cost of smaller players.

There are also claims that as a result of its market dominance, the company is also raising prices to increase its margins and abusing its virtual monopoly power by forcing third-party sellers on its platform to actually cover the shipping costs themselves -- thus allowing the giant to advertise "free" shipping to the purchaser.

Of course we've seen sellers fiddle with freight charges for a long time but often it's the complete reverse of Amazon's strategy. Many sellers using online auction sites will deliberately reduce the price of their items but hike "shipping & handling" fees well above the actual cost. They do this so as to reduce the amount of commission payable to the platform they're using.

There are even some sites that offer "free" products -- just pay the shipping charges. We know how that works!

As freight charges continue to climb, due to risking fuel charges, reduced passenger travel on international routes and other factors, the ability for sellers to offer free shipping may already be coming to an end. Perhaps "market forces" will ensure that the days of the free lunch are drawing to a close anyway.

I have to admit that many of the places from where I used to purchase a good amount of stuff have disappeared off my bookmark list due to the rising cost of shipping. There's no point in buying a $5 widget from China if it's going to cost $50 to have it shipped to New Zealand is there? Far better to simply buy the same widget for $30 from a local supplier.

With this in mind, I think local retailers are going to benefit (at least for the time being) from the paucity of free shipping offers.

What do readers think? Should we follow France's lead and ban free shipping? Even if we did try to ban it, how does that get enforced on overseas purchases and who decides if shipping is being unreasonably subsidised to gain competitive advantage?

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