Successful sellers on Amazon complain that when they have a "hot" item Amazon begins to sell it. This is great for Amazon but not so great for sellers. Its like hijacking a good idea.
Of course none of this is illegal. It is actually smart of Amazon because they have most of the online business in the U.S. and can squeeze out competition to maximize profits.
It does show there is a lack of true competition. Wal-Mart is working on some alternatives but as of yet it hasn't been made into fruition. Sellers can't jump ship or hedge their networks.
Online retailers that are selling well may want to reduce the amount they sell in order to ensure they don't attract competition from Amazon. Almost seems counter intuitive. However, if you are trying to corner the market on these products it may make sense.
The advantage Amazon has is that they don't need to take risk on finding their own products. They don't invest in purchasing and risk failure like sellers. They just watch the sellers and put their financial muscle into buying what works. The sellers bring it to them!
Jiang, B., Jerath, K. & Srinivasan, K. (2011). Firm Strategies in the "Mid Tail" of Platform-Based Retailing. Marketing Science 30 (5).