That’s one way but far from the only one. Producers like to do things like make random deals through their myriad divisions to offload inventory to a random reseller very cheaply that ultimately finds its way onto Amazon at a price that undercuts cost of the original producer’s contract on Amazon. The cost of sales are not the same on Amazon even if you are selling the same product, so they can legit undercut you. You also have different divisions of the same company around the world all selling on Amazon under different contracts competing with each other (which Amazon tacitly encourages AFAICT).

Smart companies put contracts globally that have Amazon implications under a single person who can see across every deal. If they sell to someone with a restriction on Amazon resale, they will mark those goods so that they can track it if it shows up on Amazon. However, there are so many fly-by-night resellers that this is a losing proposition, so many don’t bother with those resellers anymore because enforcement yields nothing.

The vast majority of companies are naive and not very smart about any of this. People that know how to systematically set up a sales program that is profitable and resistant to arbitrage on Amazon get paid a lot of money in industry. It isn’t that hard but most companies can’t seem to figure it out.