Shares of Home Depot, Lowe's and Whirlpool were all falling on Thursday after Sears announced plans to sell Kenmore-branded appliances on Amazon.com. Kenmore Smart appliances will also be compatible with Amazon's Alexa platform.
Shares of Sears soared on the announced deal.
"It's part of the free-market system. If you have margins too high and you want to compress them and it's good for the consumer, someone is going to come along with a business model," he said.
This isn't the only recent occasion Amazon has come along and disrupted an entire industry. Last month, Amazon announced it plans to buy Whole Foods in a deal valued at $13.7 billion. Shares of Whole Foods soared while other grocery and retail stocks tanked.
More recently, Amazon filed a trademark this week to provide customers with "prepared food kits." The company would no doubt threaten meal-kits provider Blue Apron, which just recently listed on the public market.
Gabelli said the question for him is: "At what point does somebody step in and say, 'Hey, Jeff (Bezos) is being too disruptive and he's entering too many markets and there is some anti-competitive behavior going on'?"
Gabelli said he doesn't know if Amazon can get too big.
Also on the show, money manager and popular blogger Josh Brown said, "This is the creation- destruction impulse of capitalism."
"At the end of the day, get the product to the consumer. And if you have to partner with Jeff ... listen, you had your chance to build out your own version, it didn't work as well as his. This is the reality of life," said Brown, CEO of Ritholtz Wealth Management.