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Amazon Reportedly Used Merchant Data, Despite Telling Congress It Doesn’t
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Amazon reportedly used merchant data, despite telling Congress it doesn’t [arstechnica.com]:
Amazon accounts for about a third of all US Internet retail sales, but it didn't get there entirely on its own. It did so, in part, with the assistance of hundreds of thousands of smaller vendors who signed up to sell their goods on Amazon's third-party merchant marketplace, which accounts for more than half the company's retail sales. In theory, those agreements were beneficial for all involved: shoppers could easily one-stop-shop for products, merchants could rely on Amazon's front and back-end infrastructure instead of building out their own, and Amazon could get a nice consistent cut flowing in.
The calculus of who benefits most from these arrangements, however, has changed over time. Amazon now offers a wide array of its own in-house brands, making it a direct competitor to many of the merchants who rely on its platform to reach consumers. That would be challenge enough, but the behemoth also captures sales data from those third-party vendors, then uses it to launch its own product lines and undercut the smaller firms, The Wall Street Journal [wsj.com] reports.
The WSJ reviewed internal company documents showing Amazon executives requesting and accessing data from specific marketplace vendors, despite corporate policies against doing so. More than 20 former employees told the paper the practice of flouting those rules was commonplace. "We knew we shouldn’t," one former employee said of accessing that data. "But at the same time, we are making Amazon branded products, and we want them to sell."
The paper cites a car-trunk organizer as one such example. Amazon employees accessed documents relating to that vendor's total sales, what the vendor paid Amazon for marketing and shipping, and the amount Amazon made on each sale of the organizer before the company then unveiled its own similar product.
Employees were able to get around the rules by bending the concept of "aggregation," according to the WSJ. While Amazon says it will not access individual seller data, it does create reports of aggregate seller data. If the pool of participants is large enough, that wouldn't be a problem: a report combining data from 200 vendors selling something like iPhone cases, for example, would be unlikely to reveal any proprietary data about any of them.
But the pool of vendors that can be aggregated, the WSJ explains, is any group of two or more entities. So if there's only one vendor selling an item but Amazon itself sells returned or damaged versions through its Warehouse Deals program, that's considered enough to aggregate.
Amazon in a written statement to the WSJ agreed that "like other retailers, we look at sales and store data to provide our customers with the best possible experience," adding, "however, we strictly prohibit our employees from using nonpublic, seller-specific data to determine which private label products to launch." The incidents the WSJ described to the company violate Amazon's internal policies, and it has launched an internal investigation, the company added.
Deep waters
However Amazon determines which private-label brands to launch, it has been busy getting them live in recent years. The company now has more than 145 private-label brands [this.just.in] as well as exclusive sales arrangements with another 640 brands, according to research firm TJI. Some, like Amazon Essentials or Amazon Basics, are obvious to shoppers. Others—such as kids' clothing line Scout + Ro, women's clothing brand Hayden Rose, or furniture line Stone & Beam—are anything but.
Altogether, those private labels account for about 1 percent of the company's total sales, Amazon told Ars [arstechnica.com] last September. Former employees told The Wall Street Journal, however, that they were operating under the directive that Amazon's private-label sales should be up to 10 percent of the company's retail sales by 2022.
Amazon's occasionally contentious relationships with third-party vendors on its marketplace are already the subject of several regulatory probes [arstechnica.com] in the United States and abroad. The European Union's competition bureau opened an investigation [europa.eu] in 2019 probing Amazon's use of "competitively sensitive information about marketplace sellers, their products, and transactions on the marketplace" to boost its own retail business.
Congress, too, specifically asked Amazon for information about its use of marketplace vendor data as part of its massive ongoing antitrust probe [arstechnica.com] into potentially unlawful anticompetitive behaviors by Amazon and other Big Tech firms. At a hearing last July, a witness for Amazon explicitly told Congress that Amazon "doesn't use individual seller data directly to compete" with its marketplace vendors.
Antitrust subcommittee chair Rep. David Cicilline (D-R.I.) and House Judiciary Committee chair Rep. Jerrold Nadler (D-N.Y.) had sharp words [house.gov] for Amazon over the apparent contradiction revealed by the new report.
"This is yet another example of the sworn testimony of Amazon’s witness being directly contradicted by investigative reporting," Cicilline said in a written statement. "At best, Amazon’s witness appears to have misrepresented key aspects of Amazon’s business practices while omitting important details in response to pointed questioning. At worst, the witness Amazon sent to speak on its behalf may have lied to Congress."
&larr Previous story [arstechnica.com]Next story &rarr [arstechnica.com]
Amazon allegedly used sellers' data to make competing products [engadget.com]:
Amazon’s policies forbid it from using sellers’ data to undermine their own products, but the practical reality might be very different. Wall Street Journalsources [wsj.com] say Amazon employees have been using proprietary seller data to help design and price in-house products [engadget.com], including decisions to enter certain categories. To develop a car trunk organizer, as an example, the internet retailer reportedly studied a third-party’s sales, marketing spending and Amazon’s share of sales.
This also includes executives, according to the sources. While Amazon officially has measures to prevent its product higher-ups from accessing individual sellers’ data, those rules apparently haven’t been consistently enforced. Execs would use workarounds, such as having analysts create reports or obtaining supposedly aggregated data that was really collected from one seller.
In a statement, Amazon said it “strictly prohibit[s]” workers from using private seller info to determine its own-label product launches, and that it had launched an internal investigation into the practice.
Whether or not that investigation leads to reforms, Amazon may face serious legal repercussions. The company testified to Congress [engadget.com] in July that it doesn’t use seller data to gain an unfair advantage — if the claims are accurate, that wasn’t a truthful statement even if leaders didn’t authorize it. That could lead to further scrutiny from US regulators concerned about Amazon’s dominance [engadget.com], not to mention EU investigators already worried [engadget.com] the company might be abusing merchant data. If Amazon can’t show that data misuse was limited to a rogue batch of employes, it could face penalties and government-mandated reforms.
In this article: Amazon [engadget.com], e-commerce [engadget.com], amazonbasics [engadget.com], internet [engadget.com], shopping [engadget.com], antitrust [engadget.com], Competition [engadget.com], news [engadget.com], gear [engadget.com]All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.Comments355Shares
