Enlarge /. An Amazon camp on a sunny day in Germany on April 2, 2020.
Amazon accounts for about a third of all US Internet retail sales, but hasn't got there entirely on its own. This was done in part with the support of hundreds of thousands of smaller vendors who signed up to sell their goods on Amazon's third-party marketplace, which accounts for more than half of the company's retail sales. In theory, these agreements were beneficial for everyone involved: buyers could easily buy products from a single source, retailers could rely on Amazon's front and back-end infrastructure instead of building their own, and Amazon was able to achieve a beautiful, consistent cut .
However, the calculation of who benefits the most from these agreements has changed over time. Amazon now offers a wide range of its own brands, making it a direct competitor to many retailers who rely on its platform to reach consumers. That would be a challenge enough, but the giant also gathers sales data from these third-party vendors and then uses it to launch its own product lines and undercut the smaller companies, the Wall Street Journal reports.
The WSJ reviewed internal company documents showing that Amazon executives request and access data from certain market providers, although company policies refuse to do so. More than 20 former employees told the newspaper that the practice of violating these rules was the order of the day. "We knew we shouldn't do that," said a former employee about access to this data. "At the same time, we manufacture Amazon branded products and want them to be sold."
As such an example, the paper mentions a trunk organizer. Amazon employees accessed documents related to that provider's total sales, Amazon's payment for marketing and shipping, and the amount Amazon spent each time the promoter was sold before the company then launched its own similar product .
Employees were able to circumvent the rules by bending the concept of "aggregation" according to the WSJ. While Amazon claims not to access individual seller data, reports on aggregated seller data are generated. If the pool of participants was large enough, this would not be a problem: A report that combines data from 200 providers who sell iPhone cases, for example, is unlikely to publish any proprietary data on these cases.
The pool of providers that can be aggregated is any group of two or more entities, according to the WSJ. So if there is only one vendor that sells an item but Amazon sells returned or damaged versions through its Warehouse Deals program, it is considered sufficient to be aggregated.
In a written statement to the WSJ, Amazon agreed that "like other retailers, we review sales and business information to give our customers the best possible experience," but that we strictly prohibit our employees from using non-public, seller-specific information to determine which private label products to bring to the market. "The incidents that the WSJ described to the company violated Amazon's internal policies and initiated an internal investigation, the company added.
Although Amazon determines which brands to launch, Amazon has been busy bringing them live in recent years. According to research company TJI, the company now has more than 145 private labels and exclusive sales agreements with another 640 brands. Some, like Amazon Essentials or Amazon Basics, are obvious to buyers. Others – such as the Scout + Ro children's clothing line, the Hayden Rose women's clothing brand or the Stone & Beam furniture line – are anything but.
Overall, these private labels account for about 1 percent of the company's total sales, Amazon told Ars last September, but former employees told the Wall Street Journal that they were operating under the policy that Amazon's private label sales would be up to 10 percent of the 2022 The company's retail sales should be.
Amazon's occasionally controversial relationships with third parties in its market have already been the subject of several regulatory inquiries in the U.S. and abroad. The European Union's competition office launched an investigation in 2019 to determine whether Amazon uses "competitive information about market sellers, their products, and transactions in the market" to boost their own retail business.
Congress also specifically asked Amazon for information about the use of market vendor data as part of its massive ongoing antitrust investigation into potentially illegal anti-competitive behavior by Amazon and other big tech companies. At a hearing last July, an Amazon witness explicitly told Congress that Amazon "does not use individual seller data directly to compete with its market providers."
The chairman of the Subcommittee on Antitrust, Rep. David Cicilline (DR.I.), and the chairman of the House Judiciary Committee, Rep. Jerrold Nadler (DN.Y.), spoke sharply over Amazon about the apparent contradiction the new report revealed.
"This is another example of the fact that Amazon's affidavit is directly contradicted by testimony," said Cicilline in a written statement. "At best, the Amazon witness seems to have misrepresented important aspects of Amazon's business practices while leaving out important details in response to targeted questions. In the worst case, the witness Amazon sent to his name lied to Congress."