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Amazon Used Third-Party Merchant Data After Testifying to Congress That It Didn’t

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New reporting suggests that Amazon has directly benefited from mining the sales data of its third-party merchant partners, in explicit violation of its own repeated statements to the contrary, including Congressional testimony.

Much of Amazon’s business is driven by third-party sellers who sell products on Amazon but aren’t owned by the company. In theory, this is supposed to be a win for everyone involved, with third-party sellers having access to the Amazon sales network and website backend, while Amazon got a consistent cut of revenue from sales.

But having a huge network of third-party sellers also potentially gave Amazon access to all of their data in aggregate, in ways it could easily abuse. Once Amazon began selling its own branded products, it put itself into competition for the same buyers its third-party sellers were competing for.

For years, the company has responded to concern on this point by robustly insisting it did not use this third-party data to make decisions about which products to offer or what to charge for them, even testifying to Congress that it did not abuse its monopoly powers.

According to interviews the Wall Street Journal conducted with some 20 Amazon employees, the retailer absolutely has and does engage in this kind of behavior. In addition, House Antitrust Subcommittee Chairman David Cicilline has stated publicly that Amazon’s witness at a hearing last year “may have lied” to Congress.

According to the report, Amazon employees accessed documents for a bestselling third-party trunk organizer, including total sales, how much the vendor paid to Amazon for marketing and shipping, and how much Amazon made per sale. Later, Amazon’s private-brand went on to introduce trunk organizers. Amazon claims that these practices, if they occurred, were against its internal policies and that it has launched an investigation.

Image by the WSJ

While many companies produce their own private-label brands, few companies have the reach of Amazon, sell the same breadth of products, or have the same level of insight into how third-party sales are changing on the platform on a minute-by-minute basis. According to the WSJ, former employees and one current employee told the publication that they regularly bypassed the systems Amazon had put in place to prevent third-party reseller data from being accessed by Amazon employees. One former employee states that while they “knew they shouldn’t,” they were making Amazon-branded products and “wanted them to sell.”

Executives at the company had multiple ways of gaining access to this kind of information, including asking Amazon business analysts to prepare a report on the topic. Data that was supposedly aggregated from many sellers often reflected the business of just a single company. All of these practices were part of Amazon’s push to drive Amazon-branded products up to 10 percent of retail sales by 2022. Private-label managers for the company were told to create $1B businesses for their own segments. Given that 39 percent of all US commerce occurs on Amazon, third-party sellers often feel pressured to sell on the platform no matter what, even knowing that the company might siphon their data up in this fashion.

The WSJ has detailed information on how Amazon pulled data on Fortem, the car-trunk organizer seller, whose product accounted for 99.5 percent of car trunk organizer sales on Amazon during the target period. Amazon claimed its data on trunk organizer sales was aggregated because another person reportedly sold 17 Fortem trunk organizers over a short period of time.

The entire reason Amazon wanted to know how much profit it made off sales of third-party products is so it could take that data and find a manufacturer that would offer it more profit on essentially the same product. The company attempted to justify its own entry into the market by pointing out that Fortem remains a top-seller. That might have been more convincing if they hadn’t also said, “Fortem spends as much as $60,000 a month on Amazon advertisements for its items to come up at the top of searches.”

In other words, Amazon entered the competitive market after abusing its own power to gain information it claimed it wouldn’t access. When caught, the company attempted to weasel out of the situation by arguing that Fortem had paid $60,000 in advertising to remain at the top of its segment. Does anyone believe Amazon wouldn’t have been perfectly happy to have its own trunk organizers sitting at #1 in sales? That’s not advertising. It’s protection money. The WSJ story goes into more detail on multiple incidents involving different vendors where this kind of thing happened. It wasn’t unique to the cutthroat world of trunk organizing.

Amazon’s employees understandably wanted to make certain their own product would sell well. It’s unfortunate that the way they went about making that happen wasn’t by building a better trunk organizer, but by attempting to steal business by undercutting their own partner using secret information and lying to Congress about whether it did so.

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