Wednesday, March 3, 2021

Amazon allegedly used data from third-party sellers to launch competing products

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The Amazon site sells products from third-party sellers, as well as brands belonging to the world’s leading e-commerce company. KAREN BLEIER / AFP

This is a very embarrassing revelation for Amazon: employees of the world leader in e-commerce accessed data on the sales of products sold on its platform by third-party sellers, before launching competing articles under Amazon brands.

The facts, exposed by the American daily Wall street journal, Thursday, April 23, contradict the speech still made by Jeff Bezos’s company. The case clears up some suspicions from the competition authorities. Amazon says that the practices described are contrary to its policy and announces an internal investigation.

The Wall street journal claims to have interviewed some 20 employees and ex-employees of the service responsible for launching products for the brands created by Amazon and grouped under the label Amazon Basics, a catalog of 243,000 items. The Amazon site also offers products from other companies, on which the platform charges a commission (the "marketplace"), and products from other brands that Amazon directly buys and sells.

Competing offers

Amazon therefore has information about competing products. The Wall street journal cites the specific case of Fortem. This New York SME launched, in October 2016, a storage locker for car trunk which was a great success in its category. An Amazon employee produced a report listing 25 different pieces of information about this item, including its 12-month average price, Amazon commission, brand advertising spend on the platform, or delivery costs, details the newspaper.

This information helped Amazon position a competing offer: in October 2019, Amazon Basics launched three lockers close to that of Fortem. The Wall street journal mentions a similar scenario with the office chair cushions of the Upper Echelon Products brand.

This kind of use of specific product information is "A standard procedure" in the development of new Amazon brands, says the employee who transmitted the data on Fortem. Another ex-employee says that Amazon executives who take advantage of this kind of competitive data are aware that it is not officially authorized. Amazon also assures that the practices of these employees violate its internal rules.

Yet Amazon has always ensured that there is a form of " Great Wall of China " which separated the department of third-party sellers from that of its own brands, with separate teams and statistics. The company has always maintained that it never uses data on a specific seller or item, but rather "aggregated" information on a category of items or public data available on the site, such as "best sellers". "

Procedures

Jeff Bezos recently refuted the accusations of anti-competitive practices by using the following argument: if Amazon systematically favored its own brands, the share of sales made by third-party sellers on the platform would not have grown regularly to reach today 58% of its turnover. In comparison, Amazon Basics products represent only 1% of sales.

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Still, the case is bad for Amazon. Indeed, the practice described corresponds precisely to the main suspicion of the "antitrust" authorities. The European Commissioner for Competition, Margrethe Vestager, formalized, in July 2019, a survey on the use of data from third-party sellers on the platform.

Read also European Commission to investigate whether Amazon "abides by competition rules"

In the United States, the trade regulator, the Federal Trade Commission, has also launched a procedure targeting Amazon, whose data is an important point. The most fervent lawyer for the “dismantling” of large digital platforms, the former Democratic nomination contestant Elizabeth Warren, used precisely this argument: you cannot be a operator of a sales platform and offer it her own products because it creates a conflict of interest, she explained.

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