Is Amazon ripping-off third party sellers?

Amazon founder, Jeff Bezos, has been called by the U.S. House of Representatives Judiciary Committee to testify about allegations that Amazon uses data from third-party sellers to create rival products.

Amazon’s private label business includes 45 brands that sell around 243,000 products across multiple categories. The company says that these products account for one per cent of its $158 billion in annual retail sales, although this figure doesn’t include Amazon devices such as the Echo personal assistant speaker or Kindle e-reader.

Both Democratic and Republican members of the Committee signed a letter to Bezos which referred to a story about allegations in the Wall Street Journal on April 23rd, saying: “If the reporting in the Wall Street Journal article is accurate, then statements Amazon made to the committee about the company’s business practices appear to be misleading, and possibly criminally false or perjurious.”

At the heart of the matter are statements made by Nate Sutton, associate general counsel of Amazon, who denied under oath and in written testimony that Amazon used sensitive business information from independent sellers on its platform to develop own-brand Amazon products. Disputing this testimony, the Wall Street Journal cited 20 former employees of Amazon’s private label business who claimed that Amazon did use sensitive data.

In one example cited by the Wall Street Journal, employees allegedly used information gleaned from a top-selling third-party vendor’s car-trunk organiser, including total sales, marketing and shipping costs. A similar product was later rolled out under an Amazon private label.

Committee members wrote: “We expect you, as Chief Executive Officer of Amazon, to testify before the Committee,” to answer this claim. “Although we expect that you will testify on a voluntary basis, we reserve the right to resort to compulsory process if necessary.”

The European Commission has also opened a probe into the practice of Amazon using data from its merchants to compete.

Defending Amazon, however, was Republican, Russell Dye, who said: “We wonder what Judiciary Democrats’ true motivations are. Earlier this year, they said companies like Amazon should not exist and should be broken up simply because they are large successful businesses.”

Amazon is already facing calls for an inquiry from Missouri Republican senator, Josh Hawley, who accuses the online giant of building a monopoly using “predatory data practices” to rival its own third party sellers, saying to Attorney General Wiilliam Barr: “’I write to ask you to open a criminal antitrust investigation of Amazon”. Hawley pointed out that the practice was “especially concerning” given that many small retailers have been forced to close their bricks and mortar stores and to rely on online sales during the coronavirus pandemic.

Google, Apple and Facebook are also under investigation by the House Judiciary Committee and Justice Department while the Federal Trade Commission is probing Facebook and Amazon. Groups of state attorneys general are also looking at Facebook and Google.

Amazon said in a statement that it ‘strictly prohibit(s) employees from using non-public, seller-specific data to determine which private label products to launch’ and said it is taking the allegations very seriously. The company has launched an internal investigation into the claims made by the Wall Street Journal.

For the quarter ended in March 2020 Amazon’s revenue rose by 26 percent year on year to $75.45 billion. However, Amazon has warned that it could post a loss in the second quarter as it factors in $4billion in costs related to the coronavirus pandemic. The company has also said it will hire 175,000 workers and raise wages by $2 for hourly workers, plus overtime. Jeff Bezos himself has been the world’s richest man since 2017.