- Amazon uses third-party seller data to copy the site’s most popular products, an antitrust report by the House Judiciary Committee alleged on Wednesday.
- Former Amazon sellers told an antitrust subcommittee the company released new products almost identical to their own and “killed” their sales.
- Amazon has denied accusations of this behaviour in the past.
- “We have a policy against using seller-specific data to aid our private-label business,” Amazon CEO Jeff Bezos said in July.
- Visit Business Insider’s homepage for more stories.
The House Judiciary antitrust subcommittee said it has uncovered evidence that Amazon uses detailed data from third-party sellers to copy popular products and push some sellers out of business â€” something the tech giant has consistently denied.
The subcommittee said it had heard “repeated” concerns from both former employees and third-party sellers that Amazon uses seller data to either copy products or source the product directly from the manufacturer. It then sells it direct to consumers, according to the subcommittee’s findings.
“We have heard so many heartbreaking stories of small businesses who sunk significant time and resources into building a business and selling on Amazon, only to have Amazon poach their best-selling items and drive them out of business,” the subcommittee’s chairman David Cicilline said.
The findings formed part of a wide-ranging antitrust report on Big Tech companies, including Amazon, Google, Apple, and Facebook.
One former Amazon employee who spoke to the committee compared access to third-party seller data to a “candy shop.”
“Everyone can have access to anything they want,” they said. Employees even use this data to set up their own successful third-party accounts, the Democratic leaders of the committee wrote in their report on Wednesday.
Similar accusations have mounted over the past 15 months, but Amazon has adamantly denied using third-party seller data in this way.
Third-party sellers outstrip first-party sales
Amazon sells its products, and also directly sells products from other brands â€” but third-party sellers make up around 60% of its sales, according to the company.
“Third-party sellers are kicking our first-party butt. Badly,” CEO Jeff Bezos wrote in a shareholder letter in 2018.
Amazon is using aggressive tactics to ensure its own-brand product sales stay strong, according to the antitrust report.
One former third-party seller told the subcommittee that over his 17 years of selling on Amazon, the platform repeatedly undercut him on price and ultimately drove him out of business.
On more than one occasion, he claimed his company created a new, top-selling product or product line only for Amazon to launch a competing product. This included a line of board games with a distinctive design and colour scheme, that Amazon copied once they became top-sellers â€” even down to the colour palette, according to the report. Because Amazon determines which seller is featured on its listing pages, it could favour its own products â€” this “killed” the seller’s business, he said.
The report listed many more examples alleging this practice. A small apparel business told the subcommittee that they were making around $US60,000 a year from selling one particular item on the platform. “One day, they woke up and found that Amazon had started listing the exact same product, causing their sales to go to zero overnight.”
How Amazon gathers its data
Amazon had multiple ways of getting information about third-party products, according to the report’s findings.
One third-party seller told the subcommittee that Amazon asks retailers to submit their original sales receipts to prove their products’ authenticity. A seller is supposed to be able to redact price information, but Amazon sometimes rejected these submissions by calling them “altered documents,” they said. Gaining price information allowed Amazon to “easily replicate the seller’s listing to offer a competing product,” the report said.
Some Amazon employees may have also used the data for their own private gains, according to the subcommittee.
“It was widely known that many (10+) of my peers were running very successful [third-party] accounts, where they were pulling private data on Amazon seller activity, so they could figure out market opportunity,” one former Amazon employee told the subcommittee.
Accusations surfaced in 2019
The subcommittee’s investigation isn’t the first time Amazon has been accused of using third-party data in this way.
One former product management employee told The Capitol Forum in July 2019: “I used to pull sellers’ data to look at what the best products were when I was there â€¦ That was my job.”
Speaking to Yahoo Finance in September 2019, employees described access to data as a “free-for-all,” and said Amazon Retail and Marketplace “share the same access to the data warehouse, which makes it possible for the retail team to use the data from marketplace sellers to develop private labels.”
In April, The Wall Street Journal reported that executives in Amazon’s private-label division used information about Amazon sellers to research products they want to compete against. This included Amazon employees reportedly using sales data about Fortem, a third-party seller of car-trunk organisers, to develop a near-identical Amazon private-label version.
Amazon has repeatedly insisted that it doesn’t use third-party seller data for its own gains.
Amazon: Third-party trust ‘critical to success’
“Amazon recognises that third-party sellers are our customers too, and their trust is critical to Amazon’s success,” it told the subcommittee. It referred to the Seller Data Protection Policy it introduced in 2014, which prohibits Amazon Retail teams from using data from individual third-party sellers to compete against them.
“We do not use [third-party sellers’] individual data when we’re making decisions to launch private brands,” Amazon lawyer Nate Sutton said in his testimony at a subcommittee hearing in July 2019.
“We have a policy against using seller-specific data to aid our private-label business,” Amazon CEO Jeff Bezos said in July 2020 when questioned by Rep. Pramila Jayapal of Washington. But he added that “I can’t guarantee you that that policy has never been violated.”
In correspondence with the subcommittee, Amazon claimed that it only uses “aggregate” data, which is collected from multiple sellers, rather than “individual” data about a specific seller. But Amazon itself defines what aggregate data means, and how it should be collected.
In The Wall Street Journal report, for example, Fortem accounted for 99.95% of total sales in the car-trunk organiser product category. Because 0.05% of sales come from other sellers, Amazon considered sales data from the category aggregate, rather than individual, according to the report.
In its response to the antitrust body’s report, the e-commerce giant claimed that “Amazon and third-party sellers benefit each other” and described their relationship as “mutually beneficial.”
The company has strong financial incentives to support third-party sellers, it added, because it usually makes the same or more revenue from third-party sales.
“Clearly, when it comes to Amazon and third-party sellers in our store, it’s not zero-sum,” Amazon said.
Amazon did not immediately respond to Business Insider’s request for comment.