Amazon Facing Questions About Antitrust Laws

Amazon Facing Questions About Antitrust Laws

Amazon is facing questions about its business practices, as a Wall Street Journal (WSJ) investigation alleges that it used data from third-party sellers on its own platform to launch competing products. 
If so, Amazon has not only betrayed the trust of the third-party sellers who use its platform, it may also have violated Section 5 of the Federal Trade Commission (FTC) Act. 
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Amazon and Third-Party Sellers
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In a Congressional hearing last year, Amazon’s legal representation claimed that the company does not use individual seller data to directly compete. In other words, Amazon does not use data from individual third-party sellers to compete with them by introducing competing products – but the WSJ reporter claims that Amazon has in fact done this, using data to launch Amazon-branded products to compete with products sold by other sellers. 
Amazon is conducting its own internal investigation into the matter, and a Congressional committee will also be taking up the investigation. However, there is another issue, and it has to do with antitrust law. 
How did Amazon Obtain The Data?
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If Amazon indeed uses data from third-party sellers to create its own rival products, it is engaging in monopoly behavior. The key question, however, is about how Amazon obtained the data.
By itself, there is nothing unlawful about using data to improve product offerings. If Amazon wants to use data to improve its own Amazon-branded clothing, extension cords, or other things, this is not by itself monopoly behavior.
Where the antitrust concerns come in is with the question about how Amazon obtained the data. If Amazon obtained the data through misappropriation and misrepresentation, it has run afoul of antitrust law. 
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Private Label Goods 
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To be clear, selling private label goods is a common retail practice – and has been for a long time. For example, Sears launched a catalogue business in 1888, selling goods branded by a variety of companies. Sears then started selling its own tools and appliances under the Craftsman and Kenmore in-house brand labels by 1927. 
It is now quite common for retailers to have their own in-house brands to compete with the goods of other brands on their own shelves. Other than Amazon, companies who do this include Kohl’s, JCPenney, Kroger, Target, Macy’s, Lowe’s, Costco, Office Depot, Dollar General, and Walmart. 
Thus, private label goods are common in retail, and on the surface, Amazon would seem to simply be one more retailer with its own brand. However, some critics say that Amazon is so dominant that this behavior is different when Amazon does it. 
The counter to this is that Amazon is not nearly as big as some people seem to think. Sure, it accounted for $121 billion in U.S. retail sales in 2018, slightly edging out Kroger with $120 billion and well ahead of Costco with $101 billion… but still far, far behind Walmart with $388 billion.
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Online Vs. Brick-and-Mortar Markets
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Another argument is that Amazon is an online retail market | Learn more on Commonshare |, not a brick-and-mortar one. 
Do sellers feel that they have no other option if they want to sell online? If so, it is hard to account for the fact that more than half of all third-party sellers on Amazon also sell on eBay, and slightly less than half also sell on a personal website. Moreover, over a third also sell on Walmart. 
Amazon has more data than rival brick-and-mortar retailers, including data about what customers look at but do not purchase. However, it is still not clear how much more of a competitive advantage this gives them. 
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The Platform Argument 
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One last argument is that Amazon is different because it is a platform as well as a retailer and a producer. The problem with this is that Amazon’s behavior as a platform is in many ways a digital version of what brick-and-mortar establishments have been offering for far longer.
Long before Amazon and e-commerce, brands were paying retailers to promote them with prime shelf space. Now that Amazon has come along, sellers can pay Amazon for prime search rankings and sponsored placement. 
And because traditional brick-and-mortar retailers also engage in production, they too are producers. 
Possible Wrongdoing, But Antitrust Violation? 
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It is still worthwhile for the FTC to see if Amazon actually misled and lied to third-party sellers on its own platform. The company may well have engaged in unethical behavior in that regard. 
All things considered, however, it is much harder to make a non-ideological case that Amazon violated antitrust law, given the degree to which it behaves as a digital version of a brick-and-mortar retailer. 
 

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