Amazon Used Merchant Data For Its In-House Products, Reports Claim

Reports emerged detailing Amazon’s practice of collecting data on its third-party vendors, who account for over half of Amazon’s retail sales and using it to inform the development of its own products to undercut the vendors.

These actions are reportedly against company policy, but internal documents show Amazon executives “requesting and accessing data from specific marketplace vendors” even though this was against company policies. A former employee stated, “[w]e knew we shouldn’t…But at the same time, we are making Amazon branded products, and we want them to sell.”

Former employees also noted that this practice was common at Amazon. For example, Amazon employees ascertained information about a vendor’s sales, including total sales, its marketing and shipping costs that it paid Amazon, and how much Amazon made on the sale of each product. Amazon used this information when it created its own similar product. Apparently, employees claimed they were “aggregating” the data for a seller data report. This would not be an issue if the information was aggregated from a large number of vendors because it “would be unlikely to reveal any proprietary data about any of them. However, this was not the case because to aggregate data Amazon only required at least two vendors. For example, “if there’s only one vendor selling an item but Amazon itself sells returned or damaged versions through its Warehouse Deals program, that’s considered enough to aggregate.” This would reveal information about that particular vendor. Amazon stated that “like other retailers, we look at sales and store data to provide our customers with the best possible experience.” The company also noted that “we strictly prohibit our employees from using nonpublic, seller-specific data to determine which private label products to launch.” Amazon has since launched an internal investigation after reports of employees violating these policies.

Amazon has in excess of 145 private label brands and exclusive sales agreements with 640 brands. Some of these brands are obvious, such as Amazon Essentials or Amazon Basics, but others are not, such as Scout + Ro, a children’s clothing line, Hayden Rose, a women’s clothing brand, and Stone & Beam, a furniture line. These private lines total about 1 percent of Amazon’s total sales in 2019. Former employees said the company’s goal was to have these labels be a tenth of Amazon’s total sales by 2022.

Amazon has been investigated for its conduct with its third-party merchants. Congress asked Amazon for information about the company’s use of merchant data as a part of its large antitrust investigation into Amazon and other tech giants. Amazon told Congress that it “doesn’t use individual seller data directly to compete” with its third-party merchants. However, House Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) and Antitrust Subcommittee Chairman David N. Cicilline (D-R.I.) stated are troubled by this revelation of Amazon’s deceit. Chairman Nadler stated: “If true, this report raises deep concerns about Amazon’s apparent lack of candor before the Committee regarding an issue that is central to our investigation … Amazon has had opportunities to correct the record on its business practices. It is deeply concerning that, beginning with the hearing last year, they may have misled Congress rather than be fully forthcoming on this matter, notwithstanding our repeated requests in this regard.”

Chairman Cicilline stated: “This is yet another example of the sworn testimony of Amazon’s witness being directly contradicted by investigative reporting…First, Amazon said it does not favor its own products, which extensive reporting later revealed to be untrue. Second, Amazon said it does not use individual seller data to create competing private label products. According to this report, the company used individual marketplace sellers’ sensitive commercial data for its own benefit to enter markets, reverse engineer products, and compete directly with these sellers that rely on Amazon’s platform. At best, Amazon’s witness appears to have misrepresented key aspects of Amazon’s business practices while omitting important details in response to pointed questioning. At worst, the witness Amazon sent to speak on its behalf may have lied to Congress.”

Amazon has also been sued by customers for engaging in anticompetitive practices. The Department of Justice and the Federal Trade Commission are also investigating Amazon and other tech giants for similar conduct.