U.S. lawmakers have once again put Amazon on the hot seat.
The U.S. House Judiciary Committee is accusing the e-commerce giant of withholding information during its 16-month antitrust investigation into the business practices of the four “Big Tech” companies, which also include Apple, Facebook and Google.
Democratic and Republican members of the House Judiciary Committee sent the letter, dated March 9, to U.S. Attorney General Merrick Garland calling for the Department of Justice to investigate “potentially criminal conduct” by Amazon and some of its executives.
In the 24-page letter, the House Committee accuses Amazon of obstructing Congress by refusing to provide information sought by the body’s antitrust subcommittee.
“Throughout this process, Amazon repeatedly endeavored to thwart the Committee’s efforts to uncover the truth about Amazon’s business practices,” the letter says. “For this, it must be held accountable. We therefore refer this matter to the Department to investigate whether Amazon or its executives obstructed Congress or violated other applicable federal laws.”
The letter alleges that the refusal was an attempt to cover up a lie that the tech titan told lawmakers about its treatment of outside sellers on its platform.
Amazon is firmly rebutting the congressional committee’s claims.
“There’s no factual basis for this, as demonstrated in the huge volume of information we’ve provided over several years of good faith cooperation with this investigation,” an Amazon spokesperson told Sourcing Journal.
Amazon’s business practices have been under the microscope for years, largely related to its relationship with third-party sellers and the data collected from them. Although third-party goods represent 56 percent of total sales on its marketplace, Amazon also competes against these brands with its own private labels. And in many cases, the online giant sells similar products that are often priced lower.
This has led to many accusations that Amazon deliberately uses data to launch its own private labels and undercut the third-party sellers on its site. Throughout the 16-month investigation, Amazon executives repeatedly told members of the committee in testimony and written responses that it doesn’t use the data of individual third-party sellers to inform the vast lines of its own brands, and doesn’t give preferential treatment its own products in the search results on its platform.
When the company was first called for a Congressional hearing in July 2019, Amazon’s associate general counsel Nate Sutton said it does not use individual seller data to launch private brands.
But an April 2020 Wall Street Journal report comprised of interviews from 20 former Amazon employees later contradicted Sutton’s testimony, finding that the business used non-aggregated or easily identifiable data from third-party sellers to inform its own product strategy and launch its own private-label brands.
Upon being called to Congress three months later in the wake of the report, Amazon founder and then-CEO Jeff Bezos admitted: “I can’t guarantee you that that policy has never been violated.”
At the time, Bezos agreed to share the results of an internal investigation Amazon was conducting on the matter. But the recent letter indicated that Amazon didn’t produce any list of potential policy violations or alleged incidents of misuse.
Nearly a year later, the bipartisan antitrust subcommittee introduced legislation in June 2021 that could potentially mandate structural separation of Amazon and the other technology companies examined.
One of the five bills presented would make it illegal for a company like Amazon to effectively sell its own branded products and sell competing products on the same marketplace. Amazon’s case in particular would force the company to either split its business into two separate websites—one for its third-party marketplace and one for first-party—or divest or shut down the sale of its own products.
On Oct. 13, 2021, a bombshell report added significant credibility to the accusations from both lawmakers and third-party sellers alike related to private-label sales. Citing internal Amazon documents, the report detailed how the Seattle tech titan ran a systematic campaign in India to exploit internal data to copy products sold by third-party brands and manipulate search results to boost its own labels. This report got attention in Washington, with Sen. Elizabeth Warren (D.-Mass.) calling for the company’s breakup on her social media accounts.
Investigative online publication The Markup published its own report on Amazon’s U.S. operations the next day, analyzing search results on the marketplace for 3,492 popular Internet product queries in January 2021.
Upon examining what Amazon placed in its first spot, the publication found that in 60 percent of cases, the marketplace sold this spot to an advertiser and added a public label indicating the listing was sponsored. Of the remaining cases, Amazon gave half to its own brands and brands exclusive to the site, and the other half to competing brands.
“But Amazon brands and exclusives made up only 6 percent of all products in the sample, and competitors made up 77 percent,” the article said. “In short, Amazon was hogging the top spot.”
Just days after the publication of both reports, committee members sent a letter to Amazon CEO Andy Jassy urging the company to provide “exculpatory evidence” surrounding its private-label business practices. Lawyers representing Amazon met with the committee’s legal counsel following the letter but did again not produce the requested evidence, saying the investigation Amazon had conducted was privileged information between attorney and client, WSJ reported at the time.
The House letter touched on this, indicating that Amazon refused to turn over business documents or transcripts that would either corroborate its claims or correct the record.
“And it appears to have done so to conceal the truth about its use of third-party sellers’ data to advantage its private-label business and its preferencing of private-label products in search results—subjects of the Committee’s investigation,” the letter said.
The House Committee’s callout comes as Amazon is now fighting yet another fire in its global supply chain. The Council on American-Islamic Relations is urging Amazon to sever ties with suppliers linked to forced labor in China’s Xinjiang Uyghur Autonomous Region.
The advocacy group has called on the Department of Justice, U.S. Customs and Border Protection and the U.S. Securities and Exchange Commission to investigate the “everything store’s” business in China.
The outcry came after ethics watchdog Campaign for Accountability released a report saying that five of 1,900 suppliers producing goods for Amazon’s private labels are tied to direct or indirect Uyghur forced labor.
Amazon is also facing other tussles closer to home.
The behemoth is is the throes of a unionization battle on multiple fronts as employees in two of its warehouses, in New York and Alabama, are taking steps to hold union elections in the coming weeks.
In February, a group of Amazon workers seeking to form a union in New York filed a charge with the U.S. National Labor Relations Board (NLRB) after a high-profile organizer and a pair of employees were arrested outside the tech titan’s Staten Island warehouse.