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Did Amazon lie to US Congress about how it creates and promotes its private labels?

Following the Reuters report on how Amazon India copies products and manipulates search results, US lawmakers demand an explanation.

“At best, this reporting confirms that Amazon’s representatives misled the Committee. At worst, it demonstrates that they may have lied to Congress in possible violation of federal criminal law,” a group of five US lawmakers wrote in a letter to Amazon CEO Andy Jassy referring to the recent Reuters report that shed light on the company’s antitrust practices.

The investigative report based on internal company documents revealed how Amazon India has been systematically copying top-selling products using data that is not available to other sellers and manipulating search results to promote these products over those of competitors. Sellers on the platform have long accused the company of doing this, but Amazon executives have repeatedly denied it, even in sworn testimonies before Congress. Now that significant contradicting evidence has come to the fore, US lawmakers Jerrold Nadler, David N. Cicilline, Ken Buck, Pramila Jayapal, and Matt Gaetz are demanding an explanation from the e-commerce giant.

We are providing you with a final opportunity to provide exculpatory evidence to corroborate the prior testimony and statements on behalf of Amazon to the Committee. We strongly encourage you to make use of this opportunity to correct the record and provide the Committee with sworn, truthful, and accurate responses to this request as we consider whether a referral of this matter to the Department of Justice for criminal investigation is appropriate. – US lawmakers’ letter

What has Amazon said to Congress in the past?

The US lawmakers cite the following testimonies and statements made by Amazon executives to Congress:

  • July 2019, Nate Sutton, Amazon’s Associate General Counsel: 
    • “We do not use any seller data for – to compete with them.”
    • Amazon does not “use any of that specific seller data in creating our own private brand products.”
    • “Our algorithms, such as the buy box, is aimed to predict what customers want to buy and we apply the same criteria whether you’re a third-party seller or Amazon to that because we want customers to make the right purchase regardless of whether it’s a seller or Amazon.”
    • “The algorithms are optimized to predict what customers want to buy regardless of the seller. We provide the same criteria.”
  • July 2019, David Zapolsky, Amazon’s General Counsel:
    • Amazon “prohibit[s] in our private label strategy the use of data related specifically to individual sellers,” and instead uses “aggregated store data on total sales and search volume for categories and products.”
    • Amazon’s search ranking “does not favor any particular type of offer, rather it seeks to determine which offer to highlight based on a prediction of which offer customers would choose if they were to compare all offers in detail […] that algorithm seeks to highlight the offer a customer would choose based on factors beyond price, including fulfillment speed, delivery speed, Prime eligibility, and seller performance.”
  • October 2019, Nate Sutton, Amazon’s Associate General Counsel: 
    • “Amazon prohibits Amazon’s private brand products business from using individual sellers’ data to decide which products to launch, and Amazon prohibits the use of individual sellers’ data to make sourcing, pricing, or inventory decisions for its private brand products.”
    • “Aggregated data’ is data that is aggregated across all third-party sellers and Amazon’s first-party sales and is therefore not specific to an individual seller,” and “Amazon prohibits the use of non-public seller-specific data to inform the development of private brand products.”
    • “Amazon designs its shopping and discovery experience to feature the items customers will want to purchase, regardless of whether they are offered by Amazon or one of its selling partners.”
  • July 2020, Jeff Bezos, founder and former CEO of Amazon: 
    • Bezos said that Amazon has a policy against using seller-specific data to develop competing products, but seller data from more than a single seller is considered “aggregate.” In a follow-up response post-hearing, Bezos said that this policy “prohibits the use of anonymized data, if related to a single seller, when making decisions to launch private brand products.”
  • October 2020, Brian Huseman, Amazon’s Vice President for Public Policy: 
    • “Amazon’s policy does not permit private brands employees to look at the number of sales made by a single seller.”

Reports that contradict Amazon’s stance

The lawmakers cite the following reports that contradict Amazon’s public stance:

  • Reuters: The most significant evidence contradicting Amazon’s public stance is the recent Reuters report because it reveals how the practice of copying products and manipulating results “were part of a formal, clandestine strategy at Amazon” and that at least two top executives were fully aware of it. Internal documents revealed that the company identified reference products in segments it wanted to focus on, copied these products to exact measurements, roped in the original manufactures to make these products, and promoted them on top of search results.
  • The Markup: A few days after the Reuters revelations, The Markup published a report based on an analysis of Amazon search results for 3,492 popular products that showed Amazon places its own brands ahead of competitors even those that have higher customer ratings and more sales.
  • Wall Street Journal: In April 2020, the Wall Street Journal, based on interviews conducted with Amazon employees, reported that the company pulls data on competitors to develop competing products.
  • The Capitol Forum: In July 2019, “The Capitol Forum reported that a former Amazon employee contested claims by Amazon that it does not use individual seller data to compete with third-party merchants. He told the reporter, “I used to pull sellers’ data to look at what the best products were when I was there,” the lawmakers cited in their letter as another example.

Each of these investigative reports are inconsistent with the sworn testimony and numerous statements made by Amazon’s executives to the Committee during our investigation into Amazon’s business practices last Congress. – US lawmakers’ letter

What are the US lawmakers asking of Amazon?

The lawmakers have demanded the following from Amazon by November 1:

  1. A sworn response to clarify the record as to how Amazon uses non-public individual seller data to develop and market its own line of products;
  2. A sworn response to clarify the record as to how Amazon advantages its own products over products from other sellers in its search rankings, including through sponsored results that are undisclosed;
  3. All documents and communications relating to Amazon’s internal inquiry into violations of its Seller Data Protection Policy as detailed in Amazon’s October 4, 2020 letter;
  4. All documents referred to in the Reuters report entitled “Amazon copied products and rigged search results to promote its own brands, documents show;”
  5. A response to The Markup report entitled “Amazon Puts Its Own “Brands” First Above Better-Rated Products,” including an explanation as to why Amazon does not publicly label search results for its brand-product listings as advertisements.

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