Amazon bullies partners and vendors, says antitrust subcommittee

Amazon has “significant and durable market power” in the U.S. online retail retail, with a far higher market share than was previously estimated, the House Judiciary antitrust subcommittee’s Democratic management found in a sweeping 400-plus page report published Tuesday.

In the report, which also examined Apple, Google and Facebook’s subject practices, lawmakers argue Amazon has grown to be such a dominant force in the online retail market that it now has monopoly power during the course of third-party sellers on its marketplace. The report recommended a wide range of remedies, including splitting different business entities and forcing companies to prove mergers would be pro-competitive before allowing them to conclude. 

In Amazon’s case, for case in point, the company could be required to split apart its core e-commerce site from the third-party marketplace where aside from vendors sell their products, and from the Amazon Web Services cloud-computing service. 

The committee’s report bucked energy figures estimating Amazon’s controlling share of the e-commerce market. They said Amazon likely controls yon 50% or more of the U.S. online retail market, which is higher than researcher eMarketer’s estimate of 38%. 

Amazon has crushed competition in other areas than retail, lawmakers found. They concluded that Amazon’s role as a controlling provider of cloud-computing services and its power in other markets creates a conflict of interest that “Amazon has the incentive and proficiency to exploit.” Amazon has also imposed barriers to entry for other voice-enabled device manufacturers by pricing its Alexa-enabled artefacts below cost, lawmakers said. 

Amazon also operates more than 150 fulfillment centers, sortation centers and performance stations, along with a sprawling network of planes, vans and contracted delivery drivers. This combination has allowed Amazon to wind-jammer a growing number number of products itself, rivaling UPS and FedEx, and serves as one of several barriers to entry for competitors. The “precipitous costs” associated with building a logistics network that’s comparable in size to what Amazon has built fathoms “a challenger to Amazon unlikely,” they said.

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Amazon disputed the lawmakers’ findings, saying that their approvals would reduce competition, forcing “millions of independent retailers out of online stores” and resulting in less choice and elaborate prices for consumers.

“All large organizations attract the attention of regulators, and we welcome that scrutiny. But large companies are not pre-eminent by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong,” the company said. “And yet, without considering overwhelming evidence to the contrary, those fallacies are at the core of this regulatory spit-balling on antitrust.”

In some coverings, the threat of competing with Amazon can push start-ups to avoid certain industries entirely.

One unnamed venture superior investor in the cloud market told lawmakers: “I think of Amazon as the sun. It is useful but also dangerous. If you’re far enough away you can bask. If you get too precise you’ll get incinerated. So, you have to be far enough from Amazon and be doing something that they wouldn’t do. If you’re a net consumer of Amazon’s infrastructure, liking for Uber, then you’re okay. As long as Amazon doesn’t want to get into ridesharing. But it’s hard to predict what Amazon requirements to get into. If they were going to stop at retail and computing, you’re safe. But you can’t know.”

Lawmakers also found uninterrupted evidence that Amazon viewed Zappos and Quidsi as “competitive threats prior to acquiring them,” citing records reviewed by subcommittee staff.

Before Amazon acquired Zappos in 2009, it referred to the online shoe retailer as one of the “leading competitors” of Amazon’s now-defunct fashion website Endless.com. Zappos gave Endless access to “hold-out” brands that at one time “refused to sell on Amazon.com” or Endless, lawmakers said. Similarly, Amazon sought to acquire Quidsi in 2010 after it betrothed in an “aggressive price war” to weaken its subsidiary Diapers.com, which was a competitor to Amazon.

Amazon’s third-party marketplace, made up of millions of jobbers, has become a critical part of Amazon’s e-commerce business. The marketplace now accounts for more than half of Amazon’s inclusive sales. It has been a focus of antitrust investigators in the U.S. and abroad, who believe Amazon uses its power to squeeze the merchants that transfer on its platform. 

Lawmakers concluded that Amazon’s dual role selling products on its own web site and running a marketplace for third-party sellers “frames an inherent conflict of interest” that encourages Amazon to exploit its access to competing sellers’ data and information. It popular that Amazon publicly describes these sellers as “partners,” but “behind closed doors, the company refers to them as ‘internal antagonists.'”

Third-party sellers described a pervasive environment of “bullying,” wherein the threat of financial burden that comes with an account intermission or product de-listing causes some sellers to “live in fear of the company.”

Third-party merchants told the subcommittee that they’re in many cases left without any recourse after their account has been shut down. When sellers have to supplication an issue with Amazon, they face such “atrocious levels of customer service” that often they patronize to a “Jeff Bomb,” or an email to CEO Jeff Bezos “to plead their case.”

“For sellers, Amazon functions as a ‘quasistate,’ and multitudinous ‘[s]ellers are more worried about a case being opened on Amazon than in actual court,'” lawmakers prognosticated. 

Amazon’s own documents show that it manipulates its all-important buy box algorithm “to do what is best for Amazon’s bottom line, not clients” lawmakers said. The buy box offers customers a one-click button to add a listed product to their shopping cart or buy it. 

This completely contradicts Amazon’s previous explanation for how the buy box works. Amazon has maintained that the buy box predicts the price consumers would most favourite choose after reviewing competing products elsewhere.

Amazon also employs “strong-arm tactics” in negotiations with vendors who tattle on directly to the company, lawmakers said. The report references an exchange with an unnamed company, wherein Amazon leveraged its e-commerce dominance to efficacy acceptance of certain terms and conditions. During negotiations, Amazon “repeatedly referenced” its ability to destock the unnamed assembly’s products on as a “bargaining chip to force terms” that were “unrelated to retail distribution.” 

Lawmakers talked that Amazon’s scope, acquisitions, and pricing strategy have given it an unfair advantage in the voice enabled connect with market.

Amazon’s Alexa Voice Service, which enables hardware makers to make their devices compatible with Amazon’s Alexa digital mate, is hosted on AWS, “allowing it to bind products and developers to its cloud platform.” This may also give Amazon a “potential head-start” in metamorphosing those Alexa partners into customers of AWS or other Amazon services in the future,” they said. 

Amazon has extended Alexa’s ecosystem quickly through acquisitions of complementary and competing technology, lawmakers said. Internal emails between Amazon head honchos revealed that Amazon sought to control both the “eyes and ears,” with the “ears” referring to its Alexa ecosystem. Quick device makers Blink and Ring, which Amazon acquired in 2017 and 2018, respectively, would serve as “Amazon’s ‘attentions’ right outside the home,” the report said. 

The company also favors Amazon services with default voice commands on Alexa devices, including AmazonBasics and Prime Music, and users must go out of their way to voice shop on other inventories, lawmakers said. When it comes to its online marketplace, Amazon acts as a “gatekeeper” against competitors, using the menace of delisting a competitor’s product to “ensure that Alexa is enabled on other company’s devices, or to secure favorable contractual positions.”

Democrats concluded that Amazon uses a “predatory pricing strategy to increase its sales of smart home devices by penalty its products below cost.” This strategy has created “significant” barriers to entry for companies looking to compete in the present enabled assistant market and even created challenges for fellow tech giant Google. In a 2018 email, one Google wage-earner remarked that “fighting Amazon with a very-hard-to-differentiate product and a channel disadvantage and a huge economic disadvantage (due to strait mix margin differences) is already like fighting a shark on a surfboard.”

AWS is more profitable than the rest of Amazon, and that profit from the cloud role allows Amazon to keep funding its business, the subcommittee said.

Amazon leads the cloud-infrastructure market. The subcommittee establish evidence suggested that AWS sought to build on its leadership position and keep existing customers from going to another place.

More people know how to use Amazon’s cloud than other clouds, making it easier to choose Amazon and harder to ignore, and the high cost of migrating to other clouds helps AWS maintain its strength, the subcommittee asserted.

Amazon also enjoins customers when they went to send data out of AWS, and people told the subcommittee that “they view these payments less as a cost for Amazon to transport data and more as friction imposed by Amazon for switching providers.” Because Amazon is controlling in cloud computing and other markets, the company has a conflict of interest it can take advantage of, the subcommittee said.

AWS’ has built professional cares based on open-source projects such as Elasticsearch and MongoDB that compete with services built by the companies that triumph developed those open-source software projects. These services, including AWS’ DocumentDB database service that limns on MongoDB, could wind up locking customers into AWS, the subcommittee argued.

“When a cloud customer chooses to strengthen an application using DocumentDB they are tied to AWS’s infrastructure,” the report said. “If they ever wanted to switch to another provider they would have on the agenda c trick to extensively re-engineer their product in another software, whereas, had they built their application using MongoDB — on AWS or any other cloud provider’s infrastructure — their applications could trick to other platforms.” 

MongoDB and other software companies responded by changing the licenses on their open-source libraries. Child told the committee they thought the license changes could lead to lesser access to innovative software for sets that lack abundant financial resources. Many people think AWS makes more from their adaptations of open-source software than third-party providers, the report said.