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Blog Post | April 29, 2020

Amazon Won’t Play Fair In Commerce Or Congress

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Last week, the Wall Street Journal revealed that contrary to stated company policies, Amazon looks at proprietary information generated for third-party sellers on the platform when developing its house-brand offerings. Cases described to the Journal include Amazon engineers peeking at the total sales, profit margins, and shipping costs for a popular third-party car trunk organizer which sells on Amazon Marketplace. Amazon later used that data to help design its own, rival product. Third-party sellers have long believed that Amazon wasn’t looking at this information because…Amazon said it wasn’t looking at this information. Instead, the tech giant’s control of both the Marketplace and its own house brands grants it an anti-competitive advantage over smaller sellers who depend on Amazon’s marketplace to survive. They can’t check all of their competitors’ stats on a whim to figure out how to drive them out of business. 

Third-party sellers aren’t the only group Amazon lied to about its data practices. In July of 2019, the House Judiciary subcommittee on antitrust questioned Amazon, Apple, Facebook, and Google on competition issues, a precursor to investigations into those same companies by the Federal Trade Commission and Department of Justice. Amazon dispatched its associate general counsel of competition, Nate Sutton, to testify that Amazon does not use “individual seller data directly to compete” with third-party businesses. The Journal’s reporting contradicts this; Amazon is in fact using this data on a granular level to develop their house brand products. The judiciary committee is now looking into Sutton’s misleading testimony. 

But who is Sutton, the executive that Amazon sent to lie to Congress?

He’s someone who ought to know better than to lie under oath, considering he originally hailed from one of the enforcement agencies the subcommittee oversees. Nate Sutton spent nearly 10 years at the DOJ Antitrust Division as a trial attorney, where he helped head litigation against Apple for fixing e-book prices. Sutton left the DOJ in late 2016, shortly before Amazon ramped up its acquisitions and made its priciest purchase yet— Whole Foods, to the tune of over $13 billion

Amazon likely chose Sutton to represent the company in front of Congress because they thought his government experience would lend credibility to his defense of Amazon’s practices  and argument that Amazon supports small and medium-sized businesses. Notably, in a Global Competition Review article citing Sutton’s testimony, he is credited as a former DOJ Antitrust attorney. 

Amazon seemingly hired Sutton for his expertise in the DOJ’s approach to litigating antitrust cases, even if such litigation is an increasingly rare event. The antitrust agencies at large haven’t kept pace with merger filings since 2010, when enforcement actions stagnated despite increased numbers of merger deals. Though those actions include more common requirements like divestitures, Sutton’s litigation experience in a landmark DOJ case remains valuable to large corporations like Amazon that depend on mergers and acquisition (“M&A”) for growth. Especially now that the firm is under intense antitrust scrutiny, employing someone who’s actually stood on the other side of a courtroom is a major asset for understanding how the DOJ thinks and acts. This extra information gives Amazon an unfair competitive advantage, kind of like if an e-commerce company could look at the private data of every third-party seller on its platform.

Because of the cloistered world of antitrust, Sutton’s switch from litigating against companies like Amazon to defending them in front of Congress was a well-trodden path. The Revolving Door Project found the DOJ’s counterpart in antitrust enforcement, the FTC, lost at least 6 lawyers over the last four years to in-house counsel positions at acquisition-fueled corporations, in addition to 36 lawyers who went on to defend corporate clients at BigLaw firms. 

Now, Sutton is defending Amazon’s anti-competitive practices in front of his former bosses. And the proprietary data-peeking he lied about before Congress is just one example of such practices. Amazon, as both a retailer and marketplace, has incredible power over the third party sellers that represent 58 percent of the site’s sales. The fact that pulling data on Amazon’s competitors is standard practice for developing competing products only stacks the deck more. 

During the ongoing pandemic response, Amazon prioritized its own “fulfilled by Amazon” offerings as critical products while competing products sold by third-party businesses, even those with shorter shipping times, were hidden. Sutton also spoke to Amazon preferencing house brand products at the July 2019 hearing, saying the algorithm “is aimed to predict what customers want to buy, and we apply the same criteria whether you’re a third party seller or Amazon.” Faster shipping certainly seems like something customers would want, especially in a time of long delays. While this case of algorithm fixing was deemed a mistake by the company, it’s not the first time Amazon’s algorithm favored its own outcomes. Last year, Amazon adjusted the search system to boost the most profitable products for the company, burying less profitable but more relevant products. 

Amazon also pressures sellers into offering the bulk of their in-demand products on Amazon by burying products that don’t hit the suggested inventory levels. As the pandemic response pushes consumers to the internet to buy essential products, Amazon increased suggested inventory amounts for sellers and suppliers, effectively cutting off it’s retail competitor’s access to that same inventory. 

As Amazon’s position as the top retailer in the pandemic further entrenches the company’s economic power, lawyers like Sutton claim Amazon “helps make retail even more vibrantly competitive and innovative” by supporting small and medium-sized businesses. Meanwhile, Amazon doubled down on anti-competitive behavior during the pandemic response and was revealed to be ignoring its own policies. Amazon and other large corporations also use hires from antitrust authorities to take advantage of insider expertise on government litigation tactics and lingering relationships those lawyers might have with government officials. And, of course, the greater salaries of the revolved-out might inspire yearning for a similar financial boost among current public servants, dulling their appetite for a full battle.

Amazon’s pro-competition statements, given by Sutton and other former government officials, are a facade. And the idea that revolved-out government lawyers working for big business continue to deserve extra credibility for their former public service becomes ever more farfetched.

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More articles by Andrea Beaty

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