Amazon’s best selling wholesales have long accused the company of mining their sales data to discover which products are most profitable; then Amazon clones the product and offers it for sale at a lower price than the wholesales can afford (because Amazon doesn’t have to worry about a wholesale-retail markup when it’s both wholesaler and retailer at once) and tweaks its search and recommendation system to drive sales to its private-label versions of its partners’ products.
This is the kind of thing that US antitrust regulators have turned a blind eye to for 40+ years, since University of Chicago economists dripped poison in Ronald Reagan’s ear, shifting antitrust enforcement to the “public harm” standard, in which companies are only punished for monopolistic activities that raise prices, not those that limit competition.
But the EU is emerging from this “public harm” standard to a more robust antitrust framework, driven by the crusading trustbuster Margrethe Vestager, who has capitalized on the EU’s delight at a covert trade war with the US to visit stonking great fines upon US Big Tech.
Now the European Commission has announced that it will subject Amazon’s predatory private-label practices (say that six times fast!) to antitrust investigations, relying in part on insider/whistleblower confirmation that the Amazon’s suppliers’ theories are correct.
Given the multibillion-dollar fines the Commission has smacked other US companies with, this is a pretty significant announcement.
This antitrust announcement pairs very well with Stacy Mitchell’s analysis of how Amazon’s #HQ2 search process resulted in the company amassing mountains of useful market intelligence on the plans cities have made for their futures, which the company can use to outmaneuver its competitors, even in cities where it isn’t going to build a new headquarters.
Amazon keeps the most valuable data for itself; provides less valuable data to marketplace sellers. The “most valuable info Amazon doesn’t share is info about which people have searched for a particular product in the past,” a former Amazon employee told us. Consideration data allows Amazon to “target their private label products with perfect precision,” because Amazon “knows exactly who to go to, who bought in the past, and who searched and didn’t buy.” “At the end of the day I don’t have to build the best mousetrap, I just need to know how to market it,” the former employee said.“Amazon’s own algorithm favors products that have high conversion,” he added, “so I can artificially inflate my ranking by using the consideration data I have that I don’t give third-party sellers access to.”
In addition to consideration data, search data is also highly valuable. Another former Amazon employee told us that although third-party sellers have access to sessions [i.e. traffic to their listing] and retail conversion on their products, Amazon’s retail team “has access to the A9 search result — we know that x number of people searched for a certain product and this many people bought it.” A9 is the name of Amazon’s search algorithm.
Amazon: EC Investigation to Focus on Whether Amazon Uses Data to Develop
and Favor Private Label Products; Former Employees Say Data Key to Private
Label Strategy [The Capitol Forum]
(via Naked Capitalism)