Congressional Investigation Exposes Amazon's Monopoly, Bullying, and Competition-Crushing Behavior

Shocking business practices and misused third-party data call for the breakup of the e-commerce giant.

October 8, 2020, Los Angeles, CA – The House Judiciary Committee published its bipartisan investigation into the state of big-tech competitive practices of Amazon, Apple, Facebook, and Google. The committee examined whether these dominant firms engage in anti-competitive conduct, anti-competition practices, and whether existing antitrust laws, competition policies, and current enforcement levels are adequate to address these issues.

The results of the investigation are shocking, concluding, "Our economy and democracy are at stake." Particularly alarming for Amazon sellers, suppliers, and consumers is the Subcommittee's conclusion that Amazon exercises monopoly power over its third-party sellers, bullies its retail partners, and improperly uses third-party data for its strategy for developing and selling its own private-label products.

The testimony examined how the online giants have exploited, entrenched, and expanded their power over digital markets in anti-competitive and abusive ways. Although the companies provided substantial information and numerous documents* to the Subcommittee, they declined to produce certain critical information and crucial documents requested. Their answers were often evasive and non-responsive, raising fresh questions about whether they believe they are beyond the reach of democratic oversight, wrote the chairman.

By controlling access to markets, the tech giants can pick winners and losers throughout our economy. They not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them. They have surveilled other businesses to identify potential rivals, and have ultimately bought out, copied, or cut off their competitive threats.

The firms have abused their role as intermediaries to further entrench and expand their dominance. Whether through self-preferencing, predatory pricing, or exclusionary conduct, the dominant platforms have exploited their power in order to become even more dominant.

These companies have morphed into the kinds of monopolies last seen in the era of oil barons and railroad tycoons. Although these firms have delivered clear benefits to society, their dominance has come at a price. These firms typically run the marketplace while also competing in it -- a position that enables them to write one set of rules for others, while they play by another, or to engage in a form of their own private quasi regulation that is unaccountable to anyone but themselves.

Conclusions from the Subcommittee's Amazon investigation:

The evidence the Subcommittee staff examined demonstrates that Amazon functions as a gatekeeper for e-commerce. Interviews with sellers, as well as documents that Subcommittee staff reviewed, make clear that Amazon has monopoly power over most third-party sellers and many of its suppliers.

Although Amazon is frequently described as controlling about 40% of U.S. online retail sales, this market share is likely understated, and estimates of about 50% to as high as 70% are more credible. Amazon is about eight times larger than eBay and Walmart in terms of market share. The Amazon platform has monopoly power over many small and medium-sized businesses that do not have a viable alternative to Amazon for reaching online consumers. About 37% of Amazon sellers ( 850,000) rely on Amazon as their sole source of income.

The company's control over, and reach across its many business lines enable it to self-preference and disadvantage competitors in ways that undermine free and fair competition. As a result of Amazon's dominance, other businesses are frequently beholden to Amazon for their success. A former Amazon employee confirmed that it was not uncommon for Amazon to use its brand standards policy to shut down a brand's third-party seller account and force brands into an exclusive wholesaler relationship.

Numerous small and medium-sized businesses told the Subcommittee that Amazon routinely bullies and mistreats them. In its internal documents, Amazon refers to third-party sellers as "internal competitors." Amazon's retaliatory tactics against publishers include removing the "buy" button, which blocks a customer's ability to purchase a publisher's current titles, and removing the "pre-order" button, eliminating the ability for a consumer to pre-order a publishers' forthcoming titles. Another form of retaliation that Amazon reportedly engaged in was showing publishers' titles as 'out of stock' or with delayed shipping times.

Amazon can treat sellers in this manner because it knows that sellers have no other realistic alternatives to the platform, "Amazon Marketplace is like Hotel California, a lovely place to start or expand an online retail business, but check out from Amazon Marketplace and you can quickly find your business in bankruptcy" -- Amazon seller.

Amazon has acquired at least 100 companies. It has been particularly aggressive over the past few years, making deals that are bigger and more ambitious relative to its historic approach. During this investigation, the Subcommittee heard so many heartbreaking stories of small businesses that sunk significant time and resources into building a business and selling on Amazon, only to have Amazon poach their best-selling items and drive them out of business.

This conflict incentivizes Amazon to exploit its access to competing sellers' data and information, among other anti-competitive conduct. Amazon uses its Alexa speaker device to favor its own goods and services, including its private-label 'AmazonBasics' products and Prime Music. Three U.S. Senators are demanding Amazon recall dangerous AmazonBasics devices.

David Barnett, the CEO and Founder of PopSockets, testified at the field hearing that Amazon required his company "to pay almost two million in marketing dollars in order to remove illegal products from the Amazon marketplace." Mr. Barnett testified that this money could have been used to double the number of employees dedicated to developing innovative products at the company.

Several market participants told the Subcommittee that they "live in fear" of the platforms. One said, "It would be commercial suicide to be in Amazon's crosshairs . . . If Amazon saw us criticizing, I have no doubt they would remove our access and destroy our business." Before and concurrent with the Subcommittee's investigation, international and U.S. enforcement authorities also opened antitrust investigations into Amazon's business practices.

The chairman concluded and firmly believed that the totality of the evidence produced during the investigation demonstrates the pressing need for legislative action and reform. These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement. Our economy and democracy are at stake.

There is no doubt that we now live in a time where the law lags far behind technology. As a result, Amazon enables and fosters a marketplace reaching millions of customers, where anyone, including Amazon, can sell just about anything, while at the same time taking little responsibility for their actions and ignoring consumer and seller complaints.

Consumers have the choice of where to shop. The major retailers (Kroger, Costco, Home Depot, Target, Lowes, Best Buy, etc.) offer competitive local and online purchase options with prompt delivery.

*Editors note: The Subcommittee record includes: 1,287,997 documents and communications; testimony from 38 witnesses; a hearing record that spans more than 1,800 pages; 38 submissions from 60 antitrust experts from across the political spectrum; and interviews with more than 240 market participants, former employees of the investigated platforms, and other individuals, totaling thousands of hours.