Amazon's Sleazy Business Practices are Crushing Businesses and Deceiving Consumers

What business is Amazon really running?

December 31, 2020, Los Angeles, CA - Amazon's shocking pattern of behavior illustrates an unchecked monopoly power over Amazon's third-party sellers, bullying of its retail partners, deceiving consumers, and improperly using third-party data for its strategy for developing and selling its own private-label products. The e-commerce giant has grown into a global juggernaut of fraud, counterfeits, replicas, scams, and false claims.

Amazon isn't just listing products on its website; it's on a quest to sell all things to all people through merchandise sales and company takeovers. In the process, Amazon enables and facilitates an inexhaustible supply of counterfeit, fake, fraudulent, and replica goods supported by deceptive, misleading, fraudulent product reviews, and illusory "Amazon's Choice" endorsements.

Amazon CEO Jeff Bezos has long claimed that his company is laser-focused on growth and serving the needs of customers, Amazon's "customer obsession." While customers may be obsessed with low prices, many are easily duped by the fake and replica products and phony reviews. About 50% of Amazon products come from China, assisted by fake review companies (almost always in China) that open hundreds or thousands of fake Amazon accounts known as “zombie accounts.”

Amazon admitted as much in its SEC filing; “We also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies." Amazon is no innocent victim, but a willing and active direct seller of counterfeit, fraudulent, and replica goods, while taking a cut of the sale price and shielded from product liability under the umbrella of the Communications Decency Act (47 U.S.C. § 230).

The House Judiciary Committee recently published its bipartisan investigation into the state of big-tech competitive practices, including Amazon. The results of the investigation are shocking, concluding, "Our economy and democracy are at stake." 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.

Regulators and politicians say its tactics are unfair for a company its size and potentially illegal. Amazon executives often initiated efforts like these on their own, though in some cases examined by The Wall Street Journal, Jeff Bezos himself was involved, according to former Amazon executives and internal emails.

Amazon's self-preferencing predatory pricing and exclusionary conduct exploits their power to become even more dominant and unaccountable to anyone but themselves.

• David Barnett, the CEO and Founder of PopSockets, testified at the Subcommittee 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.
• Amazon cloned a line of Pirate Trading’s Ravelli-brand top-selling camera tripods sold on Amazon’s site, hurting the vendor’s sales so severely it is now a fraction of its original size, the firm’s owner said. Amazon said it didn’t violate the company’s intellectual property rights, yet its AmazonBasics product used the same manufacturer, same components, and shared design of the Pirate Trading product. Amazon suspended Pirate Trading camera tripod models that competed with the AmazonBasics versions repeatedly, alleging the tripods had authenticity issues.
• Quidsi, the parent of Diapers.com and Soap.com, became an Amazon target a decade ago with an aggressive ‘plan to win’ against Diapers.com in the diaper/baby space. The Amazon plan included doubling Amazon's discounts on diapers and baby wipes to 30% off and a free Prime program for new moms. When Amazon cut diaper prices by 30%, Quidsi executives were shocked when their analysis determined Amazon was losing $7 for every box of diapers. Jeff Blackburn, a top lieutenant to Jeff Bezos, approached a Quidsi board member saying the company should sell itself to Amazon. The company felt it had no choice but to sell itself because it couldn’t compete with what Amazon charged. Amazon purchased the company for $500 million, only to shut it down, saying it was unprofitable.
• Williams-Sonoma Inc. successfully fought back against Amazon, claiming Amazon had copied its distinctive West Elm orb dining chair (with $2 million in sales). Amazon began selling an “Upholstered Orb Office Chair” and other furniture items under Amazon’s private-label brand that looked nearly identical to Williams-Sonoma items. Amazon removed the items from its website and settled the lawsuit. Other lawsuits against Amazon as the direct seller of counterfeit goods include Maglula Ltd. and Daimler-Benz.
• Amazon also set its sights on Allbirds Inc., the maker of popular shoes using natural and recycled materials, and last year launched a shoe called Galen that looks nearly identical to Allbirds’ best-seller — without the environmentally friendly materials and selling for less than half the price. Shoe seller Allbirds, too, had refused persistent Amazon efforts to get it to sell on Amazon's site. “Wool Runner” knockoffs were top search results from outside vendors on Amazon.
• 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.
• Amazon's retaliatory tactics against book 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 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 the Subcommittee investigation, the committee 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.

• In addition, Amazon exploits 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.
• 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."

Amazon can treat sellers in this manner because Amazon knows that sellers have no other realistic alternatives to its 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.

200,000 brands are fighting counterfeits on Amazon. A superb Wall Street Journal investigative report by Dana Mattioli and Sebastian Herrera (and cited herein) focused on Amazon sellers who reported they received notifications from Amazon that claim their products are used or counterfeit. Amazon suspends the seller's accounts until they can prove that the products are legitimate, which can cause big sellers to lose tens of thousands of dollars each day. Amazon often requests that the sellers provide details on who manufactures their product along with invoices from the manufacturer so that Amazon can verify authenticity. Several sellers told the Journal they provided those details to Amazon to get their accounts reinstated, only for Amazon to introduce its own version of their products using the same manufacturer.

The Counterfeit Report, a global award-winning consumer advocate and industry watchdog, found and removed over 139,000 counterfeits on Amazon. While only a tiny fraction of fake goods destined for, or reaching consumers, Amazon still took notice and lashed back. Amazon ignored thousands of infringing product complaints after The Counterfeit Report's CEO served Amazon with legal notice for selling hundreds-of-thousands of dangerous and obviously fraudulent Lithium-ion batteries. Amazon's inaction was followed-up with a federal class-action lawsuit.

Amazon is facing up to $36 billion in fines after Europe’s antitrust regulators charged Amazon with violating competition law. However, the US has lagged far behind, allowing e-commerce sites to operate virtually immune to product liability claims, and destructive anti-competitive behavior. There is no incentive for Amazon to stop -- they make too much money. Amazon paid no federal income tax on $11.2 billion in profit in 2018 and a 1.2% tax rate on a $13.3 billion profit in 2019.

While waiting for Congress to act, 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.

Additional reference material:
The Heavy Hand of Amazon: A Seller Not A Nuetral Platform
How Amazon Wins: By Steamrolling Rivals and Partners