The world’s richest man, Jeff Bezos, testified before members of the United States Congress for the first time on Wednesday, but said little to allay one of his biggest concerns: that Amazon’s control over online retail gives him the power to make or break small traders on a whim.
Bezos, along with CEOs of Apple, Google and Facebook, appeared by videoconference before a bipartisan group of 15 members of the United States Chamber who have been investigating the four technology giants for the past year. The stated goal of the investigation by this antitrust subcommittee has been to document whether these corporate titans abuse their power in industries ranging from retail to social media, and to assess whether the country’s antitrust laws are modern enough to protect against such abuse.
“Their ability to dictate terms, make decisions, invest entire sectors, and inspire fear represent the powers of a private government,” said Rep. David Cicilline (D-RI), chair of the subcommittee, in his opening remarks on what was an audience. over five hours.
For Bezos, much of the lawmakers’ questions focused on how Amazon competes with and benefits from the 1.7 million small and medium merchants who help supply Amazon’s digital shelves. Amazon boasts that 60 percent of its retail sales are now courtesy of these sellers, rather than being stored and resold by themselves.
But some Amazon sellers have complained over the years that, as Amazon’s market share in U.S. online commerce has increased, to about 40 percent today, which is about Seven times more than the next competitor, the company has squeezed them and otherwise damaged them. ways because they have no viable online alternatives.
According to Cicilline, Amazon sellers have told the subcommittee that “[Amazon has] It has never been a great partner, but you have to work with them. “
One concern has been information Amazon uses from its own merchants to help inform what products to develop under its own private labels, such as Amazon Basics. In April, the Wall Street Journal released a report that Amazon employees have used data from individual sellers to help Amazon decide which private-label products to pursue. That contradicts what a top Amazon attorney, Nate Sutton, told Congress earlier this year when he said Amazon’s policy is to only use data on a product when there are at least two sellers selling it.
On Wednesday, Bezos told Rep Pramila Jayapal (D-WA), which represents Amazon’s hometown of Seattle, that the company’s investigation into the policy violations outlined in the Journal report was ongoing. “I am not satisfied that we have reached the bottom, and we will continue to look at it,” he said.
And Jayapal made his point clear: “So you can allow external vendors to enter your platform. But if you are monitoring the data to make sure it will never be large enough to compete with you, that is the concern of the committee. ”
Bezos argued that other retailers don’t even have such a policy, which is completely irrelevant: No other retailer in the US operates a market even close to the size of Amazon. But the worst part is that Bezos doesn’t provide an update on the research it just means that concern about these potentially anti-competitive practices remains unresolved.
Lawmakers also questioned Bezos about what some see as a growing cut in sales Amazon takes from small merchants. According to a recent study by the Institute for Local Self-Reliance, a nonprofit organization that advocates a strong economy based on independent business versus giant corporations, Amazon raised 30 percent on average fees in 2019 from a given sale made by a seller. That number increased from 19 percent five years earlier, according to ILSR estimates. Some sellers have said that Amazon’s cut is even greater than that. In an episode of the Land of the Giants: The Rise of Amazon podcast last summer, an Amazon toy vendor told Recode that Amazon now charges fees equal to almost half of his company’s sales, including cost to advertise your products on the site.
Bezos’ defense of these increases focused on the value that he says Amazon is providing in exchange for these fees. The CEO spoke of Amazon’s advertising platform as a way to discover business, but some sellers and brands see it more as a tax simply for doing business on the platform. But the CEO did little to calm the open-ended question of whether small businesses on Amazon can succeed without giving his company an ever-larger cut in profits.
Bezos also mentioned how Amazon’s storage program, Fulfillment by Amazon (FBA), allows merchants to store, ship, and serve customer service through Amazon. In order for most sellers to qualify their products for Amazon Prime delivery, they have to pay for FBA storage. And Bezos admitted that Amazon’s algorithm that determines in real time which seller wins a certain sale, indirectly determines whether a seller is a customer of FBA. This admission could offer additional ammunition to critics who argue that Amazon is using its grip on the largest e-commerce market in the US to force its merchants to increasingly pay for services, such as FBA.
Then there is the frequency with which Amazon changes its policies and the algorithms that power its platform so that they can make or break their merchants’ businesses, essentially overnight. A member of Congress told Bezos the story of a textbook seller on Amazon who says his business was kicked off the platform without notice or explanation after his business grew. Amazon’s seemingly arbitrary suspensions are not a new complaint.
Bezos said he was “surprised” to learn of such a story and that he would like to speak to the seller. But it also responded with a defense that believes such treatment is not “systemic” on Amazon.
For Bezos, this was his first time witnessing on Capitol Hill, at least in part because Amazon, for the most part, has been a good thing for millions of online shoppers. As I’ve written before, Amazon offers shoppers incredible convenience, great prices, fast delivery, and a wide selection. And antitrust enforcement officers generally favor companies that treat consumers well and keep prices low, while generally targeting business practices or mergers that they believe will harm consumers, such as raising prices of a product. or service.
But Amazon is now worth $ 1.5 trillion, and Bezos is the richest man in the world. Along the way, media and regulatory scrutiny has intensified. The Federal Trade Commission has been investigating various Amazon business practices for the past year to see if Amazon has violated existing antitrust laws. And the House antitrust subcommittee will next issue its own report concluding its investigation that could argue for new or changed antitrust legislation that may explain the damage to innovation and competition that some lawmakers say is done by tech giants like Amazon, even when they apparently treat consumers well.
Even if Bezos didn’t shut down legislators’ concerns about potentially anti-competitive practices, his first testimony in Congress sometimes became the truest CEO of the audience. At the same time, on several occasions it politely rejected the vendor’s anecdotal complaints filed during the hearing as unique, rather than being the core of Amazon’s DNA.
And therein lies one of their problems. Even if Bezos is right and Amazon rarely abuses its position on its own sellers, complaints shared during the hearing show that the company has become so large and powerful that even negligence abuses have the power to crush small businesses. They drive Amazon’s success – but they also depend so much on the platform that you can crush them without even realizing it.
