The world’s richest man, Jeff Bezos, testified before members of the U.S. Congress for the first time on Wednesday, but said little to assure one of their biggest concerns: that the grip of Amazon on online retailing gives it the power to make or break small business on a whim.
Bezos, along with the CEOs of Apple, Google, and Facebook, appeared via video conference in front of a bipartisan group of 15 U.S. House members who have been investigating the four technology giants throughout the year. other. The stated purpose of the investigation of this antitrust subcommittee was to document whether these corporate titans are abusing their power in industries ranging from retail to social networking, and to assess whether the country’s antitrust laws are modern enough to guard against such abuses.
“Their ability to dictate terms, call shots, shape entire sectors, and inspire fear represent the powers of private government,” Rep. David Cicilline (D-RI), the chair of the subcommittee, said in his opening remarks that it was a five-hour sitting.
For Bezos, many of the questions from lawmakers focused on how Amazon competes against, and profits from, the 1.7 million small and medium-sized merchants that help store Amazon’s digital shelves. Amazon boasts that 60 percent of its retail sales now come courtesy of these sellers, rather than from the stocking and resale of items itself.
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, that’s about seven times more than next competitor – the company squeezed it and made them differently in new and different ways because they don’t have viable online alternatives.
According to Cicilline, Amazon sellers told the subcommittee that “[Amazon has] you’ve never been a great partner, but you have to work with them. ”
One concern was the data Amazon uses from its own merchants to help inform which products develop under its private label brands, such as Amazon Basics. In April, the Wall Street Journal published a report stating that Amazon employees used data from individual sellers to help Amazon decide which private-label products to follow. This contradicts what Amazon’s top lawyer, 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 who sell it.
On Wednesday, Bezos told Rep. Pramila Jayapal (D-WA), who represents Seattle’s Amazon Olive, that the company’s investigation into a policy violation described in the Journal’s report was ongoing. “I’m not happy we got to the bottom of it, and we keep looking at it,” he said.
And Jayapal made it clear: “So you can allow third-party vendors on your platform. But if you’re monitoring the data to make sure it’s never going to be big enough to be able to compete with you, that’s the concern.” which has the committee. “
Bezos argued that other retailers don’t even have such a policy, which is completely close to the point – no other American retailer operates a market even close to the size of Amazon. But worse, Bezos not providing an update on the investigation only means that concerns about these potentially anti-competitive practices remain unresolved.
Lawmakers also asked Bezos about what some think of as a growing cut in sales that Amazon takes from small retailers. According to a recent study by the local, nonprofit Institute for Self-Reliance that is in favor of a strong economy built on independent businesses against giant corporations, Amazon collected 30 percent in fees on average in 2019 from particular sales which made a seller. That number had risen from 19 percent five years earlier, according to ILSR estimates. Some sellers have said Amazon’s cut is even higher than that. In an episode of Art of the Giants: The Rise of Amazon Podcast last summer, one of Amazon’s toy retailers told Recode that Amazon now collects fees corresponding to nearly half of all sales his company, when it includes the cost to advertise its products on the site
Bezos ’defense of these increases was centered on the value Amazon says it is providing in exchange for these tariffs. The CEO spoke of Amazon’s advertising platform as a means for businesses to be discovered – but some sellers and brands see it more as a tax simply to do business on the platform. But the CEO has done little to put the open question on whether small businesses on Amazon can succeed without giving his company a bigger and bigger cut from their profits.
Bezos also mentioned how Amazon’s Warehousing (FBA) storage program allows merchants to store, ship and care for the consumer through Amazon. In order for many sellers to qualify their merchandise 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 particular sale, indirectly factors whether a seller is an FBA customer. This admission could offer additional ammunition to critics who argue that Amazon is using its control over the largest U.S. e-commerce market to essentially force its merchants to pay for more and more services, such as FBA.
Then there’s the frequency with which Amazon changes its policies and the algorithms that run its platform in ways that can make or break its merchants ’trading, essentially overnight. A member of Congress told Bezos the story of a book seller on Amazon who says her business was started from the platform without notice or explanation after her business grew. It seems that arbitrary suspensions from Amazon are not some new complaint.
Bezos said he was “surprised” to hear such a story and that he would like to talk to the seller. But he also countered with a defense believing that such treatment is not “systemic” in the Amazon.
For Bezos, this was the first time he testified on Capitol Hill, at least in part because Amazon was, for the most part, a good thing for millions of online shoppers. As I wrote before, Amazon offers buyers incredible convenience, good prices, fast delivery, and a vast selection. And U.S. antitrust enforcers typically favor companies that treat consumers well and keep prices low, while typically targeting business practices or associations that they believe will harm consumers, such as by increasing prices for a product or service.
But Amazon is worth $ 1.5 trillion, and Bezos is the richest man in the world. Along the way, media and regulatory scrutiny intensified it. The Federal Trade Commission has been testing several Amazon business practices over the past year to see if Amazon has violated existing antitrust laws. And the House antitrust subcommittee will issue its own report concluding its investigation that could argue for new or modified antitrust legislation that could account for the harm to innovation and competition that some lawmakers say which is being made by tech giants like Amazon, even while apparently dealing with consumers as well.
Even though Bezos did not close legislators ’concerns about potentially anti-competitive practices, his first congressional testimony was sometimes found to be the most authentic of the Chief Executive at the hearing. At the same time, he has on several occasions politically denied the seller’s anecdotal complaints filed during the hearing as ‘off-offs’, instead of being central to Amazon’s DNA.
And therein lies one of his problems. Even though Bezos is right and Amazon rarely abuses its position on its own sellers, the complaints shared during the hearing show that the company has grown so big and strong that even negligent abuses have the power. crushing small businesses to bolster Amazon’s success. – but also they are so dependent on the platform that you can crush them without noticing it.