House refers Amazon to DOJ for ‘potential criminal conduct’

Live Brief:

  • Amazon and some of its senior executives could potentially face investigation from the Department of Justice after the House of Representative’s Judiciary committee alerted the agency to “potential criminal conduct,” including obstruction of Congress.
  • Specifically, the committee alleges that executives lied about the company’s use of seller data and “manipulation of consumers’ search results” during a House investigation into the market dominance of technology giants.
  • In a statement, an Amazon spokesperson said, “There’s no factual basis for this, as demonstrated in the huge volume of information we’ve provided over several years of good faith cooperation with this investigation.”

Live Insight:

In July 2019, Amazon’s Nate Sutton, from the company’s general counsel office, tested under oath that the company did not use data from third-party sellers to compete with those sellers in its own private label business. According to a documented timeline from the House Judiciary Committee, Sutton (who, before going to Amazon, was an attorney in the DOJ’s antitrust division) and Amazon’s general made similar statements during the investigation.

In April 2020, The Wall Street Journal published a story on the topic. Its first sentence read: “Amazon.com Inc. employees have used data about independent sellers on the company’s platform to develop competing products, a practice at odds with the company’s stated policies.” It went on from there to detail how the company did so based on the anonymous accounts of more than 20 former employees.

The question about if and how Amazon used sellers’ data in its own competing lines of business was a central one to the committee’s investigation. In a scathing report on tech companies, the committee argued that Amazon’s role as a dominant platform for third-party sellers is in conflict with its role as a private label seller itself (through Amazon Basics and other brands).

The House also scrutinized Amazon’s place as one of two major destinations (along with Google) of customers for product search online. In the letter to Attorney General Merrick Garland, the committee noted that a senior Amazon official testified that Amazon’s search algorithms did not prefer its own labels over those of independent sellers. “But again, credible investigative reporting showed otherwise,” the committee wrote, pointing to a 2021 story in the Markup.

Summarizing the back-and-forth between the committee and Amazon, the committee told Garland, “During that investigation, and in follow-up inquiries, Amazon engaged in a pattern and practice of misleading conduct that suggests” the company was trying to obstruct the investigation.

Amazon’s business practices and market dominance in e-commerce has long been under scrutiny, including by government authorities here and abroad. The company has reportedly been under investigation by the Federal Trade Commission over possible antitrust violations, beginning during the Trump Administration.

The current FTC chair, Lina Kahn, previously wrote an authorized legal paper about Amazon’s possible anti-competitive behavior and served as counsel in the House’s big tech investigation.

Amazon has long denied that it is a monopoly or that its own interests diveerge from those of its sellers. Last fall, around the same time when House members previously suggested Amazon executives lied during the investigation, the company described its platform as “a lifeline to small businesses during COVID-19,” and that its independent sellers had created some 1.8 million jobs.

To Marketplace Pulse, Amazon’s third-party marketplace accounts for 25% of all e-commerce in the US In terms of traffic, visits to Amazon were nearly triple those of its next closest marketplace rival, eBay, and more than five times the visits the to No. 3 Walmart, according to Statista data.

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