Amazon executives discussed abandoning Amazon Basics to appease antitrust regulators.
Earlier this week, Amazon celebrated the biggest Prime Day in its eight-year history. But just a few hours later, this event was followed by news of a number of major proposed changes to how Amazon does business in Europe aims to clear accusations from regulators of Amazon’s anti-competitive behavior.
The concessions offered by Amazon include providing greater visibility to multi-seller listings for a given product so that customers have more choice. They also prohibit the company from using any non-public data from Amazon sellers to grow Amazon’s own retail business, including private label brands.
But Recode learned that Amazon’s top executives were also discussing inside the company a more drastic move to ward off regulators: an outright move away from the private label business. At least as recently as last year, several of Amazon’s top executives, including its current retail CEO Doug Herrington and its general counsel David Zapolsky, have expressed their willingness to make this different but important change if it means avoiding potentially harsh remedies resulting from government investigations. US or abroad, according to a source familiar with the discussions.
Amazon’s private label business includes homegrown brands like Amazon Basics, which sells everything from trash bags to batteries and office chairs, and the Amazon Essentials clothing line. The business line also includes non-Amazon brands such as paper goods label Presto, food brand Happy Belly, and fashion line Goodthreads. This assignment does not apply to the company’s own line of gadgets, including Kindle, Echo, and Fire TV devices. Amazon’s use of private labels has been criticized by politicians and regulators not only because they exist, but because the data Amazon uses to create them and the tactics he uses to prioritize them in search results on your trading website and app.
“There was a strong consensus that this could be a viable option if the company ever finds itself in a situation where it has to negotiate a settlement,” a source told Recode. This person has requested anonymity because he is not authorized to disclose internal discussions.
Amazon spokeswoman Betsy Harden said the company has not “seriously considered” closing its private label business and continues to “invest in this area, as many of our retail competitors have done for decades and continue to do today.”
On Friday morning, the Wall Street Journal reported that Amazon reducing the choice of private labels.
There has been occasional talk at Amazon about dropping its private labels as attention to the line of business increased, with executives expressing a desire to keep this potential remedy under wraps so that it could be seen as a threat to regulators, the source said. big concession. Leaders advocating such a decision believed that Amazon had the right to sell private label brands, as many retailers do, but that the business was not strategically important to defend against the more serious potential remedies required by antitrust authorities. . When a company like Amazon offers such a concession, it does so in hopes of shutting down any ongoing investigations.
“One of the goals of the negotiations is to get completely out of the veil of investigations,” Bill Kovacic, former chairman of the Federal Trade Commission, told Recode. “That means it’s all gone.
Amazon said its private labels accounted for a small percentage of total merchandise sales at its online stores. But they are still undeniably a significant source of revenue for Amazon’s retail business, in part because the company doesn’t have to spend as much money on advertising as a third-party brand does. At competing retailers such as Walmart, Costco, and Target, own brands account for a larger percentage of total sales. As of 2019, the biggest impact of Amazon’s private label business has been felt in the so-called “softlines” category, which includes products such as clothing and linens. In this area, Amazon’s own brands accounted for 9 percent of the company’s sales in this category, Amazon told Congress in 2020.
Amazon has consistently downplayed its private label business in testimony and communications with Congress during its 2019 and 2020 investigation into big tech. has not yet confirmed the investigation or file a lawsuit against the company. The agency is currently led by chairman Lina Khan, who wrote a legal paper in 2017 called Amazon’s Antitrust Paradox. In it, Khan argues that the structure of antitrust enforcement over the past 40 years, which usually gives a pass to companies offering low prices or popular services to consumers, does not take into account the harm to competition caused by digital gatekeepers like Amazon. Khan also played a critical role as a legal advisor A 16-month House Antitrust Subcommittee investigation of major tech giants and preparation of 400-page reports by House Democrats alleging that all four of the top US tech giants engage in anti-competitive practices and should be curbed.
Amazon is also one of the main targets of the US Online Innovation and Choice Act, which is being championed by Senator Amy Klobuchar and Rep. David Cichillin. The “Self-Preference” Act will give regulators the power to sue tech giants for business practices that favor their own products and services over those of third parties that do business on their platforms or that use private data from their own users to use your own services. Amazon’s use of non-public data, including sales data, has sparked accusations that Amazon uses such information to copy top selling products..
Amazon fought the bill aggressively, funding ad campaigns that made the dubious argument that if the Internet Innovation and Choice Act were passed, the American Internet Innovation and Choice Agreement would disrupt Amazon Prime. Supporters of the bill are still waiting for Senate Majority Leader Chuck Schumer to nominate him for a full Senate vote ahead of the November midterm elections.
While it’s unclear what U.S. lawmakers and regulators will do next, some of Amazon’s proposed concessions to antitrust officials in the EU’s European Commission appear to be in line with some of the goals of the U.S. surrender bill.
For example, Amazon has told the European Antitrust Commission that it will prohibit its employees and computer systems from using “non-public” data from Amazon sellers—whether from an individual seller or a group of sellers—to help Amazon’s own retail business. This in-house business consists of products that Amazon buys in bulk from other brands and resells to customers, as well as private label products such as Amazon Basics that Amazon manufactures and sells itself.
This is the first of five key concessions, including three related to Amazon Prime. The first of the Prime-related changes will be allow sellers to qualify for the Prime badge even if they don’t use Amazon’s warehousing and shipping service known as Fulfillment by Amazon (FBA). this is hard to do, meaning that the vast majority of merchants need to use FBA to get the Prime badge for their products. The second would prevent Amazon from using information collected through Prime about the performance or rates of third-party logistics providers to benefit Amazon’s own logistics and shipping business. The latest Prime-related offer will see Amazon no longer consider the Prime badge in the algorithm that decides which business—be it Amazon or one of the third-party sellers selling through Amazon—wins a given sale when a buyer is looking for a product that is being sold by multiple parties.
Lastly, Amazon offered to display two different “shopping boxes” to better see product listings from different sellers when they sell the same item at different prices or shipping rates. Today, Amazon customers around the world have to click a small tab to see purchase options other than the one Amazon’s algorithm selects as the Buy Box winner.
Here’s how Amazon can add a second “Buy a Box” to its app as part of concessions offered to the European Union to end antitrust investigations. https://t.co/IuaJyR7eC8
— Jason Del Rey (@DelRey) July 14, 2022
Now that Amazon’s European offering has gone public, businesses affected by how Amazon does business have until September 9 to provide feedback on concessions. The European Commission will then decide whether to accept Amazon concessions or insist on changes or additions to the offer.
There is currently no indication that European regulators want Amazon to stop all sales of its private label products. However, we now know that some of Amazon’s top executives have considered the benefits of such a move, and it remains to be seen how they will react to increased pressure from US regulators. In any case, there is mounting evidence that Amazon is taking antitrust threats seriously.