Amazon’s use of seller data for private-label business is under SEC scrutiny

The news: The US Securities and Exchange Commission is investigating how handles third-party-seller data in its online store and whether that data forms the basis for the company’s private-label business, per Engadget.

How we got here: Retailers like Allbirds, Williams-Sonoma, and others have accused Amazon of using data from third-party sellers to create its own cheaper copycats. Amazon has also allegedly altered search results to surface its own white label products while burying those of third-party sellers.

  • A Reuters investigation into Amazon’s India business in October found documents showing it had intentionally used non-public, third-party data to create copycat products.
  • An independent investigation from The Markup in the same month revealed Amazon places products from its own house brands ahead of those from competitors, even those with higher customer ratings and more sales based on the volume of user reviews.
  • At a congressional antitrust hearing in 2020, then-Amazon CEO Jeff Bezos said although Amazon has a policy against using “seller-specific data” to help its own-brand businesses, he could not guarantee that policy had not been violated, per Insider.
  • The SEC can impose fines and various actions if it finds Amazon failed to disclose business practices to its investors.
  • Amazon denied that it uses third-party-seller data to create copycat products. It also said it launched an internal investigation of its private-label division but refused to give Congress copies of its results. 
  • In March, the House Judiciary Committee asked the DOJ to investigate Amazon over possible criminal obstruction.

What’s next? Mounting allegations claiming Amazon is using third-party-seller information to create competing products, as well as rigging search results to surface its own goods above others, will lead to intensified multi-agency regulatory scrutiny into its business practices.

  • The DOJ is in the midst of backing antitrust legislation aimed at self-preferencing tactics by Big Tech companies like Amazon and Google, per The Wall Street Journal.
  • The SEC will continue to probe whether Amazon failed to disclose its practices or misled investors, which could lead to fines or tighter regulation over retail practices and possibly search algorithms.

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