amazon-uses-data-from-third-party-sellers-to-develop-its-own-products,-wsj-investigation-finds

Amazon CEO Jeff Bezos.

Emmanuel Dunnand | AFP | Getty Images

Amazon uses data from its vast network of third-party sellers to determine what new products it will create, a Wall Street Journal investigation has found. 

The probe found that some Amazon executives had access to seller data that was then used to discover bestselling items they might want to compete against. The executives also developed workarounds to Amazon’s internal restrictions to gain access to reports on individual seller data, as part of a practice dubbed “going over the fence,” the Journal reported. 

An Amazon spokesperson told CNBC that without viewing the data provided to the Journal, it has no way to vouch for its authenticity, but added that the company has reviewed its records and found that store data for the products mentioned was aggregated and included multiple offers from sellers. 

“We strictly prohibit our employees from using non-public, seller-specific data to determine which private label products to launch,” the spokesperson said in a statement. “While we don’t believe these claims are accurate, we take these allegations very seriously and have launched an internal investigation.”

The spokesperson also said private-label products are a common retail practice among many retailers and that those retailers often know the sales volume for products in their stores. They said Amazon looks at customers’ shopping behavior, fashion and shopping trends across the industry, suggestions from manufacturers for new product lines and gaps in its product assortment relative to its competitors when determining its private-label strategy.

The Journal’s findings directly contradict Amazon’s previous messaging around the issue of how it uses data from third-party merchants to build private-label products. For many years, Amazon has housed its own private-label goods under the AmazonBasics branding, which offers everything from furniture to clothing. It also makes private-label products under other brand names.

Amazon has long maintained that it’s against company policy to use such data to build future products. Last July, at a hearing of the House Judiciary subcommittee on antitrust, Nate Sutton, associate general counsel at Amazon, denied that individual seller data is used to manipulate search algorithms to favor Amazon’s own products, or in any other way to directly compete with merchants. 

Sutton’s denial echoed statements Amazon had previously given on the issue. For example, the company called out then-presidential candidate Sen. Elizabeth Warren, who said Amazon was hurting third-party sellers by using their sales data against them.

AmazonBasics has been the target of criticism from some third-party sellers who say it gives Amazon an unfair advantage over sellers. The company had been aggressively promoting its own brands on its website, including adding links to its own products on third-party sellers’ listings. 

The practice has also attracted growing scrutiny from regulators, who argue it may be anti-competitive. Amazon is already being probed by Federal Trade Commission officials over its business practices in retail and cloud computing, according to reports from several outlets. The Department of Justice and the House Judiciary Committee have both opened broad antitrust reviews of Big Tech.

Read the full story from The Wall Street Journal.

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