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ALPHABET INC.

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Amazon Accused of Using 'Monopoly Power' in Rise as E-Commerce Gatekeeper

10/07/2020 | 11:38am EST

By Dana Mattioli

A House antitrust panel took direct aim at one of Amazon.com Inc.'s defenses against scrutiny of its retail dominance and detailed allegations about the company wielding its market power.

In a report issued Tuesday, the Democratic-led House Antitrust Subcommittee challenged the company's stance that its share of total U.S. retail shopping is the most relevant way to understand its size. The committee asserted repeatedly that Amazon dominates U.S. e-commerce. The company's market share of U.S. online sales is often said to be about 39%, but the figure is as high as 74% across a range of product categories, according to the report.

"Amazon functions as a gatekeeper for e-commerce," the report said. The document provided details that it says shows how Amazon uses its size and platform to thwart competitors, dedicating more pages to its findings about the Seattle-based technology giant than the other large rivals featured in the probe.

Amazon addressed the findings in a blog post. "All large organizations attract the attention of regulators, and we welcome that scrutiny. But large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong."

The House panel argued that Amazon has amassed "monopoly power" over sellers on its site, bullied retail partners and improperly used seller data to compete with rivals. The subcommittee cited examples that it said showed how Amazon has launched copycat versions of products sold by third-party merchants on its platform. The report also accused the company of blocking search advertising on its site for competitors and attempting to "replicate some of the startups it meets with or invests in."

Several investigative articles by The Wall Street Journal published earlier this year accused the company of similar actions. Amazon launched an internal investigation following the story into whether its employees used seller data to inform the company's private-label strategy.

Amazon Chief Executive Jeff Bezos, in testimony before the House subcommittee this summer, said the investigation was continuing and that the company has a policy of prohibiting employees from using data on specific sellers to inform decisions about launching or developing its own products. "I can't guarantee you that that policy has never been violated," Mr. Bezos said then.

The company has told the Journal that it doesn't use confidential information from companies it meets with. It didn't directly address the question of whether or not it hobbles rivals' marketing on its website.

The committee suggested legislation that could cause Amazon to exit business lines, such as its private-label or devices businesses, that compete with sellers on its platform. Such legislation would be a blow for Amazon, which has developed more than 100,000 private-label products and made significant investments in the areas of smart devices, such as its Echo speakers.

The report is the culmination of a more-than-yearlong review of Amazon, Apple Inc., Facebook Inc. and Alphabet Inc.'s Google and whether these companies engage in anticompetitive behavior.

"The investigation revealed that the dominant platforms have misappropriated the data of third parties that rely on their platforms, effectively collecting information from customers only to weaponize it against them as rivals," the report said.

The report noted the example of a seller of apparel for construction workers and firefighters. The seller found success with a new item and was making about $60,000 a year selling it on Amazon's site, said Rep. David Cicilline (D., R.I.), who chairs the subcommittee.

"One day, they woke up and found that Amazon had started listing the exact same product, causing their sales to go to zero overnight," Mr. Cicilline said to Mr. Bezos at the hearing. "Amazon had undercut their price, setting it below what the manufacturer would generally allow it to be sold," the congressman said.

Citing interviews and emails, the subcommittee accused Amazon of discriminating against major competitors through its advertising arm and using its dominance in some areas to extract advantages in others.

Last month, the Journal reported that Amazon was limiting the ability of some device competitors, such as Roku Inc., to place certain ads on its website, according to Amazon employees and executives at rival companies and advertising firms. Roku, which makes devices that stream content to TVs, couldn't buy Amazon ads tied to its own products, the article said, citing people familiar with the matter. Amazon told the Journal that it is common practice among retailers to choose which products they promote on their websites.

Multiple agencies are looking into whether the mergers and acquisitions process has been weaponized by technology companies who buy small competitors and stifle innovation. The report cited evidence that it says shows Amazon using its venture-capital arm to "inform and improve Amazon's smart home ecosystem." The Journal reported in July that since launching its Alexa Fund venture-capital arm in 2015, Amazon had a pattern of meeting with startup founders for deal meetings and investments and then introducing competing products and services, according to interviews with founders and investors.

In some cases, as the Journal reported, Amazon's decision to launch a competing product devastated the business in which it invested. In other cases, it met with startups about potential takeovers, sought to understand how their technology works, then declined to invest and later introduced similar Amazon-branded products, according to some of the entrepreneurs and investors.

The congressonal report said Amazon "displayed a lack of candor" and transparency when communicating with the committee over the course of its investigation.

Write to Dana Mattioli at dana.mattioli@wsj.com

(END) Dow Jones Newswires

10-07-20 1137ET

Stocks mentioned in the article
ChangeLast1st jan.
ALPHABET INC. 2.33% 1795.36 Delayed Quote.34.04%
AMAZON.COM, INC. 1.64% 3220.08 Delayed Quote.74.26%
APPLE INC. 3.08% 122.72 Delayed Quote.62.17%
FACEBOOK INC 3.46% 286.55 Delayed Quote.39.61%
RETAIL PARTNERS CO., LTD. -3.39% 1481 End-of-day quote.65.29%
ROKU, INC. -2.68% 285.71 Delayed Quote.119.25%
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Financials (USD)
Sales 2020 179 B - -
Net income 2020 35 705 M - -
Net cash 2020 118 B - -
P/E ratio 2020 35,2x
Yield 2020 -
Capitalization 1 215 B 1 215 B -
EV / Sales 2020 6,14x
EV / Sales 2021 5,02x
Nbr of Employees 132 121
Free-Float 90,3%
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Number of Analysts 47
Average target price 1 887,24 $
Last Close Price 1 795,36 $
Spread / Highest target 25,3%
Spread / Average Target 5,12%
Spread / Lowest Target -31,1%
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John LeRoy Hennessy Chairman
Ruth M. Porat Chief Financial Officer & Senior Vice President
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