Antitrust Investigation of Amazon Won’t Benefit Consumers

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Yesterday, Senator Josh Hawley (R-MO) asked the Department of Justice to open a criminal investigation into alleged “predatory and exclusionary” data practices at Amazon. The Internet retailer responded in a statement, “we strictly prohibit employees from using non-public, seller-specific data to determine which private label products to launch.”

A recent Wall Street Journal report detailed claims by former Amazon employees that data about third parties who sell on the platform was being used to competitive advantage by Amazon when developing its own private label items. Senator Hawley categorized the alleged practices as enabling Amazon to, “build and maintain a monopoly.” Amazon said this practice was against its internal Seller Data Protection Policy and launched an investigation into the allegations.

Whether the accusations prove true, false, or are the result of rogue employees remains to be seen, but Hawley’s use of these data practices to justify antitrust actions deserves scrutiny regardless.

In his letter, Sen. Hawley seems to go beyond the specific question of what did or did not happen at Amazon and calls into question online data practices in general. The line between on and offline retail is blurring in the marketplace, so Sen. Hawley seems behind the curve when he devotes a meaty paragraph to arguing that Amazon’s collection and use of consumer data isn’t comparable to that of large brick and mortar retailers, to which he seems to have no objection:

 The kind of data Amazon can access poses a much greater threat to competition than the data accessible to ordinary retail stores. Brick-and-mortar stores collect data, such as how often third-party products are purchased, when they are purchased, and whether they are purchased in combination with other products. But online retailers like Amazon can collect so much more data. They can track how long a person’s attention lingers on a product, which features attract a person’s attention, which images a person views and for how long, and what reviews a person reads. Amazon’s capacity for data collection is like a brick-and mortar retailer attaching a camera to every customer’s forehead.    

It’s true that large brick and mortar retailers already collect and use consumer data, but they don’t need to strap cameras to customer’s heads to catch up to online retailer’s data capabilities. Location tracking through consumers’ already downloaded apps can pinpoint where they stand within a six-foot radius inside physical stores. More than a year ago, in an article about startup Cosmose, CNBC reported that the firm can tell retailers “which customers visited a fitting room but never made it to the cash register” and “that someone was trying the makeup, someone was trying fragrance,” within a brick and mortar store.

In 2018, The New York Times reported: “At least 75 companies receive anonymous, precise location data from apps whose users enable location services to get local news and weather or other information.” In addition, “Several of those businesses claim to track up to 200 million mobile devices in the United States.” The Times found that this offline location data “reveals people’s travels in startling detail, accurate to within a few yards and in some cases updated more than 14,000 times a day.”

In the real world, there seems to be less of a distinction between online retailers and physical sellers than Sen. Hawley’s letter suggests. It’s not just the virtual online data cat that’s out of the bag, it’s the in-the-flesh data cat too.  

That’s important because, whether through clicks, apps, security cameras, or clerks in small towns who know every customer by name and reputation, more information often means improved service, better tailored products, and improved efficiency. Surveillance by law enforcement poses threats to liberty. Surveillance by private retailers often just means coupons. Consumers have grown very comfortable with that tradeoff in the brick and mortar world. But if you’re not sold, you can always opt out of location tracking and avoid shopping or selling on the Amazon platform.

There are things legislators could do to make it easier for small retailers to avoid selling on Amazon. Congress should pass a federal preemption of the remote state sales tax laws that often make tax compliance costs prohibitive for small and medium firms to go it alone online.

Launching (yet another) antitrust investigation into Amazon won’t benefit consumers. Amazon has every incentive to retain its third-party sellers. That revenue stream is one that must be balanced, not plundered, with revenue from private brands. In-house brands are another option for consumers both on and offline.

The U.S. antitrust law standard is consumer harm. To stretch antitrust investigations to include data, privacy, or protect the interests of competitors over consumers would rewrite law and introduce chaos. In the country’s current health and financial crises, surely there are better things for the federal government and for Amazon to concentrate on than a meritless antitrust investigation.