Congress is Dragging Jeff Bezos to the Hill to Explain a Routine Business Strategy

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Alongside his fellow Big Tech CEOs, Jeff Bezos will appear before the House Judiciary Committee next Monday to testify about Amazon Marketplace’s business practices with its third-party sellers. The occasion will make for entertaining political theater, but the expected line of inquiry is mostly without merit.

Mark Zuckerberg of Facebook, Sundar Pichai of Google, and Tim Cook of Apple have all testified before Congress many times, but this will mark the first time that Bezos will appear before the legislative body. In February, House antitrust subcommittee Chairman David Cicilline of Rhode Island told CNBC, “As I think about this marketplace, it’s pretty clear to me that it’s not functioning properly, that there’s not robust competition there.” More specifically, the committee is interested in allegations that the online retail giant uses data about its third-party sellers to compete against them with its own in-house brand.

Former Amazon employees told the Wall Street Journal that they “often consulted sales information on third-party sellers when developing private-label merchandise.” Amazon countered that this is against its official policy of prohibiting “employees from using nonpublic, seller-specific data to determine which private-label products to launch.” Amazon said it has launched an internal investigation into those claims.

While it’s important to verify that Amazon is actually doing as it says it’s doing, the legality of the practice in question is less concerning. Retailers using data from branded products to inform their treatment of generics happens in every corner of the industry. Grocery stores, big-box retailers, and department stores have for decades been fine-tuning what products they offer, and at what price, based on data about name-brand sales in their stores. It’s standard operating procedure in retail — and for good reason: It benefits consumers. Customers get more product options, often at lower price points. It’s unclear why that benefit would be any different for Amazon Marketplace customers.

Compared to other retailers, Amazon generates just a sliver of its revenue from its own brand of products. Department store Kohl’s derives 46% of its revenue that way. For Target, it’s 33%, and Macy’s, Lowe’s, Costco, Office Depot, and Dollar General all make 20% on their own products. By contrast, Amazon makes just 1% of its revenue through private-label goods. This makes Amazon, with just about 5% of total U.S. retail, an odd focus for congressional critics of this particular data practice.

It’s difficult to justify using the subcommittee’s time, energy, and resources (and Amazon’s, which has to comply with document and testifying requests) to investigate a well-accepted and long-standing business practice. And the broader inquiry about Amazon not being subject to sufficient competitive pressures is equally pointless.

Amazon faces fierce and increasing competition from other platforms. Facebook is taking on Amazon Marketplace with its own online selling platform, Facebook Shops. The social media giant has partnered with Shopify, BigCommerce, WooCommerce, and others to help sellers succeed on the new platform.

Read the full article at The Washington Examiner.