By Bhavya Surapaneni ’23
Amazon.com spent a record $4.38 million dollars on lobbying in response to antitrust scrutiny in the second quarter.
The multinational company has been increasingly criticized for violating United States antitrust laws, which aim to “protect the process of competition for the benefit of consumers,” according to Federal Trade Commission. The FTC works to uphold antitrust laws and maintain the sense of competitiveness that protects the United States’ economy.
Amazon.com’s spending on lobbying in the second quarter of the 2020 fiscal year had a 9% increase from the second quarter in 2019, according to Bloomberg. Amazon’s lobbying total for the first half of 2020 was approximately $9.2 million.
Antitrust has long been a concern for Amazon, with inquiries in California and Washington state beginning several months ago and law enforcement scrutinizing Big Tech companies beginning last year. Amazon’s controversy with antitrust laws stem from the undercutting of their competitors. This can be seen as breaking certain FTC laws that refer to pricing at a loss to injure a competitor, and then having the ability to retrieve those losses after the competitor is affected. Investigations and documents released to the public display Amazon’s capability and intention to undercut both external competitors and their own third-party sellers for the benefit of the private company itself.
Amazon’s competition with Diapers.com has been continually referred to as an instance of Amazon violating antitrust laws. Over a decade ago, Amazon undercut Diapers.com at loss prices, and then worked to prevent the success of Soap.com, an in-the-works counterpart of Diapers.com. In a 2010 email, Doug Herrington, the senior vice president of North American consumer for Amazon at the time, stated that “Given diapers.com's strength and competencies, Soap.com is our most significant short term competitor in the HPC space.” After this, Amazon acquired Quidsi, the parent company of Diapers.com, in a $545 million deal, only to shut down Quidsi 7 years later because it “failed to become profitable.” Because Amazon engaged in pricing that was intended to negatively impact another company, its actions could be seen as breaking antitrust laws.
Amazon has also gotten flak for using internal information from Amazon’s Marketplace, where third-party sellers retail their goods. Amazon has been accused of using Marketplace to identify successful products and then copy those products to create their own contenders. Critics claim that Amazon is undermining their third-party sellers and that they rely on these external sellers to be successful.
One such example of an exploited third-party seller is the technology company Nucleus. Nucleus’ product was a communication device that worked with the Amazon Alexa voice assistant. Alexa Fund, Amazon’s investing initiative, invested into Nucleus, and despite assurance that they wouldn’t create a competing product, Amazon came out with the Echo Show, which was very similar in function to Nucleus’ product. In an interview with The Wall Street Journal, an investor of Nucleus claimed, “We may have been naive in believing they weren’t competitive with us, and we ran into conflicts over employees, merchants, customer lists and vendors.”
Many other alleged stories of Amazon’s manipulation of startups have been released to the media. With claims against Amazon’s use of its third-party sellers and its predatory prices against companies like Diapers.com, Amazon’s activity from the last decade was looked into, and Congress decided to hold a Big Tech hearing for 4 different companies that were implicated in antitrust activity.
The Big Tech antitrust hearing on July 29, 2020 was the first large-scale hearing for antitrust since the 1970s. The House Judiciary Committee drilled leaders of Amazon, Google, Facebook, and Apple for nearly 6 hours, obtaining information on how each company acted on competition in the market. Jeff Bezos, the founder, CEO, and President of Amazon was primarily questioned on the role of third-party sellers in Amazon’s products.
Stacy Mitchell, co-director of the Institute for Local Self-Reliance, a non-profit that advocates for local rather than corporate power, spoke to Venture Beat about her thoughts on the issue: “This is a pretty serious matter because effectively what Amazon has done is it has compelled sellers to use Amazon’s fulfillment services in order to get the kind of placement on the site that actually results in sales,” she said.
The landmark hearing could have an impact on Amazon and other large tech companies in the future. Possibilities for further action include new antitrust laws, changes to legislation, and even breaking up certain companies. Further investigation into Amazon’s policies to determine a plan of action is likely, but nothing has been confirmed yet. The Antitrust subcommittee of the House Judiciary Committee is expected to release a report based on the hearing and other evidence, and supposedly, all 4 companies in the hearing will face an investigation from the Department of Justice or state attorneys general.
Amazon has not publicly addressed any such investigations thus far.