Amazon Execs Use Privileged Third-Party Seller Data To Decide Which Products To Launch: WSJ

Amazon.com Inc. AMZN employees use privileged access to third-party seller data on its platform to determine which of the company's label products to launch, the Wall Street Journal reported Thursday.

What Happened

The executives studied individual seller data to decide whether it's worth entering a new product segment, which features of a product should be copied, and the range at which the product can be priced, former and one current Amazon employees told the Journal.

Such a move would be in violation of Amazon's own policy, as the company forbids the use of seller proprietary data, but the employees, facing pressure over sales numbers from the management, found ways around it to access the data.

The e-commerce giant's label brands account for about 1% of its $158 billion in annual retail sales, excluding Kindle, Echo, and Ring Doorbell devices, it has said. According to the Journal, it is asking employees that the brands should cross 10% of retail revenue by 2022, and each brand has been asked to create at least $1 billion in business for their segments.

Amazon said it had launched an internal investigation into the matter following the Journal's report. "Like other retailers, we look at sales and store data to provide our customers with the best possible experience," the company said in a statement to the Journal. "However, we strictly prohibit our employees from using nonpublic, seller-specific data to determine which private label products to launch."

Why It Matters

Amazon has long maintained that it doesn't use privileged seller data to determine its own products. The matter has been a subject of regulatory inquiry worldwide, including in the European Union and the United States.

We don't use individual sellers' data to launch private label products (which account for only about 1% of sales). And sellers aren't being "knocked out" – they're seeing record sales every year. Also, Walmart is much larger; Amazon is less than 4% of U.S. retail. https://t.co/5wXTfaAHuN

— Amazon News (@amazonnews) April 23, 2019

The company's associate general counsel, Nate Sutton, testified before the House Judiciary Committee July last year that any data it collects is used to find the best deal for customers irrespective of who is the seller, CNBC reported at the time. Following the report, the committee's Chairman Jerrold Nadler said that the lawmakers would look into whether the Amazon representative lied in sworn testimony at Congress.

"This report raises deep concerns about Amazon's apparent lack of candor before the committee regarding an issue that is central to our investigation," Nadler told the Journal. "We plan to seek clarification from Amazon in short order."

Price Action

Amazon's shares closed 1.5% higher at $2,399.45 on Thursday. The shares traded 0.4% lower at $2,389 in the after-hours session.