Amazon monopolizes markets, crushes rivals, and extracts as much data as possible from unsuspecting consumers and 3rd-party vendors.
This latest
revelation—which isn't Amazon's first attempt at
targeting children with tracking-like devices—comes as no surprise from a
corporation that has made surveillance a critical part of its business model.
As Amazon continues
its relentless crusade to monopolize markets, crush rivals, and extract as much
data as possible from unsuspecting consumers and third-party merchants,
Congress and federal law enforcers must step up to restructure the corporation
and prevent it from using these harmful practices.
A new report by
the Open Markets
Institute (where I am employed) details how.
As of June 2021,
Amazon has 6.2 million sellers and 1.6 million active sellers, making it the
world's largest e-commerce platform. Amazon also has near-absolute dominance
across a range of markets, including almost 50% market share in e-commerce, 90%
in e-books, and 32% in cloud computing.
Critically, in these
markets, Amazon acts as an intermediary between separate user groups—such as
between customer and merchant on its Marketplace e-commerce platform.
By virtue of its
market position, Amazon possesses an extraordinary amount of control to
structure the relationship between the parties and their relationships with
Amazon. The corporation can employ tactics that allow it to radically extend
its surveillance infrastructure and fortify its dominance.
Consider Amazon's Marketplace e-commerce platform. Before a merchant can put their products on Amazon's site, they must agree to a surfeit of requirements unilaterally imposed by Amazon in a take-it-or-leave-it manner.
The same applies to
potential customers. These coercive agreements forcibly allow Amazon to collect
as much data as they can from merchants and consumers. These agreements thus
create the backdoor for Amazon to exploit its surveillance infrastructure.
When users browse
Amazon's Marketplace site, nearly every action they take is tracked and logged
by Amazon. Amazon watches every user click, every user search, every submitted
comment, and every product review.
Amazon even tracks the
length of time a user stays on a webpage. From the purchase of just one
product, Amazon can harvest upward of 2,000 data points.
For merchants,
Amazon's data collection operations are no different. According to a former
Amazon executive, "Each opportunity to interact with a [merchant] is
another opportunity to collect data."
Amazon's agreements
allow the corporation to harvest information related to a product's price,
description, and its purchase history and frequency.
The immense amount of
data Amazon collects can be used to extend its monopoly power and significantly
harm independent businesses.
For example, by
accessing a product's description, purchase frequency, and other data points,
Amazon can precisely choose a product category to optimize its potential
revenue.
In combination with
its vast production and distribution infrastructure, Amazon can then completely
copy a merchant's products and sell them directly to consumers under its own
exclusive brand.
In effect, Amazon
forces third-party merchants that depend on the company for their business to
assist Amazon in competing against themselves.
Amazon's use of its
surveillance infrastructure to copy products has been immensely successful for
the corporation, even after the corporation was caught lying to
Congress about its data harvesting practices.
Amazon has now become
the seller of 94% of all batteries on its Marketplace, over 50% of the products
in the clothing, shoes, and jewelry categories, and over 30% in the home,
garden, and pets categories.
By harvesting data
about each of its consumers, Amazon can even use its surveillance
infrastructure to properly set its prices to maximize the chances of a
successful purchase.
Thus, the data from
every product purchase or interaction with Amazon's site that millions of
merchants and consumers are forced to provide are essentially mini
trial-and-error experiments for the company to optimize its own branded
product's commercial standing, pricing, and design.
In the past, Amazon
even used its monopoly power to impose restrictive
pricing agreements that prevented
merchants from offering lower prices on competing
e-commerce sites.
Amazon can even
reorder the search rankings of its product listings to place its own items at
the top of search results. Because of its control over the structure of its
e-commerce platform, Amazon can manipulate the performance and standing of its
own products (the ones it often creates by copying merchants).
This tactic deceives
consumers who frequently think that the search rankings are based on merit,
consumer preferences, or paid promotion via advertisements.
Amazon presents
consumers with a false reality about which products they are shown, and why,
while also using its control to push and nudge consumers to purchase Amazon's
own branded products. As a result, Amazon is robbing consumers of the ability
to choose products based on performance or ratings while artificially boosting
its own products.
Amazon's dominance
practically guarantees it can unilaterally impose any new method of
surveillance it develops on its third-party merchants. For example, Fulfillment
by Amazon (FBA) is the corporation's storage, packaging, delivery, and customer
management service offered to third-party sellers.
FBA might appear to be
a generous service—but the corporate behemoth is doing more than just offering
third-party merchants the opportunity to use its vast infrastructure to support
their operations.
FBA is actually a
crucial bat that Amazon is able to swing against dependent merchants. It
provides Amazon access to intricate product data as well as other competitively
sensitive information about how products are packaged and delivered.
With almost two-thirds
of merchants relying on FBA, should a merchant try to defy Amazon by not
adopting its terms of service—no matter how arbitrary or onerous they
are—Amazon can remove a seller from its service or arbitrarily raise shipping
and delivery prices.
With its immense
amount of power, Amazon can even pick the winners and losers on its Marketplace
by rewarding those merchants most loyal to it.
For example,
researchers found that merchants were more likely to receive a Buy Box (a
digital button a user can add to their cart for easier and immediate purchasing
of a product) on their product's page if the merchant uses FBA.
Amazon is therefore
forcing sellers into a position where they can either continuously adopt
Amazon's services and become even more dependent on the company or risk
discrimination or removal from the essential e-commerce platform.
As our report
details, Amazon engages in a host of other surveillance tactics,
including copying competitor software with its AWS cloud computing division and
using its Alexa speaker devices to collect user voice data. Fortunately, there
are plenty of available solutions. Antitrust regulators, enforcers, and
Congress have previously used
many available tactics for curbing concentrated corporate
power in the American economy.
For example, Congress
can enact legislation or antitrust enforcers can initiate a lawsuit to
structurally separate Amazon's various divisions (such as its Marketplace and
its FBA division) into separate corporate entities. Such a remedy would prevent
Amazon from using its dominance to coerce parties to adopt many of its
services.
The Federal Trade
Commission can also use its broad rulemaking powers to prohibit the kinds of
coercive agreements Amazon imposes on its sellers and consumers to obtain
exceptionally favorable terms and extract endless amounts of data.
Congress and federal
regulators can even impose common carrier restraints on the corporation's
operations to prevent the company from imposing unfair terms on sellers. Such a
situation would impose additional public oversight onto Amazon's operations to
ensure Amazon's terms are fair and reasonable for all who wish to use its
Marketplace to sell products.
Each of these
solutions can help end Amazon's surveillance practices to create a fairer, more
democratic Marketplace for consumers and independent merchants.
A plethora of evidence shows that
Amazon will relentlessly expand its surveillance infrastructure to monopolize
markets. Now, with even children as
a potential target for collecting more data, Congress and federal regulators
must act to stop Amazon's harmful practices.
DANIEL A. HANLEY
is a policy analyst at the Open Markets Institute. Follow him on Twitter
at @danielahanley.