20 votes

Amazon copied products and rigged search results to promote its own brands, documents show

23 comments

  1. [10]
    Thrabalen
    Link
    Is this much different than what other very large stores (Target, WalMart, Costco) do? They have a search engine, but no one goes to Amazon thinking that they're getting unbiased search results....

    Is this much different than what other very large stores (Target, WalMart, Costco) do? They have a search engine, but no one goes to Amazon thinking that they're getting unbiased search results. Review rigging is another matter entirely, of course. That absolutely should not be misleading... but their own internal search engine? I just sort of assumed it was rigged to grow their business.

    5 votes
    1. [2]
      burkaman
      Link Parent
      Yes they do: https://themarkup.org/amazons-advantage/2021/10/14/amazon-puts-its-own-brands-first-above-better-rated-products#amazon-methodology-fig4b-survey-bars-Q2 Most people think Amazon search...
      • Exemplary

      no one goes to Amazon thinking that they're getting unbiased search results

      Yes they do: https://themarkup.org/amazons-advantage/2021/10/14/amazon-puts-its-own-brands-first-above-better-rated-products#amazon-methodology-fig4b-survey-bars-Q2

      Most people think Amazon search will give them the bestselling or best rated product, or just don't really think about it.

      Also, that's what they told Congress: https://docs.house.gov/meetings/JU/JU05/20190716/109793/HHRG-116-JU05-20190716-SD038.pdf

      Amazon designs its shopping and discovery experience to feature the items customers will want
      to purchase, regardless of whether they are offered by Amazon or one of its selling partners.
      Amazon considers many factors when choosing the shopping results featured for customers,
      including, for example, customer actions (such as how frequently an item was purchased),
      information about the item (such as title, price, and description), and availability.

      In question 7 they explicitly deny that their algorithms consider a product's relationship to Amazon.

      14 votes
      1. Thrabalen
        Link Parent
        Honestly, that's naïve from everyone involved. From Amazon thinking no one would call them on that, and from the shoppers who believed it in the first place.

        Honestly, that's naïve from everyone involved. From Amazon thinking no one would call them on that, and from the shoppers who believed it in the first place.

        1 vote
    2. [2]
      post_below
      Link Parent
      Online is rarely comparable to brick and mortar. Maybe never comparable where business is concerned. It's not about search alone, but rather a combination of factors. Amazon, naturally, has access...

      Online is rarely comparable to brick and mortar. Maybe never comparable where business is concerned.

      It's not about search alone, but rather a combination of factors.

      Amazon, naturally, has access to detailed sales data from retailers who use their platform. They also have full control over both the search and buy box algorithms. It's nearly impossible to compete with Amazon for the buy box, even if your price is significantly lower.

      Individually all of those things are fine, Amazon should be able to run their platform however they want. Of course they're going to favor themselves. The same logic applies to Google.

      Except that, like Google, Amazon is in antitrust territory. They have between 40 and 50% of the US ecommerce market (which isn't India, I know, hear me out). Moreover, Amazon is growing absurdly fast, their sales increased by 40% in 2020. Who knows when their growth will start to plateau. What that means is that nearly 50% of the online retail market is accessible only through Amazon. And a large part of that market is locked in. Prime members, to a large degree, don't go elsewhere if they can find what they want on Amazon.

      If Amazon decides, after reviewing your sales data and doing some cost analysis, that they're going to copy your product and take all of your sales, there's nothing you can do about it. You can't move to a competing platform, the closest competitor in ecommerce is Walmart with around 7% market share. If you were shortsighted enough to use Amazon as your main, or only, sales channel, your business is done.

      Once you're gone, Amazon can charge whatever they want for your (their) product. They already have the algos in place to automatically raise prices when the numbers indicate it's possible to do that without losing too many sales.

      And Amazon has the resources to do this in 100's of niches in the span of time it would take a smaller business to launch one product line.

      Amazon is well aware of the issues with all of this, from a regulatory standpoint. That's why they've been vehemently denying that they do it for years. Including Bezos, in person, to congress.

      Amazon's market share in India is undoubtedly smaller than in the US, and I don't know how regulators in India handle this sort of thing. Maybe nothing will come of it. But if they're smart they'll step in now, before Amazon achieves dominance.

      Meanwhile this will raise a lot of regulatory eyebrows in places where Amazon is already dominant. And that is potentially good news, I don't think anyone wants online retail to be controlled by one company. Which is exactly what will happen without regulation.

      10 votes
      1. vord
        Link Parent
        This is also part of the reason Apple has avoided antitrust over the decades, despite their vast first-party ecosystem, in a way Microsoft has not (and Google should not). They're not a vastly...

        Except that, like Google, Amazon is in antitrust territory

        This is also part of the reason Apple has avoided antitrust over the decades, despite their vast first-party ecosystem, in a way Microsoft has not (and Google should not). They're not a vastly dominant player in quite the same way (outside iOS, which is kinda pushing that line), so anti-trust is less of a factor.

    3. [4]
      vord
      Link Parent
      Let's expand on that Walmart example a bit. Lets suppose Walmart signed a deal to be the exclusive retailer for a new product, provided it does well in a few test stores. Walmart sees it flying...

      Let's expand on that Walmart example a bit.

      Lets suppose Walmart signed a deal to be the exclusive retailer for a new product, provided it does well in a few test stores.

      Walmart sees it flying off the shelves. So they copy the original product, put their copy front and center of every store in the nation. And they sell the creator's product at the bottom shelf in the back corner with the broken, flickering light.

      That would almost certainly get shutdown by regulators for being anticompetitive. How is what Amazon is doing any different?

      They're so dominant in the online sales space that their double-dipping as the storefront and a seller means it's easy to wipe out a new entrant without a second thought.

      If 80% of Amazon basics are good, an underlying assumption gets formed that AmazonBasics is better than the alternatives, especially since people prioritize top search results.

      So if you happen across a new product you hadn't encountered, who you going to trust? The assortment of random companies you know nothing about, or Amazon's?

      At this point Amazon just needs split up. Mandate that they must choose between selling their own products or providing a storefront for everyone else.

      8 votes
      1. [3]
        Thrabalen
        Link Parent
        Except that's what Walmart already does. As does Target, Macy's, etc. Whatever brand is going to make them the most money gets the best spot. That might mean a better shelf position, that might...

        Except that's what Walmart already does. As does Target, Macy's, etc. Whatever brand is going to make
        them the most money gets the best spot. That might mean a better shelf position, that might mean a particular coat going into the store window. Amazon rigging the search algorithm isn't so much putting the products they don't want to sell in a dingy corner, it's putting their own in the end cap, or with a sign advertising them. Or more to the point, asking an employee "where can I find ketchup?" and instead of pointing you to the Heinz, they point you to the store brand. Look a little further down the shelf, and there's the brand name you were looking for.

        Amazon isn't virtuous by any nature, but this is jaywalking levels of bad compared to the real problems.

        3 votes
        1. Diff
          Link Parent
          Sorry, this is totally tangential but unless you've stumbled across a koolaid-drinking member of upper management, any random employee you ask could not care less what brand of ketchup you buy....

          Sorry, this is totally tangential but unless you've stumbled across a koolaid-drinking member of upper management, any random employee you ask could not care less what brand of ketchup you buy. Just don't let your dog poop on the floor. And don't poop on it yourself. Amazon can exert the koolaid influence down to the consumer level directly through the software, where the koolaid influence at a physical store is limited to shelf layout that has to be somewhat mindful of anticompetitiveness.

          9 votes
        2. vord
          (edited )
          Link Parent
          This is true, but I doubt it is always their product. Walmart (and others) have a super shady practice in that vein, having manufacturers make crappier versions of their products, under the same...

          Whatever brand is going to make them the most money gets the best spot

          This is true, but I doubt it is always their product. Walmart (and others) have a super shady practice in that vein, having manufacturers make crappier versions of their products, under the same brand and labeling, to sell cheaper at their stores than others.

          Even then, when coming to grocery stores, they'll often promote the other brands more, via sales and such. I've never seen big sale banners for store-brands. But I sure do see a lot of "Buy 2, get 1 free!" specials for name brands that are still more expensive than the store brands. I'd wager the margin is a lot higher on the name brand items, and the store brands are mostly there for the poor people and contrast. I've never seen a store brand packaging look remotely as well-refined as a name brand.

          And there definitely a major difference (as @Diff mentioned). A shelf is a relatively minor barrier (my dingy flicker light was hyperbole), but when it comes to computing, it's generally accepted that the first few results will take the vast majority of the attention. It's a well-known trope that if you're not on the first page of Google results, you might as well be invisible.

          3 votes
    4. Thrabalen
      Link Parent
      None of this, by the way, is to say that Amazon is a stellar workplace or a model of business... they're far from perfect. I just feel like this is a distraction from the real issues of the company.

      None of this, by the way, is to say that Amazon is a stellar workplace or a model of business... they're far from perfect. I just feel like this is a distraction from the real issues of the company.

      2 votes
  2. [12]
    Pistos
    Link
    I only got a third of the way into the article, but my main concern is more about the laws themselves. Why is it "anti-competitive" for any given business, in its own brick-and-mortar store, or...

    I only got a third of the way into the article, but my main concern is more about the laws themselves. Why is it "anti-competitive" for any given business, in its own brick-and-mortar store, or its own website, to promote its own products over others? Sure, that reduces or eliminates competition -- in that website. Just that website. So are big businesses being penalized for being too big? i.e. Is the argument "almost everybody shops "just" at the Big Box Store, so competing products won't be found if they're only Tiny Store, so therefore we should force Big Box Store to stock and market products in an even distribution, so the competing products have a fair chance in the marketplace"?

    5 votes
    1. [4]
      Thra11
      Link Parent
      Often, anti-competitive practices involve (ab)using a dominant position to give an unfair advantage to something which is unrelated to how they achieved dominance. For example, a well known case...

      Often, anti-competitive practices involve (ab)using a dominant position to give an unfair advantage to something which is unrelated to how they achieved dominance.

      For example, a well known case was Microsoft abusing their position as the dominant OS to push their browser on people. In this case, Amazon is abusing their dominant position in selling stuff (originally books) online to push their own product lines which are unrelated to their original business.

      These anti-competitive practices are bad for consumers because they favour products which are made by the dominant business, rather than products which are actually better.

      8 votes
      1. [3]
        Pistos
        Link Parent
        I understand what you're saying. At the same time, I'm just not convinced there needs to be laws that prevent this behaviour. Let's carry this to a separate example. Let's say Joe Carpenter makes...

        I understand what you're saying. At the same time, I'm just not convinced there needs to be laws that prevent this behaviour. Let's carry this to a separate example. Let's say Joe Carpenter makes great, hand-made furniture, and opens up Joe's Furniture Shop. Is he doing something wrong by selling (in his store) only the furniture he made? Is he "supposed" to stock a wide variety of other furniture from other carpenters in town? And, even if he did, is he not allowed to put his own furniture in a prominent position near the entrance, and leave Gary Carpenter's work in the back corner? Is he required to carry equal amounts of stock from all the carpenters in the city?

        Am I the only one thinking this line of thinking is a bit silly? This is what I'm questioning. Why there are laws enforcing this sort of thing.

        Is it because it's a more severe problem at the vast scales of these mega companies (Amazon, Walmart, etc.)? Or is "dominant position" necessary to fit the definition of the problem?

        2 votes
        1. MimicSquid
          Link Parent
          There's a difference between a business that is primarily a retailer of other's goods and one that is primarily a manufacturer and sells their own goods.

          There's a difference between a business that is primarily a retailer of other's goods and one that is primarily a manufacturer and sells their own goods.

          7 votes
        2. Greg
          Link Parent
          It sounds like you're questioning monopoly/anti-trust laws as a concept; the short version is yes, it absolutely is because it's a more severe problem at vast scale. Very, very broadly, the moral...

          It sounds like you're questioning monopoly/anti-trust laws as a concept; the short version is yes, it absolutely is because it's a more severe problem at vast scale.

          Very, very broadly, the moral justification for Western legal systems supporting capitalism and free enterprise is that competition is in the interests of all citizens. Joe has the opportunity to start his furniture business and the ability to profit from it; the general public have the opportunity to buy quality furniture at a fair price because Joe will be outcompeted by someone else if he doesn't provide that. Obviously the reality is many millions of times more complex, but that's the basic pitch.

          When a single market player becomes too dominant, this starts to break down. They can sell below cost to crush all local competition, and any new entrants to the market, before raising prices as high as they like when they're the only player left in the game. They can buy up competitors that threaten to provide any real counterbalance to their prices or quality. They can squeeze suppliers out of business simply because they have nobody else to sell to. In short: once Joe's Furniture Shop dominates the landscape to a sufficient extent, he can sell crap products for high prices and nobody can stop him.

          That's the core purpose of anti-trust laws: the preservation of fair competition for the good of the population as a whole.

          5 votes
    2. [7]
      streblo
      Link Parent
      AFAIK brick and mortar grocers charge retailers fees for shelf-space which helps ensure new products have some validity to them and they'll actually sell (market research/testing etc.) Amazon...

      AFAIK brick and mortar grocers charge retailers fees for shelf-space which helps ensure new products have some validity to them and they'll actually sell (market research/testing etc.)

      Amazon seems to be taking the opposite approach, taking advantage of digital space by flooding their marketplace with a sea of crap (which they often don't have to even warehouse themselves) and then trying to establish their brand as a 'quality' brand (at least among the sea of crappy alternatives).

      What I'm unsure about is if there is any regulation for in-store brands having to pay the stocking fee and if those fees are differentiated by shelf location. Anyone have any knowledge of this?

      2 votes
      1. [6]
        stu2b50
        Link Parent
        When you think about it, it's pretty much exactly the same as store shelfing. Amazon search results are the "shelf" - to get in a good "shelf", e.g a high spot in the search results or, more...

        When you think about it, it's pretty much exactly the same as store shelfing. Amazon search results are the "shelf" - to get in a good "shelf", e.g a high spot in the search results or, more expensive, the coveted "amazon recommended" label, you have to bid in an auction, just like you'd auction for the most prime locations at a Walmart or whatever.

        In that vein, it's not really true that Amazon can place its items high up "for free" - after all, an AmazonBasics taking up a top result is a top result that can't be auctioned for a great deal of money. It doesn't cost cash flow, but there is an economic cost.

        4 votes
        1. streblo
          Link Parent
          I agree with what you're saying re: opportunity cost but I'm not sure online search results are directly transferable to brick and mortar shelves. If I search "6' USB-C cable" on amazon and your...

          I agree with what you're saying re: opportunity cost but I'm not sure online search results are directly transferable to brick and mortar shelves.

          If I search "6' USB-C cable" on amazon and your product isn't either featured or on the first page the chances of me buying it probably drop very drastically. In a physical store, eye-level and aisle-end shelves probably do command some sort of premium but in general products aren't arranged in a totally vertical fashion -- e.g. peanut butter may be on two or three shelves but typically it's not arranged as a column with the brand shelling out the least on the bottom shelf. Instead items are grouped by similar product and the difference between a "heavily featured" peanut butter and someone who pays the bare minimum is probably small (excluding end-shelves I guess).

          Of course, Amazon can stock hundreds of variations of products (through offloading warehousing to thirdparty sellers) while physical stores typically are limited to a handful so the premiums Amazon can charge are probably larger just due to the size of the field. When you consider the fact that @post_below mentions, in that Amazon doesn't have to do any market research at all of course they are going to be able to maximize the utility of the '$20,000' premium spots with their generics.

          4 votes
        2. [4]
          post_below
          Link Parent
          There isn't a cost though, not in a net sense. The profit margins on a direct to consumer product that you manufacture (even true if you're just contract manufacuring) are so high that they easily...

          There isn't a cost though, not in a net sense. The profit margins on a direct to consumer product that you manufacture (even true if you're just contract manufacuring) are so high that they easily negate the profit you lose (commissions, search bidding, FBA fees, etc..) by not letting someone else sell in that spot.

          That's especially true when you don't have to spend anything on marketing or research. The retailer you copied the product from already did the market research for you. In some cases they established the market and then got sucked into the gravitational pull of Amazon's giant, lucrative, audience.

          1. [3]
            stu2b50
            Link Parent
            Money is fungible, there is no difference between being paid $500 less and getting paid the same amount but then being fined $500. Of course, I'm not saying it's not a net profit for Amazon to...

            Money is fungible, there is no difference between being paid $500 less and getting paid the same amount but then being fined $500.

            Of course, I'm not saying it's not a net profit for Amazon to make their own generics, that's evident by the fact that they do make their own generics for all kinds of items, and Amazon tends to do things that make money, but you need to consider opportunity costs as real. The real advantage Amazon has is that it, like other retailers, has purchasing data from other suppliers to strike where the iron is hot at any given time. The fact that they also run the auctions to their search results/shelves is moot.

            In a world where, say, a recommended spot on Amazon search results has a market value of $20,000/month for a commodity item, an Amazon that chooses to give one of their biddable recommended spots to themselves is an Amazon that has $20,000 less dollars. Apart from auction and other misc fees, which Amazon would dodge, this is functionally the same as an Amazon that has to pay a 3rd party $20,000 for a spot; in either case, the net result is that Amazon, by making this choice, has $20,000 less dollars than the Amazon that did not make the choice.

            1 vote
            1. [2]
              post_below
              Link Parent
              No argument here, the opportunity cost is real. That cost just isn't going to stop them from from doing it because while they "lose" $20k, they gain $40k (so to speak). From a consumer standpoint...

              No argument here, the opportunity cost is real. That cost just isn't going to stop them from from doing it because while they "lose" $20k, they gain $40k (so to speak). From a consumer standpoint it's irrelevant, Amazon still gets to use its market position to stifle competition.

              Side note: You can't pay for a recommended spot on Amazon. Bidding doesn't impact the "Amazon's Choice" or "Best Seller" labels. You can of course pay for a sponsored spot, which increases your visibility by putting you before "organic" results.

              So by manipulating organic results, Amazon loses only the commission and fees they'd make if the sale went to someone else.

              2 votes
              1. streblo
                Link Parent
                I think it's worse than that. To me, they are artificially inflating the value of their sponsored slots by trying to offer as many alternatives as possible. It would be like if you went to the...

                You can of course pay for a sponsored spot, which increases your visibility by putting you before "organic" results.

                So by manipulating organic results, Amazon loses only the commission and fees they'd make if the sale went to someone else.

                I think it's worse than that. To me, they are artificially inflating the value of their sponsored slots by trying to offer as many alternatives as possible. It would be like if you went to the grocery store and they only kept the end-of-aisle shelves and the aisles themselves were replaced by giant unsorted bins full of products of varying quality but mostly crap.

                Sure, consumer choice is great but only if there is actual utility offered in those choices. Normally a retailer doesn't want to inventory a bunch of shit that collects dust on shelves but hey, if someone else wants to inventory it so you can charge more for your search results? Well that sounds great to me!

                The other question I'm left with is the auctioning of sponsored content regulated at all? If Amazon wants your business for their generics can they refuse to auction you a front page result or offer discounts to less-established/trustworthy competitors i.e. make the front page their product and a bunch of crap and put you on page 2 or beyond? Seems likely to me? Yes, there is opportunity cost to this but if they think its beneficial to do this and they can then they certainly will.

                1 vote