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It can. Amazon is not a typical grocery store

The corona virus has The stationary retailers were even less able to limit Amazon’s market power.

Since the antitrust and regulatory spotlight is on the abuses of Amazon during the pandemic, a report by The Wall Street Journal Last week it was announced that Amazon employees had access to data from individual marketplace sellers when developing products that the company would create and sell under its own brand names. The report appears to contradict the testimony of a top Amazon lawyer, Nate Sutton, who said at a congressional hearing that the company never used seller data to create its own products.



Hal Singer (@halsinger) is the managing director of Econ One and an associate professor at the McDonough School of Business in Georgetown. Shaoul Sussman (@shaoulsussman) is a legal fellow at the Institute for Local Independence.

On Friday, seven House Justice Committee members, four Democrats and three Republicans, sent a letter to Amazon asking CEO Jeff Bezos to testify and clear the protocol. “It is critical for the committee,” said Congress members, “that Amazon is responding to these and other critical questions related to competition issues in digital markets as part of its critical work of studying and understanding competition issues in the digital market.”

To counter this congressional pressure, Amazon defenders are selling the myth that the company’s alleged exclusionary behavior – especially regarding the appropriation of information from and subsequent competition with independent retailers on its platform – is no different from that of the typical grocery store in the future .

There is no problem with private labels per se;; Other retailers have successfully launched this type of product over the years. The problem is whether the information Amazon uses to create its clone has been improperly retrieved, as by the diary and whether Amazon’s discriminatory control over the search for products on its dominant platform jeopardizes innovation among independent retailers.

Here are five reasons why Amazon’s argument “Everyone does it” is wrong.

1. As an incubator for new products, Amazon can generate a larger share of the profit from branded products compared to brick-and-mortar stores.

The Amazon Marketplace is an exciting laboratory that introduces new and untested products every day. Contrary to the physical limitations of brick and mortar, Amazon’s shelf capacity for presenting new products is infinite. Many small brands, which would probably never attract the attention of a traditional large retailer, can sell their products directly to consumers in the marketplace. And unlike your neighborhood store, Amazon can afford to host these brands in its market, as applicable laws protect it from liability if experimental products kill or hurt Amazon.com customers. Most recently, the Fourth Circle Court of Appeals ruled that while Amazon was not immune to Section 230 lawsuits, the law did not classify it as a “seller” of the harmful product and, therefore, was not liable for the sale of defects under state law.

Amazon can collect valuable information about emerging products and use this information to decide which markets to enter. Amazon can develop its rival version earlier in a brand’s life cycle and get more of the brand’s future profits.

In contrast, brick-and-mortar stores mainly deal with more established brands that already have references and recognized consumer appeal. By the time a brand appears on a retailer’s shelf, it’s likely that it has been around for a long time and has been copied, which means that that retailer doesn’t have the same profits from copying. This also means that the established brands can better withstand the invasion in this retailer’s aisles.

2. Because Amazon sells sophisticated advertising services to its merchants, it has unprecedented access to the data of sellers who launch their products in the marketplace lab.

Using a vendor’s proprietary data, including the amount an upstart brand needs to spend on advertising to generate consumer demand, Amazon can identify the next hit long before it could be another established brand or retailer. This information, which only Amazon has access to, can be used to determine whether the hype that a particular product generates on its marketplace is authentic or the result of serious ad spending. It offers Amazon a first mover advantage over other sellers on its platform when launching a private label product.

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