Amazon, Antitrust, and Private Label Goods

In the debate over private-label goods, it’s important to keep in mind why consumers prefer them.

by Alec Stapp | Director of Technology Policy

Last week, the WSJ published an investigation with the headline: “Amazon Scooped Up Data From Its Own Sellers to Launch Competing Products.” As the article notes, in a Congressional hearing last year, an Amazon associate general counsel said, “We don’t use individual seller data directly to compete” with businesses on the company’s platform. The reporter for the WSJ claims to have seen evidence of Amazon managers violating this self-imposed rule in order to improve its private label goods business (i.e., Amazon-branded products).

There are two issues at play here. First, there is the question of whether Amazon violated Section 5 of the FTC Act by engaging in “unfair and deceptive practices” in order to entice third-party sellers onto its platform. Amazon is currently conducting an internal investigation into what occurred and a Congressional committee has already said it will be looking into the matter. These investigations are necessary and worthwhile for determining what exactly happened and who knew what when.

The second issue is about antitrust law. Stacy Mitchell, the executive director of the Institute for Local Self-Reliance, said, “An exec testified in July that Amazon doesn’t use data from sellers to create its own rival products. Turns out it does. This is monopoly behavior, hence the coverup.” But as Doug Melamed, a professor at Stanford Law School, said in comments about the situation, “Using the data to improve product offerings is not, and ought not be, unlawful under US law. The issue is whether Amazon obtained the data by misappropriation or misrepresentation.” Professor Melamed is correct on the question of antitrust law. To understand why, it’s useful to discuss the history of the retail industry and how it works today.

1. All major retailers use data on what sells in stores to build their private label businesses

It is common practice for retailers, including grocery stores and department stores, to use data to develop their own store brands to directly compete with name brand products. As Benedict…