Amazon replicated ‘benchmark’ products to promote own brand: Report
An investigative report by Reuters has revealed that Amazon ran a systematic campaign of creating knockoff goods and manipulating search results to boost its own product lines in India. The publication has based its report on thousands of pages of internal Amazon documents – including emails, strategy papers, and business plans indicate so.
Earlier in February, another Reuters investigation revealed that the company gave a tiny group of vendors preferential treatment for years. Internal documents revealed that 33 Amazon sellers accounted for about one-third of the value of all goods sold. Further, two merchants in particular (Cloudtail and Appario), accounted for around 35% of the platform’s sales revenue in early 2019.
Amazon has indirect equity stakes in those two merchants. Collectively, this means that 35 sellers on the Indian e-commerce marketplace accounted for around two-thirds of its online sales. (Amazon has more than 4 lakh sellers)
The Competition Commission’s Investigation
The CCI ordered an investigation into the issue after the Confederation of All-India Traders (CAIT) filed a complaint. The CCI later submitted before the Karnataka High Cout that the Reuters February story backs up its investigation.
After the Karnataka High Court, the Supreme Court also rejected Amazon’s appeal against the investigation. A three-judge bench led by Chief Justice N.V. Ramana said:
“We expect major companies like Amazon and Flipkart, big companies like Amazon and Flipkart, to volunteer for inquiry and transparency, and you don’t even want (an) inquiry…You must submit, and an investigation must be performed.”
The CCI is still investigating the issue. Meanwhile, Amazon has decided to end its relationship with Cloudtail.
Private-brands team copied products
The documents reveal that Amazon’s private-brands team exploited internal data from its Indian marketplace to copy products sold by other companies. It studied proprietary data about other brands, identified ‘reference’ or ‘benchmark’ products, replicated them, and then offered them on its own platform.
Citing one such example, the report says Amazon followed the measurements of John Miller shirts and replicated them. For pots and pans, ‘Prestige’ was the ‘reference brand’. The company’s employees also rigged search results to display those products in the first 2 or three search results on Amazon.in.
One document showed that Amazon had the ambition to be amongst the Top 3 brands in each sub-category they competed in.
Indian Private Brands Program
The new report also suggests that after Amazon employees learnt that manufacturers of ‘reference’ products used unique processes that impact the end quality of the product, they planned to partner with them. One document titled “Indian Private Brands Program” said:
“It is difficult to develop this expertise across products and hence, to ensure that we are able to fully match quality with our reference product, we decided to only partner with the manufacturers of our reference product.”
Although Jeff Bezos himself explained to the U.S. Congress in 2020 that Amazon does not use internal data to create its own private-label products or manipulate search results to promote them, the documents suggest that Amazon is apparently abusing the data, at least in India.
Rigging search results
Amazon used “search seeding” to boost the rankings of its private-brand goods, according to an internal report from 2016. Referring to Amazon’s product codes (Amazon Standard Identification Numbers or ASIN), the report said: “We used search seeding for newly launched ASINs to ensure that they feature in the first 2 or three ASINs in search results.”
The e-commerce company used another technique called “search sparkles”. Sparkles are banners that Amazon displays above search results to show the product it wants to promote. Amazon also placed promotional information about its products on the detail pages of competitor products to direct traffic to its own products.
The move resulted in massive sales drops for Indian retailers.
Amazon has said that Reuters has not shared the documents and as such, it cannot confirm the veracity of the claims. “We believe these claims are factually incorrect and unsubstantiated.”
The company added that it doesn’t favor private-brand products. Further, it strictly prohibits the use or sharing of non-public, seller-specific data for the benefit of any seller, including sellers of private brands.
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