Is Amazon Too Big? We Ask Its Sellers
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One day this summer, I met a guy named Molson Hart. Molson liked the Canadian beer. Hart's tall, barely 30, with a boyish face. And when he met me at our studio, he seemed a bit flustered. Dude, I'm nervous right now just having you talk about that. It's so nerve-wracking when I tell my friends, I'm going to be on the Recode Vox Media podcast. People are just like, yo, why are you doing that?

Hart sells toys on Amazon. I founded and am the CEO of a toy company called Viahart. We make products like Brain Flakes, Goodminton, and a plush brand called Tigertail Toys. And we sell a lot of product on Amazon. And the reason he was so nervous? He had agreed to discuss a topic that many in the business world just won't: how Amazon's business practices hurt consumers and sellers.

Recently, Hart took the risk of writing a blog post all about it. I think that what I've written, what I'm saying is pretty legit. It's right. It's well-researched. But in Amazon's terms of service, there's a line that says that, you know, we're not allowed to make press releases. We're not allowed to talk about the Amazon services publicly. And so technically, I'm violating the agreement right now by discussing it and

I don't know, if Mr. Bezos doesn't like what I have to say, maybe we won't be able to buy our toys on Amazon. Heart's not alone. During the six years I've reported on Amazon, I've talked to a lot of people who sell on Amazon, from CEOs of well-known brands to small mom-and-pop business owners. And almost all of them say the same thing. Yeah, Jason, I'll talk, but don't quote me. What the heck is going on? ♪♪

I'm Jason Del Rey and this is Land of the Giants: The Rise of Amazon. On this episode, we're going to dive into one of the hottest topics in Silicon Valley and in Washington, D.C. Is Amazon's dominant position in retail just a sign of its overwhelming excellence? Or is Amazon too powerful? The thing that makes capitalism capitalism is competition. But as you have more and more corporate agglomerations of power,

You're going to see less and less competition. I think we need vigorous antitrust legislation in this country. Because he's got a huge antitrust problem because he's controlling so much. Amazon is controlling so much of what they're doing. We've got to break these guys apart. The question of Amazon's business practices and whether they're anti-competitive is a huge and complicated topic. So we're going to zoom in and explore through the stories of three business leaders and their experiences selling on Amazon.

Legal thinkers, politicians, and sellers have accused Amazon of creating an environment that these sellers can't live with and can't live without. That's all coming up. But first, we need to go back to Amazon's early days to understand how we got to this point in the first place. Back in the 90s, Amazon acted like any other retailer, say a Walmart or Best Buy.

It would buy products from manufacturers or distributors, mark them up to a retail price, and then sell to you, the customer. That's called a first-party sale at Amazon. And it's the way Amazon started selling books and then other products like CDs and DVDs.

In 2000, Amazon introduced what it calls the Amazon Marketplace. For the first time, it opened up its website to let other people, called third-party sellers, list their products on Amazon and sell directly to shoppers. For a fee, of course. This was a win-win situation. Amazon got to increase the number of products it could offer without having to actually buy the inventory. And for sellers, Amazon's Marketplace was a great way to reach a lot of shoppers.

So it makes sense that the marketplace attracted tons of attention from small business owners and entrepreneurs. Entrepreneurs like Molson Hart. One day I had this epiphany when I saw this app roller on Amazon that was selling for like $13 or $14 that had like 50 reviews. And I knew how much it cost in China. It was like a buck in China. I was like, okay, $14, Amazon, 50 reviews. That means there's sales volume there and massive margins. Oh.

I'm going to launch a thousand products on Amazon. And so that's what we ended up doing. Hart knew a thing or two about Chinese products because he had moved to China after graduating college in 2009. He started a toy company called ViaHart,

And by 2013, it was turning a profit. It was selling mostly to regional toy store chains, as well as doing some third-party sales on Amazon. But then, one of those chains went bankrupt. And then they didn't pay us on the last payment, which left a rather sour taste in my mouth, especially in the context of, you know, we were being very successful with e-commerce and every product that we launched on Amazon was

was kind of turning into a success. With toy stores closing all around the country, it made sense for Hart to go all in. So we went from having 100% of our sales effectively being through brick-and-mortar retail channels in like 2013, 2014, to now like really a total flip. We're probably like 99.5% e-commerce. Wow. And almost all of those e-commerce sales come from Amazon.

Today, the so-called marketplace is a really big deal for Amazon. In his most recent shareholder letter, Jeff Bezos revealed an impressive stat. Last year, third-party sales accounted for 58% of Amazon's physical product sales. That means more stuff was sold on its website by other sellers than by Amazon itself. So how did this happen? Well, there was one big innovation called Fulfillment by Amazon, or FBA.

It launched in 2006. Under that program, third-party sellers could store their products in Amazon warehouses. Amazon then would handle the packing, shipping, and customer service, again, for a fee. And most importantly, FBA allowed third-party sellers to qualify their products for Amazon Prime to reach Amazon's best customers. For sellers, that Prime checkmark next to their products is invaluable.

So at this point you might be thinking, wait a minute, this all sounds great for shoppers, for sellers, and for Amazon. What's wrong with this picture? To answer that question, we need to talk about ads. Think about what happens when you search on Amazon for something generic, like backpacks or a desk lamp. The first row of results you'll see will have a small light gray description. It says sponsored. These are ads that a company paid for, and here's how it works.

Amazon sells ads based on keywords, the words people like us use to search for things. So third-party sellers like Molson Hart could bid on a keyword like plush toy and have their product come up as the top result ahead of what's called organic search results. Hart says sellers have to buy sponsored ads because when customers are faced with an overwhelming amount of options,

they're more likely to pick the thing that's right in front of them. The products have to be seen by customers. The only way to ensure that is to pay sponsored advertising. Ads have become a big business for Amazon, but they've created problems for sellers, especially smaller companies like hearts. So we transitioned from a world where we didn't have to pay Amazon additional money

in order for our products to be seen to a world where we do. And that, the amount of money that we spend on advertising goes up every year. Because it's more competitive? Yeah, more and more people are selling on Amazon. The more people that sell on Amazon, the more people want to advertise their products on Amazon. The more people who advertise their products on Amazon, the more drives up the cost of advertising. Because like Google AdWords, it's done by an auction. As in, the highest bidder wins. Here's an example.

Hart has a construction toy called Brain Flakes. It's a set of plastic interlocking disks that you can build things out of.

He buys ads on Amazon to help people find Brain Flakes. You bid on Brain Flakes construction toy or construction toy or building blocks. So, Lego and I are going like head to head when someone searches building blocks, like which product is going to appear? Is it going to be Brain Flakes or is it going to be Lego? It might seem normal that there's this open competition for ads when you're talking about a generic phrase like building blocks. But it gets crazier.

Hart has to actually spend money to buy the search terms for his own brand name, like "Brain Flakes," because other companies can buy it too, to try to capture some of his business. It's that competitive. At this point, though, it makes sense to offer a defense of sponsored ads. First, it's just really hard for a brand to rise up to the first organic search result.

Secondly, for new sellers on Amazon, they don't have a ton of sales yet or positive reviews, so they can buy keywords to get discovered. I asked Hart about this idea. Well, Amazon might say that,

They want to display new products ahead of old favorites on Amazon. And sponsored advertising is a way to make that happen. Discovery, yeah. Yeah, but there are other ways for Amazon to make that happen without charging us $183,000 just to have our products appear in search. I think that... That was the total last year. Yeah, 2018, we spent $183,000 on sponsored advertising. So advertising fees are one gripe Hart has with Amazon.

Another one is about pricing, and this one comes up a lot in arguments that Amazon is anti-competitive. So from 2012 when we started on Amazon through March 2019, we weren't allowed to sell the products that we sell on Amazon for less than

on our own website, on Walmart.com, or eBay.com. If you did that, there could be consequences, though Amazon won't tell us what exactly they are. And so that is the way that Amazon kind of ensures high prices. What happened in March 2019? In March 2019, Amazon ended their pricing parity policy. It's said in a less fancy way. They changed their contract so the sellers could sell their products for less on their own website and on other platforms.

But Hart says the policy is still being enforced in other ways. Now, if you price your goods on Walmart for less than you price them on Amazon, you will lose the buy box on Amazon and your products will no longer appear as prominently in search. If you don't work in e-commerce, the phrase Hart mentioned, the buy box, might be unfamiliar. But the point is pretty straightforward. If you don't win the buy box, you don't sell. It's as simple as that.

Amazon told me there's nothing nefarious about this. It says sellers do have control over pricing, and the company just notifies them of pricing disparities to, quote, maximize their sales in our store. Still, according to Hart, Amazon's behavior hurts sellers. It also hurts consumers. So the way the consumer harm happens is that the constant fee raises and then enforcing price parity together

And this is one aspect of Amazon's power that members of Congress and government agencies may be looking at. But first, there's one obvious question I had to ask Hart. Why don't you just...

pull off of Amazon if it's this bad. Like no one's forcing you to sell there. You are smiling. We're in too deep. You know, we've built this big business. I'm really proud of what we sell. Yeah, sometimes I want to pull my hair out because of how difficult it is. But I'm just kind of in it for the long haul. If you woke up tomorrow and you said, I've had enough and you pulled off, how long would your business remain viable?

You know, maybe 30 seconds. I mean, there's no reason for us to exist without that channel. You can't sell toys today without selling toys on Amazon. So Hart's story shows us the challenges a small third-party seller faces on Amazon. Advertising costs, pricing policies, and the disaster his company could face if it left Amazon.

The next CEO we're going to hear from, well, he runs a big company, a company you've definitely heard of. I'm David Kahn. I'm the chief executive officer of Birkenstock Americas. Kahn started at Birkenstock in 2013 with this goal, to make Birkenstock's business as big as its name recognition.

This was really a niche brand. I mean, this was a niche within a niche within a niche. And, you know, the stereotypical Birkenstock consumer was what you thought the stereotypical Birkenstock consumer was. Hippie, crunchy granola. You know the stereotype.

And by the way, Kahn, he does not fit the stereotype. I'm a New Yorker. I'm living in the Bay Area, but it's not who I am. I'm not a gray area guy. I'm black or white. What he's talking about is right and wrong. We'll get to that. But going back, when Kahn started working at the company, Birkenstocks was selling wholesale to Amazon. So a first party, not a third party sale.

And Kahn was okay doing business with Amazon. A lot of business. They were double-digit percentage of our business. It was not a small little side business. But after a couple years, things started to change for Birkenstock.

We really started to get incredible brand momentum. I mean, we were becoming very important to every possible retailer that we could want to be meaningful to. I mean, the idea of this little, you know, funky German product that's made in our own factories and, oh my God, we use cork, one of the most sustainable products on the face of the earth, and it molds to your foot and people were loving it.

And around the same time, the problems were mounting on Amazon. The marketplace was getting flooded with other sellers of Birkenstocks. Some Khan knew, but others, he didn't. We would get an inordinate number of phone calls from people who got shoes that fell apart or had problems. And sure enough...

99.9, it may even be 100% of the time when they were asked, "Where did you buy them?" It was on Amazon. - Kahn suspected these were counterfeit products. And so he did a little detective work. - I would order shoes online that I thought looked suspect. We would get them to the office. In some cases, shoes came in exact replica boxes. In some cases, they came wrapped in a rubber band.

But they smelled like glue. We knew they were fake. Kahn was outraged, and he assumed Amazon would be too. The real tipping point, Jason, was when we called this out to them and did it in a very clear manner, like, oh, my God, do you realize this is happening? It wasn't as if they were like, oh, my God, we share your concern. What are we? It was as if, yeah.

Yeah, well, you know, open a case. Meaning Amazon told them to basically fill out a form. Now, by the time you open the case, you ship it to them, you get some, you know, fake sellers shut down. Hundreds of people have bought your fake products. Hundreds of people now had a bad experience with your product. And that, to Kahn, was a black and white problem. If even one person had a bad experience with the Birkenstock brand, that was one too many.

So Birkenstock pulled the plug. It stopped selling its footwear to Amazon. I don't want to sound holier than thou, but we decided, do the right thing. However hard it is, do the right thing. That decision? It's way easier for Birkenstock to make than it would be for a smaller company, like the toy company Viahart you heard from earlier. Birkenstock still has some power in a world dominated by Amazon. And yet...

Three years after Kahn pulled the plug on selling Birkenstocks to Amazon, you can still find its products on the website. Despite everything he finds wrong with the platform, Kahn still allows some Birkenstock vendors to sell a small quantity of his products on Amazon's marketplace.

Because basically, Amazon has become the default search engine for consumerism. So because people do go on there and search, we were very concerned that if we didn't in some way manage our good partners that we distribute our product with, then you would only go on Amazon and potentially see fakes and stolen product. So anyhow.

We do have certain partners that we authorize on Amazon. I asked Amazon about the Birkenstocks situation. A company's spokesperson said Amazon worked closely with Birkenstock in the summer of 2016 to address their concerns about counterfeits. But the two sides continued to disagree on how to solve the problem. Kahn wanted Amazon to ban all sellers of Birkenstocks that didn't have an official relationship with the shoe company.

Amazon declined to do that, saying a ban would also punish legitimate sellers. Amazon also sent me a company blog post from this past summer that reads in part, Amazon strictly prohibits the sale of counterfeit products. We invest heavily in prevention and take proactive steps to drive counterfeits in our stores to zero. If you're a merchant on Amazon, it can be a never-ending battle.

The competition, it's fierce. And profit margins are getting squeezed. Counterfeits and other scams are out there undercutting your prices and maybe even your reputation. And if that's not enough, when you think, wow, I'm just barely surviving on the marketplace, but I can afford to leave. Turns out that Amazon wants to go head to head with you because it's not just hosting the marketplace, it's making its own products too. That's after the break.

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Nope, it's not December quite yet. But who doesn't love Christmas carols in the middle of the summer? I'm at an event thrown every year by Amazon in New York City. Basically, Christmas in July.

It's a special preview for journalists of what the company calls the "must-have" products that'll be featured on Amazon this holiday season. The event space has so many mini showrooms that Amazon actually printed out a book with all the products inside. Okay, so I'm opening up this holiday preview lookbook and I opened up to a page of furniture and these are all Amazon brands.

That's right. Since 2017, Amazon's been selling furniture under its own brand names: Rivet and Stone and Beam. In the retail industry, they're called private label brands. So we have a Rivet Rustic Industrial Dining Table. Very hipster-ish. Although, since I think it's cool, it's probably out of style. Amazon selling mid-century furniture under a private label? Yep, that's the Amazon of today.

Company spokesperson Kelsey Friedrich told me that the furniture had a 30-day return policy. No questions asked. And if you're wondering... Yeah, everything's available Prime shipping, but it's not exclusive for Prime members. So if you're not a Prime member, you can still purchase Rivet and Stone & Beam. And Amazon owns dozens of other brands that don't carry the Amazon name. Product lines like the snack food brand Happy Belt and Solimo, which makes everything from trash bags to body wash.

And then there's Amazon Basics, which is their biggest private label brand. It's huge. If you search Amazon Basics today, more than 2,000 different products show up. So what's it like to go head-to-head with an Amazon brand on Amazon? I asked that question of a wide range of people who compete with Amazon brands. Several of them told me they'd be happy to talk, but only off the record, except for Charlie Cole.

I am the global chief e-commerce officer at the Samsonite Group. We have a bunch of brands within our portfolio, some of which are well-known across the world, like Samsonite and Tumi and American Tourister.

Samsonite is the third company in our episode. And Cole says Samsonite's relationship with Amazon has felt increasingly one-sided since he joined the luggage company back in 2016. It's been, I'd say for the most part, a fairly carnivorous evolution on the Amazon side for the last two or three years. And what I mean by that is there's this old line from the great Mel Brooks movie Spaceballs,

God willing, we'll all meet again in Spaceballs 2 to search for more money. And I feel like that's sort of the mantra that's on the wall of the Amazon offices. That search for more money? It's become evident in two ways, Cole says.

First, that Amazon Basics brand, it includes luggage. So number one, the Amazon Basics brand started to be larger and larger. And in some cases, if you typed in Samsonite and you typed in American Tourister, all of a sudden you see sponsored links or a more heightened organic link for Amazon Basics. You know, that's just naturally going to cause us to kind of side-eye it a little bit and cause a little friction.

The other thing Cole has noticed is the growth of Amazon's advertising business. Those search results with the sponsored label that we heard about with Molson Hart. Amazon's making money off your products, making money off your data by creating brands, and Amazon's making money off the privilege of being on their platform by selling you advertising to protect your brand. So it's been a tough relationship.

And just like ViaHeart and its brain flakes, even major consumer brands like Samsonite increasingly have to buy advertising on Amazon, even for their own brand names. Case in point: the night before I interviewed Cole, I searched for Samsonite on Amazon. At the top of the results page, I saw a giant ad for Samsonite. And underneath that ad, I saw a row of suitcase images that included two more ads sponsored by Samsonite.

That's a lot of advertising stamps I'd had to buy just to get top placement when I'm already searching for the brand. You asked me the question, like, why do we have to spend money to do it? And the answer is because somebody else will. I think from Amazon's side, what they miss that Google does not is give that consumer the best possible experience, right? If you type in Amazon basics, don't show them a Ramoa bag, right? That is not the best customer experience.

Amazon doesn't really seem to care about that. They seem to care about monetization more than anything else. And I think that's another area that differentiates them as quote-unquote consumer-friendly. They put forward this idea that it's all about giving the consumer what they want. But to your point, if we didn't advertise on those keywords, then they would see something that they didn't search for. That isn't a customer experience-centric opportunity. Remember, Amazon's number one leadership principle is customer obsession.

And Jeff Bezos has always wanted Amazon to become Earth's most customer-centric company. In the Amazon world, it doesn't matter what your eyeball wants, you get shown Amazon.

It's not about fairness to me. It's about the customer promise that Amazon says they make that like oh well We're just doing what the customer wants and I call BS on that right when you start to actually assume that every single customer on earth wants Amazon I don't think you're being realistic and I don't think you're being honest your customer promise anymore and that's the thing that really bothers me and and

If they want to monopolize their platform, then that's a dangerous game that they can play. But don't talk out of both sides of your mouth and say anything you're doing because that's what the customer wants. I mean, I think it'd be probably unrealistic for Bezos to go out on the stock market and be like, hey, you know what? That customer promise thing, we just made that up. We just really want to sell everything on earth to everybody and we just want to monopolize the whole world. And it's a very Orwellian strategy. Chances are he's not going to say that, right? But the reality is,

I don't like the hypocrisy of saying, they say to us and they say it publicly, that they're doing it to help the customer. At this point, that is now disingenuous and just flat out not true. So Cole seems pretty upset. Despite all of this, Cole insists he has no problem with Amazon making and selling its own brands. I will say this about the Amazon Basics program.

it does cause every brand to up their game. What Cole finds unfair is the promotion and placement for those products.

Amazon, he says, doesn't seem willing to support and incubate brands other than its own. Honestly, there has never, ever been any sort of reciprocation from Amazon towards brands. But now that lack of reciprocation is harming the consumers, and it's making it so the consumers are being basically misled, and they're asking for one thing and being fed another thing which they didn't ask for. And I think that's where it really sucks. I have to admit, Kohl's candor was refreshing.

So I wondered what Cole hoped to accomplish by speaking out. My hope is just that to hopefully be fair, to be honest, and at the same time, if we can open up a channel of communication to make Amazon what it used to be, right? Where Amazon was an amazing channel that we were absolutely thrilled to be a part of. And for what it's worth, we are still thrilled to be a part of it. It's just a much different relationship because of this one-way relationship that they now have towards retailers. And so that's my hope. There really is a chance for this to be a symbiotic relationship as opposed to the one-sided one it is today.

So, maybe there is a conversation Amazon can have with its sellers. And maybe something could change. But the bigger question these days is whether Amazon should be forced to change. By government regulation. By the threat of antitrust action. I asked Charlie Cole, could anything short of enforcement fix this situation?

If history is any indicator or predictor of the future, then no. Like, their behavior's not going to change because their behavior hasn't changed and it's gotten more and more and more kind of predatory. That's a bit of a negative word. I'll go back to my word I used before: carnivorous before, right? So yeah, I think if you made me bet on it, Jason, that will be what causes them to change, if anything. So if Amazon doesn't change its ways, what could the government actually do? This committee will come to order.

Government is starting to pay attention. We know the Federal Trade Commission, the Department of Justice, and some states are looking into Amazon. I asked Amazon for an interview on tape for this episode, but it declined and sent written responses instead. But there was this hearing in the House of Representatives earlier this summer.

Our third witness is Nate Sutton, Associate General Counsel of Competition at Amazon. Every time Amazon is questioned about whether its behavior is unfair to its own sellers, it basically offers the same response. Amazon's success in retail depends on our partnership with third-party sellers that sell their products right alongside our own products.

We have invested heavily in these sellers, and they are growing twice as fast as Amazon's own retail and make up almost 60% of total unit sales in our stores. So Amazon highlights this data to argue that sellers are thriving on the marketplace. Of course, Sutton, the Amazon lawyer, got some pushback. Here's Congressman David Cicilline, Democrat from Rhode Island.

That's a different question. What I'm saying is you are selling your own products on a platform that you control, and they're competing with products in the marketplace from retail, from other sellers.

Right? Thank you. Thank you for the question. That practice, I think, has been common in the retail industry for decades. Most retailers offer their own products in their store as well as third-party products. But Mr. Sutton, the difference is Amazon is a trillion-dollar company that runs an online platform with real-time data on millions of purchases and billions of... In its written statement to me, Amazon said its private label products account for only about 1% of total sales.

which the company says is far less than other retailers. Our incentive is to help the sellers succeed because we rely on them. If we did that, we know they'd go elsewhere. They have many options. Many options. As we heard from Molson Hart, we know that's not how it feels for some sellers. So who's right? And what's fair? And fair for whom? Honestly, we could spend the next hour talking about antitrust law and enforcement, and we would barely scratch the surface.

It all depends on how words get defined and laws interpreted and what enforcement agencies choose to do. How would you feel if...

The government that prosecutes murders said, we will only bring a trial for murder if we know 100% we can win. That would be clearly under enforcement. And that's kind of where we're at with the agencies. That's Sally Hubbard. She's a lawyer who thinks there are a lot of cases that could be brought under current antitrust law, but aren't because they're not the easiest cases to win. Hubbard is one of the people pushing for more government action against tech giants like Amazon.

She's a former assistant attorney general for antitrust in New York State. Today, she's at the Open Markets Institute, a think tank that defines its mission as fighting, quote, corporate monopolies. Everyone's so used to living in a country where that doesn't enforce its antitrust laws. People don't even think the antitrust laws exist anymore. We reached out to Hubbard because we wanted to hear how a case might be made against Amazon.

One thing she's looking at is the rapid expansion of its private label brands. Of course, private label brands are nothing new. Costco has its Kirkland Signature brand, and Target's got several popular ones of its own, including the kids' line Cat & Jack. And they could be very good for consumers, offering them similar products to a name brand, but at lower prices. So what makes Amazon Basics any different? The difference is that Target...

is not a monopoly. Amazon is a monopoly. Hubbard says there are a few different ways to prove this. There's direct evidence of monopoly power, and that is the power to control prices or the power to exclude competition. Amazon can do both of these things on its marketplace, control prices and exclude competitors. We heard it happening earlier in the stories of the three companies.

Hubbard and many other legal thinkers also see Amazon as a monopoly because they define the playing field differently than Amazon does. I get really frustrated when people say that Amazon is not a monopoly because of some small percentage of the whole retail market of the United States of America. Amazon itself makes that very claim. In fact, it's the company's primary argument for why it is not a monopoly.

At that congressional hearing, Republican Congressman Greg Stubbe posed this question to Amazon attorney Nate Sutton. What's the current market share of Amazon in total U.S. domestic retail sales? Amazon is 1% of the global retail market and 4% of the U.S. retail market, approximately. 4% of the U.S. retail market. By the way, Amazon sent these same stats to us in a statement. 4 sounds pretty small.

But Sutton's math puts Amazon in competition with all of retail, both e-commerce and physical stores. Hubbard says that's not the right definition. That is not how you define a relevant product market for antitrust purposes.

And when you define the relevant product market, you don't say things like all e-commerce. If you look at any antitrust case that's ever happened, it's never been like that. Microsoft, the definition I think was Intel-compatible PC operating systems. That was the relevant product market. Molson Hart, the toy seller we heard from earlier, agrees that Sutton is understating Amazon's size and, by extension, its monopoly power.

Amazon likes to tout these statistics. So we're only four to five percent of retail sales, but they don't sell cars. They don't sell gasoline. You know, they're pretty weak in food. They're weak in grocery. And those account for a huge portion of retail sales. And, you know, the question is not whether or not Amazon has five percent of overall retail sales. The question is whether or not Amazon has an 80 percent market share in books or toys or luggage.

In other words, how you judge whether Amazon is too powerful depends entirely on what category or categories you put it in. Hubbard says Amazon's monopoly power is also clear from the way many sellers and brands feel that they have no choice but to accept Amazon's terms or else. Well, if you talk to Amazon sellers, they're living in fear. I mean, I could have spent the last three years doing nothing but talking to Amazon sellers who have been wronged,

All of a sudden, they're cut off. They don't know why. Their whole livelihood is at stake. You know, with a flip of a switch, their livelihood is gone. How often do they want their comments to be associated with their name? Never. Never, because they are living in fear. They have no other alternatives. And I've often suggested to them, could you sell on eBay? And they say, no, the volume is not there.

And when you consider that Amazon's own brands are directly competing with these sellers on a platform that Amazon runs, Hubbard says this combination is bad for competition.

Or as I like to say, the tech platforms are controlling the game and they're playing it too. So they're able to put a thumb on the scale, a very big thumb, in favor of their own products and services that are on the platform, making competition really impossible, fair competition impossible for those who depend on their platform to reach users. And it's not just the existence of Amazon Basics and other private labels that bothers Amazon's critics.

It's the way those labels get created. In the congressional hearing, Amazon lawyer Nate Sutton got a question from the company's hometown congresswoman. Pramila Jayapal, a Democrat, represents most of Seattle.

And she asked if Amazon uses data from third-party sellers to inform its own private label offerings. Essentially, you have this massive trove of data, right? People that are buying products on your platform. And so you're able to see which are the ones that are doing really, really well, like that size 14 pant or that houseware that's being sold. Do you track that? And then do you create products?

that directly compete with those most popular brands that are out there? Thank you. Let me answer that question. That data on popularity of products, like much retail data, is actually public data for each of our products. You can see where it's ranked. You can see how popular it is. We do not use any of that specific seller data in creating our own private brand products.

We do offer private brands on occasion because we think it offers high value and low cost items for customers and because customers demand that and we want to provide that opportunity for customers. Thank you. I know my time is up. Let's break that down.

Sutton was careful to say that Amazon is not using any specific seller data when it comes up with its private brand products. But that doesn't mean Amazon can't see, in real time, what general types of products are selling well, like phone chargers or bath towels, and at what prices. For David Kahn, the Birkenstock America CEO, that gives Amazon an unfair advantage.

If I'm a boot company and I make a well-known six-inch wheat boot that's highly recognizable, what's to stop Amazon now from not just making the boot but directing their sales and

And all the AI to anyone who's bought your boot or searched your boot in the last however many years, you're almost facilitating them. It's rope-a-dope. They're playing with you until the time they come in with the knockout punch. And if I were them, oh my god, are they a retailer? They're a data management company. And every consumer transaction is giving them data.

Amazon says everything it does is to help the consumer. And so far, it's faced no real threat of antitrust enforcement in the U.S. That may be changing, but how it changes depends a lot on legal interpretations and politics. Because antitrust policy is in many ways part of a larger debate about how much government should get involved in business.

Molson Hart, the toy seller, thinks government could intervene, but it could also go too far. I'm not calling for having some 75-year-old congressman rewrite the rules of e-commerce. I'm not sure that's the best idea. I do think the Department of Justice should look into it and really try to figure out whether or not all the things Amazon does is right. Sally Hubbard says current antitrust laws could be applied to require Amazon to play fair.

either by implementing legislation or more drastically, breaking up the company. So what would that mean in this case? That means that everyone gets treated equally. If you are controlling the infrastructure for competition, you can't give prioritization to your products. It has to be a level playing field for competition.

you know, you get access to reviews systems and everyone gets access to review systems, you know, making it fair. And it's very similar to the idea of net neutrality. Just because you control the broadband pipes doesn't mean you get to pick the winners and the losers. Our fight is for big structural change.

It's a plan that's been championed by Massachusetts Senator Elizabeth Warren during her presidential campaign. Amazon's marketplace would be considered a platform utility, kind of like a public good. Amazon would be required to spin off its private label brands to a separate company. The hope then would be that Amazon Basics would compete on the same level as a Samsonite or Viahart. We'll see.

After covering Amazon for a long time, I can definitely say it would be an incredible story if any of this happens. But in the meantime, Amazon's being as consistent as ever in its talking points. It is not a company that gives in easily.

This is so important because the secret sauce of Amazon, where there are several principles of Amazon, but the number one thing that has made us successful by far is obsessive compulsive focus on the customer as opposed to obsession over the competitor.

Audio news clips come from The David Rubenstein Show, Face the Nation, Hannity Live, Speakeasy with John Harwood, Washington Post Live, and Forbes.com. Our show's producer is Rebecca Sinanis. Our editor is Allison McAdam. Brandon McFarlane engineered this episode and composed our theme. Our senior producer is Golda Arthur. Our showrunner is Art Chong. Our executive producer is Nishat Kerouac.

I'm Jason Del Rey. We'll be back in September with our final episode on Amazon, recorded live at Recode's Code Commerce event. In the meantime, let us know what you think. Our email address is landofthegiants at voxmedia.com. You can also talk to us on Twitter. We're at Recode. Land of the Giants is a production of Recode and the Vox Media Podcast Network.