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Report: Amazon Used Independent Sellers Data When Developing Competing Products

By Donna Fuscaldo – Apr 23, 2020 at 5:26PM

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Amazon is launching an internal inquiry into the report, saying the actions violate the company's policies.

Amazon (AMZN 2.75%) has reportedly used data from independent sellers when developing in-house products to hawk on its vast eCommerce platform. 

Citing interviews with more than 20 former Amazon employees of its private-label unit and documents, The Wall Street Journal reports that the tech giant used the information to decide pricing, which features to emulate, and whether or not to enter certain product categories. Those practices fly in the face of what Amazon has long claimed, namely that it doesn't use data on third-party sellers to influence the development and production of its own products. 

A business owner packaging up a product to ship out.

IMAGE SOURCE: GETTY IMAGES.

According to the report, in one case employees used data and documents about a hot-selling car trunk organizer to introduce a competing product. The paper noted Amazon employees looked at total sales, the amount spent on marketing and shipping, and what Amazon made off of each sale. In another example, some Amazon executives were able to get access to data that included proprietary information. The data was then used to research what products are best sellers on the platform to determine if Amazon should launch a competing offering. If managers didn't have access to the proprietary information, they would ask a business analyst within the organization to create reports with the information included. 

In a statement to the WSJ, Amazon said it "strictly" prohibits employees from using nonpublic, seller-specific data for private label products. Amazon also said it was launching an internal investigation and that the behavior would be in direct violation of the company policy. 

Amazon's private-label business has long been criticized by some third-party sellers who argue Amazon favors its products over those of rivals. Its aggressive push to promote its own products has also raised the ire of regulators including the Federal Trade Commission, which is probing its retail and cloud computing practices. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Donna Fuscaldo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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