SEC investigates Amazon over business practices


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Jared Maloney

The Securities and Exchange Commission is investigating Inc. over its use of customer data.

More specifically, it is looking into the alleged routine use of data from third-party sellers to create competing products for the company’s private label businesses, such as the generic AmazonBasics and 365 by Whole Foods brands.

The e-commerce company  was also accused of using its search algorithms to recommend its own products over third-party companies, according to reporting by The Wall Street Journal.

These accusations come on the heels of a larger congressional investigation into Amazon’s status as a monopoly in 2019, in which questions were asked about Amazon’s use of seller data and manipulation of consumer search results.

During that investigation, Nate Sutton, Amazon’s associate general counsel, swore under oath that the company did not use third-party sellers’ data to compete with them.

However, the recent SEC investigation shows that Amazon has continued this flagrant misuse of customer data and has continued to use both customer and third-party data for its own unfair competitive advantage.

This is not the first time the SEC has investigated Amazon. In 2020, the SEC charged former Amazon finance manager Laksha Bohra and two family members with insider trading. On April 6, the SEC declared in a letter that Amazon could not block a vote by shareholders to investigate conditions at its fulfillment centers and conduct an independent audit, just five days after a warehouse in Staten Island became the first in the company to unionize.

In this case, the SEC was contacted after Amazon remained reluctant to disclose the details of an internal investigation it claimed to conduct after its congressional hearing. The SEC remains tightlipped about the investigation’s details and has declined to comment on the report to investigative media outlets.

Amazon’s issues with antitrust and unfair competitive practices are not new. The inherent conflict of interest that seems to come with being both a massive retailer and producer has dogged the company since its inception.

Legal scholar and Federal Trade Commission Chair Lina Khan published a paper in 2017 titled “Amazon’s Antitrust Paradox” through Yale University. It detailed the innate contradictions of interest that could arise from such an all-encompassing business model.

“In using its Marketplace this way, Amazon increases sales while shedding risk,” Khan wrote.

“It is third-party sellers who bear the initial costs and uncertainties when introducing new products; by merely spotting them, Amazon gets to sell products only once their success has been tested.”

As Amazon seeks to expand more into production and as an online marketplace, these conflicts are likely to become more frequent. It remains uncertain how regulatory bodies and  competitors will cope in the near future.

Still, this recent round of investigations from two separate government institutions seems to indicate that the problem is being taken more seriously in recent years. Amazon will not remain unchecked and unquestioned as it seeks to expand.