Lawmakers focus on Amazon during antitrust hearing, grilling company on marketplace practices

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Rep. Pramila Jayapal. (Facebook Photo / RepJayapal)

Congress asked four of the top tech companies in the world to testify on antitrust issues Tuesday — but once questioning got underway, it was clear that many of them only had eyes on Amazon.

The Seattle tech giant fielded the several pointed questions from the House Judiciary Committee’s antitrust division. Lawmakers were particularly interested in learning more about how Amazon competes with third-party sellers in its marketplace. Representatives from Facebook, Google, and Apple joined Amazon on the panel.

The committee zeroed in on how Amazon treats third-party sellers because those practices raise some of the most serious questions about the company’s competitive behavior. That issue is already the subject of a European Union antitrust probe.

Rep. Pramila Jayapal set the tone early on. The Democrat from Washington hails from Seattle, “a place where many small companies became large giants, including Amazon,” she said. Jayapal asked Amazon associate general counsel Nate Sutton whether the company tracks the most successful products in its marketplace and then creates duplicates to compete with those items.

“You have this massive trove of data, people that are buying products on your platform,” Jayapal said. “You’re able to see which are the ones that are doing really, really well.”

Amazon associate general counsel Nate Sutton testifies before the House Judiciary Committee. (YouTube livestream screenshot)

Sutton said its popularity data is publicly available and claimed Amazon does not use individual seller information to inform the private-label products it develops.

“We use data to serve our customers,” Sutton said. “We don’t use individual seller data directly to compete with them.” He did not say whether Amazon uses aggregate data to gain a competitive edge for the products it sells.

During the hearing Tuesday, Sutton noted that retailers for decades have sold their own private-label products alongside other sellers. That position was unsatisfactory to Rep. David Cicilline (D-RI).

“The difference is Amazon is a trillion-dollar company that runs an online platform with real-time data on millions of purchases and billions in commerce and can manipulate algorithms on its platform and favor its own products,” he said. “That is not the same as a local retailer who might have a CVS brand and a national brand. It’s quite different.”

Though Amazon’s retail operation was the main focus, it’s not the company’s only business lawmakers are scrutinizing. Rep. Greg Steube, a Republican from Florida, asked a series of questions about Amazon’s dominance in cloud computing.

“As one of the early innovators, we had a lead, but major competitors have entered and are closing that gap such as Microsoft, IBM, and others,” Sutton said.

Amazon Web Services had a 32 percent market share of the cloud infrastructure market at the end of 2018, while Microsoft Azure was second at 16 percent, according to research firm Canalys.

Microsoft has emerged as Amazon’s chief competitor in cloud services and it is the most valuable company in the world. But the Redmond, Wash., tech company was not summoned for the hearing Tuesday.

Still, the company was a presence in the room because it faced its own antitrust crackdown in the late ’90s.

“The case later settled after Microsoft agreed to make it easier for Microsoft’s competitors to integrate their software with the Windows operating system,” Jayapal said Tuesday during the hearing.

Jayapal noted that some scholars believe that settlement paved the way for a new wave of innovation. “Some of the companies represented here today actually flourished after that court ruling,” she said.

During the hearing, Apple fielded questions about its App Store and Facebook endured a recitation of its social media dominance. Rep. Joe Neguse (D-CO) noted that Facebook owns four of the top six social media brands in the world. “We have a word for that: monopoly,” he said.

But the committee appeared most interested in interrogating Amazon.

Federal regulators have not opened formal investigations but are looking into whether the four companies who testified Tuesday are behaving anti-competitively.

Despite the attention the issue is getting, some antitrust experts remain skeptical that the scrutiny will amount to real changes. Larry Downes, director of Georgetown University’s Center for Business and Public Policy, said antitrust law would have to fundamentally change to pursue a successful case against the companies that testified.

“They don’t meet any meaningful definition of ‘monopoly,’ for one thing,” Downs told GeekWire in an email. “More important, there is no evidence that their practices have resulted in demonstrable harm to consumers in the form of price increases, which is essential for a successful prosecution.”

Though Congress isn’t pursuing legislation that would change antitrust standards, it is a priority for at least one candidate running for president in 2020. Sen. Elizabeth Warren is campaigning on a proposal to create new laws that govern “platform companies,” namely the four that testified in the hearing. Her plan would unwind previous acquisitions and prevent companies like Amazon from operating a marketplace and selling goods in it.

“Of course there have been loud but vague calls to change antitrust standards and harm thresholds, but so far as I know there isn’t a single piece of legislation floating around that would do so, including from the senators and congressmen yelling the loudest for ‘breaking up’ or otherwise punishing some of the most successful tech companies,” Downs said. “Tech has become a convenient punching bag for a variety of reasons, none of them related to antitrust. That’s all these hearings are, for better and for worse.”

[Editor’s Note: Amazon associate general counsel Nate Sutton’s title has been corrected since publication.]

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