The head of Amazon's marketplace has lost most of his authority amid internal shake-up

• Peter Faricy, Amazon's VP of marketplace, has lost all of his direct reports, just three months after his boss left the company, CNBC has learned.
• Many of Faricy's marketplace responsibilities have been moved to the retail group, which sources and sells products.
• Amazon's marketplace has been plagued by counterfeits and scammy tactics.

Just three months after the head of Amazon's massive marketplace left the company for WeWork, the highest ranking remaining executive in the business has been stripped of much of his authority.

Peter Faricy, the vice president of the Amazon Marketplace and a 12-year company veteran, currently has no direct reports except for his assistant, according to an internal document viewed by CNBC. Many of the functions previously overseen by Faricy or his former boss, Sebastian Gunningham, who joined WeWork in March, appear to have been reassigned to executives in Amazon's retail group, led by Doug Herrington.

It's the latest shakeup in the third-party marketplace, which now accounts for over half of Amazon's e-commerce volume. The business has grown rapidly in recent years by giving millions of outside merchants access to Amazon's global fulfillment center, logistics system and shipping relationships as well as its huge customer base.

But with its expansion, the marketplace has been plagued by counterfeits and infringements, and bad actors have been able to manipulate the site with fake reviews and other tactics that hurt legitimate sellers. While Amazon has created programs like Brand Registry and a software-based product called Transparency to help identify and weed out tricksters, these problems have proven difficult to stamp out.

Now, Faricy is being sidelined and Amazon is pulling the marketplace unit closer to the core retail business. The distinction is that in retail, Amazon sources products like watches, electronics and toiletries directly from brands and acts as the seller, rather than connecting third-party sellers with buyers.

Kyle Walsh | CNBC

CNBC's rendering of Amazon's retail org chart

In an e-mailed statement to CNBC, Amazon didn't address specific management changes, but did say that it's working to consolidate the groups so that customers have the same experience whether they're "buying a product sold by us or by the millions of small businesses selling on our websites."

"We've been working for some time on standardizing the products, tools and services we offer to the brands and resellers that sell on Amazon, and have made some organizational changes as a result," the company said.

Bloomberg reported earlier this month that the retail and marketplace teams are merging, citing former and current employees.

What's changed in the organization

The latest organizational changes put more control in the hands of Herrington, who is senior vice president of the North American consumer business, which includes retail.

Gunningham was Herrington's counterpart on the marketplace side. When he left in March, Amazon did not replace him and instead put Faricy in charge of the division while keeping his title as vice president.

Faricy now reports directly to Jeff Wilke, the CEO of Amazon's worldwide consumer business, the internal org chart shows. Faricy was most recently in charge of transaction risk management systems (TRMS) and seller services, though those roles are no longer in his purview, according to people familiar with the matter who asked not to be named because the changes are confidential.

Getty Images

Workers pack and ship customer orders at the 750,000-square-foot Amazon fulfillment center in Romeoville, Illinois.

Several people with knowledge of the marketplace said that Faricy's job has clearly changed but that it's not certain if he will ultimately stay with the company in a new position or find a job elsewhere. At least some of Faricy's marketplace responsibilities have moved under Dharmesh Mehta for the time being, according to two people familiar with the matter. Mehta, a former Microsoft executive, was promoted to vice president from director of Amazon's worldwide marketplace in March, according to his LinkedIn page.

But Mehta, whose current title is vice president of consumer and brand protection, doesn't report up to anyone in the marketplace. Instead, the org chart shows that he works under Herrington, on the other side of the house.

After Gunningham's departure, Mehta moved over to Herrington's group as did Peter Sauerborn, the vice president of North American marketplace, said one person with knowledge of the changes. According to the org chart, Mehta has nine people reporting to him, while Sauerborn has eight direct reports.

The reorganization comes amid a series of executive departures at Amazon in recent months and follows a layoff in the range of "low hundreds" that took place in February.

'Financial disincentives'

The retail and marketplace teams have a long history of competition. But in the last few years, the marketplace side has gained significance, thanks largely to an influx of listings from Chinese manufacturers. In its most recent quarter, Amazon generated $9.3 billion from the third-party marketplace, which includes commissions, and shipping and storage fees for their products.

Regardless of where the marketplace business presides, Amazon is well aware of the work required to fight fraudsters and knockoffs, using both technology and manpower, and the company tells reporters, whenever asked, that it has a "zero tolerance" policy for counterfeits.

Amazon is hiring people across the globe to work on the TRMS team, investigating fraud and safeguarding the marketplace "through a combination of automated and manual investigations of the buyers and sellers on our marketplace," according to some recent listings.

It even has a "financial disincentives team," which is tasked with "removing the financial incentive for Bad Actors while accurately and fairly paying millions of third-party Sellers."