Jeff Bezos has been on a collision course with D.C. for years — this week's hearing marks a new chapter

Key Points
  • Amazon CEO Jeff Bezos will testify before Congress for the first time on Wednesday.
  • The hearing will likely serve as a flashpoint in lawmakers' examination of Amazon's market power. 
  • But insiders familiar with Amazon's business question whether members of Congress will ask the right questions.

In this article

Jeff Bezos
Elif Ozturk | Anadolu Agency | Getty Images

Amazon CEO Jeff Bezos will finally come face to face with lawmakers looking to question his company's growing influence at Wednesday's antitrust hearing. 

The hearing before the House Antitrust Subcommittee, which will be held over videoconference because of the coronavirus pandemic, will give lawmakers a rare opportunity to grill the Amazon CEO directly about Amazon's market power and business practices, along with other hot-button issues, like its treatment of warehouse workers during the pandemic.

The CEOs of Apple, Google and Facebook, who will also appear on Wednesday, have previously attempted to make overtures with politicians who have questioned their companies' power or policies, whether by appearing on the Hill or, in the case of Apple CEO Tim Cook, finding common ground with President Trump.

But Amazon has mostly put forth other top executives in past antitrust hearings with lawmakers, allowing Bezos to stay largely out of the fray. Dave Clark, Amazon's senior vice president of retail operations, Jeff Wilke, CEO of Amazon's consumer business, and Jay Carney, Amazon's top spokesperson and a former press secretary for President Barack Obama, have traded barbs with the company's critics in press interviews and on Twitter. 

Meanwhile, President Trump, angry over critical reporting from the Bezos-owned Washington Post, has repeatedly criticized the company, accusing it of everything from evading local taxes to taking unfair advantage of the U.S. Postal Service. The conflict reached a new peak in January, when Amazon filed a formal complaint over the Department of Defense's decision to award a $10 billion cloud computing contract to rival Microsoft. Amazon Web Services chief Andy Jassy told CNBC's Jon Fortt at the time, "When you have a sitting president who's willing to be very vocal that they dislike a company and the CEO of that company, it makes it difficult for government agencies, including the DoD to make objective decisions without fear of reprisal."

Wednesday's hearing will mark Bezos' first appearance before Congress. But he has been steadily increasing his presence in the nation's capital for years. 

After buying the Post in 2013, Bezos purchased a $23 million mansion in D.C.'s Kalorama neighborhood. Within a few years, Amazon selected the National Landing neighborhood of Washington suburb, Arlington, Virginia, as the location for its second headquarters, HQ2. Amazon remains one of the top lobbiers among tech companies and it has grown its public policy team in recent years.

Lawmakers going after an "easy target"

Wednesday's hearing is likely to draw new attention to the antitrust scrutiny surrounding Amazon, but people familiar with the company's business practices remain skeptical around whether lawmakers will ask the right questions. 

Amazon faces probes by the Federal Trade Commission, the Department of Justice and state attorneys general, as well as possible antitrust charges in the EU over its treatment of third-party sellers, The Wall Street Journal reported in June. 

Amazon's relationships with third-party sellers have emerged as a major theme of investigations. These sellers hawk their wares on Amazon's Marketplace, which accounts for more than half of the company's annual revenue, and some have complained about inconsistent policies and unclear communication from the company over the years. 

A WSJ report earlier this year found Amazon employees used nonaggregated or easily identifiable data from third-party sellers to build its own competing products, and the House Antitrust Subcommittee has pressed Amazon for answers on the data it collects from third-party seller transactions, what employees have access to transaction data, as well as how it determines who wins each sale and at what price. 

The report's findings appeared to contradict testimony given by Amazon general counsel Nate Sutton during a hearing in July 2019. Sutton said Amazon doesn't use third-party seller data to help develop its private-label goods, but that it does look at aggregated data from merchants. 

House Antitrust Subcommittee Chairman David Cicilline said the report raised suspicions that Amazon may have lied to the committee. The committee then called for Bezos to testify to address the matter. 

Jason Boyce, a former Amazon seller who is now a consultant to third-party merchants, says he experienced firsthand some of the strategies regulators are now examining. Boyce said he began to question whether Amazon's third-party seller data was being looked at by other teams as far back as 2007, based on information he gleaned from meetings with Amazon executives. About a decade later, his concerns became more personal when Amazon launched a private label bocce ball set that appeared strikingly similar to his, down to the "unique color scheme" designed by Boyce's brand. 

It's not uncommon for grocery stores and department stores to develop their own brands and promote them to customers. Additionally, Amazon says that its private label goods make up about 1% of its sales. 

Boyce said Bezos will arrive at the hearing prepared with statistics like these to try to downplay the importance of Amazon's private label products on the platform, as well as concerns that they're given preferential treatment over third-party goods in search ranking and advertising. 

"Bezos will follow the standard Amazon party line," Boyce said. "They like to focus on the numerator instead of the denominator, in terms of where they are or what they're doing in the market."

Ads and the 'buy box'

More complicated issues impacting third-party sellers are likely to fly under the radar during Wednesday's hearing, given time constraints and the fact that lawmakers may not have all the expertise necessary to understand the full nuances of certain technologies used on the marketplace, Boyce said. For example, he said lawmakers may not know to ask about the algorithms fueling Amazon's "buy box," which offers customers a one-click button to add a listed product to their shopping cart or buy it. It's an important sales driver, but not all third-party merchants qualify to get the box on their listings.

James Thomson, a former Amazon manager and now partner at Buy Box Experts, said Amazon's private label business is an "easy target" for lawmakers to go after, but that other issues, such as Amazon's use of customer data to target ads, should be considered as well. 

Thomson said targeted ads on Amazon have caused it to resemble a "virtual grocery store, where you're only shown aisles where you've made product purchases." He admitted it's not clear whether this access to detailed customer data gives Amazon an advantage over other sellers on the marketplace.

Nonetheless, he said, "It would be interesting to learn more about what Amazon's proprietary marketing is that it provides itself but doesn't provide anyone else, in terms of space, access to data, email campaigns, unpaid advertising placement."

Melissa Burdick, a 10-year Amazon veteran who now runs an Amazon ad buying technology provider, reiterated that investigators shouldn't overlook Amazon's advertising practices. "Amazon has become a pay-to-play platform because the game is to show up on the first page of search results," she added. 

The House Antitrust Subcommittee questioned Amazon last October about ad placement on the site, asking whether its algorithms favor third-party merchants who've purchased ads and other services, whether its private label business pays for sponsored ads and whether it makes ad space above the buy box available to third-party sellers. 

In its responses, Amazon said it doesn't reserve ad space for private label brands, adding that it "depends on many variables," such as what shoppers search for and the device they're browsing on. 

"Manufacturers will never publicly say they're upset with Amazon, but when Amazon suggests a private label product as a cheaper product, I think these are the questions," Burdick said. "I think it's looking at what is fair and then making some consistent and standardized rules around it."

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