SEC Investigates Amazon Over Use of Third-Party Seller Data

Whether or not Amazon uses third-party seller data to give its own private label brands an unfair advantage has long been subject of antitrust pressure from regulators. This week, Wall Street Journal reported that the Securities and Exchange Commission (SEC) is probing how the ecommerce giant handled disclosures of its employees’ use of data from marketplace sellers.

The Probe

An April 2020 investigation by the WSJ involving documents and interviews revealed that Amazon scooped data from its own third-party marketplace sellers in order to launch competing products under its proprietary private label brands.

Amazon has denied such findings and has since launched an internal investigation into its private-label division, yet it failed to provide a copy of its findings to Congress. Last month, members of the antitrust subcommittee of the House Judiciary Committee referred Amazon and its executives to the Justice Department over potential criminal obstruction.

Whereas Congress is already investigating Amazon over such abusive practice, the SEC probe will focus on how Amazon disclosed its business practices, including how its employees used data for its private-label brands.

The SEC regulates how public companies like Amazon communicate with investors, and it is empowered to bring civil enforcement actions when it finds that companies misled shareholders or failed to disclose important information in a timely manner. The Commission’s enforcement division has reportedly asked for emails and communications from several senior Amazon executives regarding the matter.

The SEC investigation, which insiders say has been underway for more than a year, comes two weeks after a US court dismissed an antitrust case filed against the ecommerce giant.

On All Fronts

The Federal Trade Commission, now headed by longtime Amazon critic Lina Khan, is also probing Amazon over potential violations of antitrust laws.

• In February, a complaint filed before the FTC accused Amazon’s ads for being deceptive, as the company routinely fails to clearly and conspicuously disclose which of the results are organic and which are sponsored.
• Earlier this year, Amazon was ordered to shut down its Sold by Amazon program for being an unlawful price-fixing scheme.
• Also last year, Amazon was fined a whopping $1.3 billion by Italian regulators for abusing its market dominance.
• Back in 2019, Amazon claimed during a Congressional hearing that it does not use individual seller data for developing its own brands, but it does, at the very least, use aggregated data (e.g., category revenue, keyword trends, etc.).

Bigger Picture

This latest probe by the SEC relates to a 16-month investigation into technology companies including Amazon beginning in 2019 by the congressional committee, which thereafter proposed a series of bills aiming to keep Big Tech giants in check. One of the proposed measures targets Amazon in particular, seeking to make it unlawful for the company to give its own products preference over those of competitors, or to use sellers’ nonpublic data to compete with them.

As of writing, Amazon is actively functioning as a marketplace, a retailer, and a logistics company all at once, and it is yet to make a definitive announcement of severing its marketplace business from its own retail business.