This is our second instalment in the “Monopolica: Kill’em all series”, entitled “The Real Wolf of Wall Street? A look at how Amazon kills small business“.
In this second instalment, we look at how Amazon uses their ownership of the online marketplace to gain access to strategic data of their “partners”, which they then use to crush them. For the first instalment on how Yelp and Foundem.com got “Googed”, click here.
#3 Amazon: User partner’s data against them
Although Amazon has rejected claims by the EU about its use of its partners' data, WSJ has found evidence to the contrary:
“…interviews with more than 20 former employees of Amazon’s private-label business and documents reviewed by The Wall Street Journal reveal that employees did just that. Such information can help Amazon decide how to price an item, which features to copy or whether to enter a product segment based on its earning potential, according to people familiar with the practice, including a current employee and some former employees who participated in it…In one instance, Amazon employees accessed documents and data about a bestselling car-trunk organizer sold by a third-party vendor. The information included total sales, how much the vendor paid Amazon for marketing and shipping, and how much Amazon made on each sale. Amazon’s private-label arm later introduced its own car-trunk organizers.”
Furthermore, the Congressional investigation into Amazon found that "Because of the severe financial repercussions associated with suspension or delisting, many Amazon third-party sellers live in fear of the company" The Report cites the following as evidence: "My pregnant wife had to visit the ER due to increased anxiety and fear for the future . . . . Due to Amazon's stature, influence, and bullying nature, we are afraid of retaliation."
Like how Google crushed Foundem.com, Amazon crushes its "partners." For Foundem.com to be found, they relied on Google – who distorted the ranking to eliminate them. Similarly, to sell online, a business will depend on Amazon – forcing them to hand over the very data Amazon will use to destroy their business.
How could Islam stop such tactics? E-commerce requires small players to be on Amazon – there is no alternative. For example, Dalen Thomas once made $3.5 million per year selling these tripods on Amazon. However, Thomas's business was effectively driven out by Amazon. Amazon launched “its own versions of six of Pirate Trading’s top-selling tripods under its AmazonBasics label." Unsurprisingly, when "Mr. Thomas ordered one of the Amazon tripods and found it had the same components and shared Pirate Trading’s design." Also, Amazon used its control of the Marketplace to "suspended Pirate Trading camera tripod models that competed with the AmazonBasics versions repeatedly, Mr. Thomas said, alleging his tripods had authenticity issues. Amazon rarely suspended the tripod models that didn't compete with AmazonBasics versions, he said".
What did Mr. Thomas do? He "found being a seller on Amazon too risky and has largely pivoted to real estate investing." (All quotes taken from the WSJ article cited earlier).
What this illustrates is that marketplace has been privatized. In Islam, the marketplace must be commonly owned. Amazon's own actions prove this point. How? Amazon usurped the role of the government by suspending Mr. Thomas's product for "authenticity issues." It is illegal for a person to stop trade in Islam: “Allah has permitted trading” [TMQ 2:275]. Who is Amazon to forbid what Allah (swt) has permitted? The Congressional report cited above also noted that:
"For sellers, Amazon functions as a “quasi-state,” and many “[s]ellers are more worried about a case being opened on Amazon than in actual court…because Amazon's internal dispute resolution system is characterized by uncertainty, unresponsiveness, and opaque decision-making processes." [Emphasis added].
This again illustrates how Amazon has usurped the role of the government.
What’s Wall Street got to do with this?
Amazon would not exist in an Islamic economy. Similar to Walmart, it used an Islamically illegal means to finance its operation, i.e. interest. In February 2000, it issued $672 million convertible bonds at a 6.9% interest rate. This occurred just before the dot-com bubble burst. Without that infusion of cash, it would have likely not have survived or would be a regular company.
However, let's say hypothetically, a large player would rise using halal or legal means. What would happen? The State could create an alternative platform to host small businesses, like Pirate LLC, that sold tripods. Also, the State would not permit the company from seizing governmental functions. Any disputes around legal matters (such as the authenticity issues used by Amazon to suspend the sales of its tripod competitor) would need to be judged by a court - not a private business.
In the last instalment, we will look at how RCA lawyered its competition to death and how CVS cuts the revenues of its competitors and then sends letters to buy them out.