Amazon Unbound

by Brad Stone

  Behind the scenes, Lanny Breuer, the former head of the Justice Department’s criminal division under Barack Obama and a partner at a law firm that conducted work for Amazon, Covington & Burling, tried to influence Democratic committee members and keep Bezos out of the limelight. Lina Khan later told me they viewed Amazon’s posture as “ruthlessly aggressive and, frankly, rude to lawmakers,” and compared it unfavorably to Google’s more decorous approach, which had been forged by a decade of previous experience with government scrutiny.

  Finally, a bipartisan group of lawmakers threatened to subpoena Bezos, citing the Wall Street Journal article that quoted private-label employees on how they used internal data from third-party merchants to launch Amazon-branded products. An Amazon lawyer, Nate Sutton, had previously vowed under oath before the committee that such practices did not occur, so the lawmakers demanded that Bezos address this conduct and the question of whether Sutton had perjured himself. He and the company couldn’t avoid it anymore: for the first time, Bezos would have to testify before Congress.

  With the pandemic raging, Amazon’s policy and communications executives emerged from their respective quarantines to help prepare Bezos in his Day 1 office. Jay Carney later called the prep sessions “one of the high points of my year, work-wise,” both because he got to see colleagues in person and because Bezos was characteristically curious and willing to learn how best to navigate the challenge at hand. In one respect, he would have it easy on this maiden voyage: the four CEOs being called to testify didn’t have to be physically present on Capitol Hill, confined in a packed hearing room amid swarming photographers, but would instead present their testimony remotely, via live video conference.

  The hearing, on July 29, 2020, was avidly watched on both coasts and in the capitals of Europe. “Our founders would not bow before a king, nor should we bow before the emperors of the online economy,” said Cicilline in his introductory remarks, with Lina Khan hovering over his right shoulder in a sky-blue blazer and mask. Bezos appeared on camera from his desk in Seattle, wearing a dark navy suit and tie, and used his opening statement to deliver an elegant tribute to his parents and to the trust that customers place in Amazon while stipulating that the size of the retail industry left room for many competitors.

  From there, the hearing grew chaotic. Over more than five hours, representatives directed questions at Bezos, Sundar Pichai, Mark Zuckerberg, and Tim Cook, boomeranging between the unique issues related to each of their companies. Committee members frequently interrupted the CEOs, rushing to insert theatrical political statements into their constrained time limits instead of listening to fuller answers and any corporate boilerplate. Several Republicans also trampled over the topic with allegations of anti-conservative bias in tech. And to cap it all off, after his opening remarks, a technical glitch with the video conferencing software sidelined Bezos during the first hour of questioning.

  But when the technical issues were ironed out, committee members homed in on Bezos. He was assailed on topics that he had never before been forced to address publicly, such as counterfeit goods, and revelations from The Everything Store about Amazon’s furious price war with Diapers.com and its private attitude toward small book publishers, which it had once revealed by declaring itself a cheetah and naming an internal negotiation program “the gazelle project.” As Amazon’s legal department had long feared, the indiscriminate use of words and phrases was now being weaponized against the company.

  Mostly though, policymakers lasered in on the most accessible illustration of Amazon’s potentially anticompetitive behavior: its third-party marketplace and the torrent of complaints they had received from aggrieved independent sellers. Bezos earnestly answered these questions, but also seemed somewhat ill-prepared and unable (or unwilling) to respond with anything other than defensive corporate aphorisms. Former Amazon executives later compared his performance to that of countless employees who had worked hard, prepared for weeks, and still gotten their butts kicked when peppered with probing questions by the demanding and bellicose S-team.

  Pramila Jayapal, the Seattle congresswoman and an avowed Amazon critic, was the first to ask Bezos the central question: Did Amazon employees snoop on the private sales data of sellers? “It’s a candy shop. Anyone can have access to anything they want,” she quoted a former employee who had talked to the subcommittee.

  “We do have certain safeguards in place. We train people on the policy. We expect people to follow that policy the same way we would any other,” Bezos told Jayapal. He almost certainly knew that the policy was poorly enforced and had been regularly trampled upon by desperate employees striving to meet aggressive internal benchmarks. But he vaguely asserted that he couldn’t “guarantee you that the policy has never been violated” and insisted that an internal investigation into the matter was still ongoing. “The fact that we have such a policy is voluntary,” he added. “I think no other retailer even has such a policy.”

  Cicilline then asked why a small apparel seller had compared selling on Amazon to a drug habit. “Sir, I have great respect for you and this committee,” Bezos said, “but I completely disagree with that characterization…. It was a very controversial decision inside the company to invite third-party sellers to come into what is really our most valuable retail real estate, our product detail pages. We did that because we were convinced it would be better for the consumers, it would be better for the customer to have all of that selection.”

  Representative Lucy McBath from Georgia posed the question this way: “If Amazon didn’t have monopoly power over these sellers, do you think they would stay in a relationship that is characterized by bullying, fear, and panic?”

  “With all respect, Congresswoman,” Bezos replied, in the moments before he was interrupted again. “I do not accept the premise of that question. That is not how we operate the business. In fact, we work very hard to provide fantastic tools for sellers and that’s why they’ve been successful.”

  * * *

  As Lina Khan and other congressional staffers drafted their final report over the summer of 2020, I wondered about Amazon’s true popularity among the tens of thousands of sellers on its crowded marketplace. According to the evidence presented to the subcommittee by disgruntled merchants, Amazon appeared to be an almost cartoonish villain, bullying sellers, stealing their data, booting them from the site indiscriminately, and hurting their lives and livelihoods.

  In response, Amazon executives argued that the case for widespread discord was based on nothing more than anecdotes and that most of the independent merchants who sold 60 percent of the physical products on Amazon were thriving. “Anytime you have a population of a million, it’s not going to be too hard to find some folks who are unhappy,” said David Zapolsky. While he conceded that some of those anecdotes arise from Amazon’s mistakes, he said that most come from disgruntled sellers who “are not winning as much as they think they should be winning.”

  In lieu of some magical, all-encompassing poll to gauge the real sentiment of Amazon sellers, I decided to canvass not the vocal band of familiar antagonists in the seller community but the company’s own allies—the merchants who had previously lobbied for Amazon or spoken out on its behalf. As Congress deliberated the real character of Bezos’s empire, what did they think of Amazon’s always-evolving retail frontier and whether the company was fulfilling its duties as a fair and principled marshal?

  Paul Saunders had testified twice on Capitol Hill, in 2017 and 2018, as part of Amazon’s campaign to demonstrate it was helping small business. Saunders, a veteran of the U.S. Marine Corps, exemplified the Marine motto of Semper fidelis, or “always loyal,” by repeatedly praising Amazon to lawmakers for abetting the extraordinary growth of his Evansville, Indiana–based business, eLuxury, which sells high-quality housewares. “Amazon is vilified so often,” he once told a group of high-ranking public officials, during a private meeting about Amazon’s economic impact. “If it wasn’t for Amazon, I may not have been abl
e to build a business that employs seventy-five people, pays millions in local and federal taxes, and invests significantly in employee benefits.”

  But when I reached him in 2020, Saunders’s views had evolved. Rising fees and the increasingly expensive requirements of advertising on Amazon had gutted his profits; AmazonBasics products directly competed next to his listings in search results; and foreign sellers with lower costs, unenforced tax obligations, questionable reviews, and the fruits of other seemingly nefarious business practices had made it almost impossible to compete. Loyal to the bone, Saunders was extremely hesitant to share his concerns on the record at first and continued to reach out to Amazon executives in an attempt to enlist help. When he finally agreed, he sent me excerpts of a six-page, Amazon-style document he had presented personally to company executives, including senior vice president Doug Herrington.

  The paper exhibited the raw feelings of a frustrated partner. It suggested numerous ways for Amazon to support the welfare of the sellers who had played a role in its success, concluding: “I have gone ‘beyond the call of duty’ to be a trusted and impactful partner to Amazon and your customers. Unfortunately, and increasingly, it appears that Amazon may not share in this philosophy, specifically as it relates to third-party sellers.”

  A few months after those meetings, when nothing had significantly changed, Saunders moved much of eLuxury off Amazon in favor of more trusted partners like Walmart, Target, Wayfair, and Overstock, where he was seeing continued growth. He was disappointed and surprised that Amazon would not act promptly to penalize bad actors and protect their mutual customers. “I truly believe, and I know firsthand that numerous Amazonians agree, that Amazon understands the marketplace is a mess, but they just don’t know how to fix it,” he told me.

  Wendell Morris largely agreed with that sentiment. The founder of the Santa Monica–based YogaRat was one of the first sellers on Amazon to hawk yoga mats and yoga towels; he later expanded into beach towels and microfiber blankets, all sourced from China. In 2014, he became one of the few Amazon sellers that Jeff Bezos touted by name in his widely read annual letters to shareholders. “The beauty of Amazon is that someone can say, ‘I want to start a business,’ and they can go on Amazon and really start a business,” Bezos had quoted Morris as saying that year. “You don’t have to get a lease on a building or even have any employees at first. You can just do it on your own. And that’s what I did.”

  But by the time I talked to him, Morris, like Saunders, had changed his opinion. In 2016, when YogaRat employed seven people, he found that his listings were inexplicably disappearing from Amazon’s search results. He spent hours on the phone with an Amazon customer support staffer in India and wrote pleading emails to Bezos’s public email address. His listings were finally restored, though they never returned to their previous positions at the top of search results. A year later, his seller account was suspended altogether because some of the images on his listings violated Amazon’s guidelines against depicting groups of people in product photos. Morris conceded the error while bitterly showing me how countless other sellers violated the same rules without penalty. Someone—probably a competitor—had singled him out to Amazon’s enforcement team.

  While Morris scrambled to reinstate his account, other sellers of the same merchandise replaced him atop search results. YogaRat never recovered. He now runs what’s left of his firm alone with his wife, and the challenges are daunting. He is constantly fighting overseas knockoffs of his designs and reviews of his products that mysteriously show up on rival listings. When he calls Amazon customer service, he suspects the reps’ primary metric for success is how quickly they can get off the phone. Once a devoted yogi, Morris can barely stand to look at a yoga mat anymore.

  “I’m all for competition, but I did not start my business and go sell on Amazon so that I could eventually become fertilizer for Amazon’s growth as I am buried and destroyed,” he told me. “It’s apparent this is happening to a lot of sellers, and I don’t believe it’s right. What Amazon does is analogous to being invited over for Thanksgiving dinner, then finding out as you sit down to dine that you’re the turkey.”

  Stephan Aarstol and his firm Tower Paddle Boards made Bezos’s shareholder letter published in April 2016 (with his name misspelled there and in Invent & Wander, Bezos’s subsequent collection of writings, as Stephen). An entrepreneur with a memorable turn on the TV show Shark Tank, Aarstol employed ten people at the height of his company’s success and was selling more than $11,000 in inflatable paddle boards every day. Over the years he was a reliable guinea pig for Amazon, entering into a new program for Amazon-exclusive brands that agreed not to sell anywhere else and borrowing money from Amazon to fund his expansion, using the merchandise he stored in its warehouses as collateral. “His business has become one of the fastest-growing companies in San Diego, in part with a little help from Amazon Lending,” Bezos wrote.

  For Aarstol, the turning point came soon after. Hundreds of stand-up paddleboard sellers, with generic names like XYLove and FunWater, flooded onto the site, mainly from China, and jockeyed with Tower for sales. Some of these sellers competed by fraudulently generating one of the site’s most valuable commodities, positive customer reviews, which helped to determine the position of products in search results.

  Aarstol tried to advertise on Amazon to boost his visibility but that gutted his profits. In the years after he was mentioned in Bezos’s letter, he went from employing ten people to three and from recording $4 million in annual sales to less than $1.5 million. “Amazon doesn’t give a shit about brands,” said Aarstol, who by 2020 was almost completely off Amazon and focusing on sales over his own website. “They don’t care whether you live or die.”

  In the same investor letter, Bezos had also touted Bernie Thompson’s company, Plugable Technologies, quoting him as saying that shipping products in bulk to Amazon warehouses in Europe and Asia “changes the paradigm.” Thompson had competed with Chinese vendors for years; he was the seller who was once told, “Bernie, I’m sorry, but I’m going to run you over,” by Steven Yang, the otherwise genteel founder of the Chinese consumer electronics seller Anker.

  Despite that vow, and unlike the other former Amazon allies I talked to, Plugable was still thriving. Thompson had overcome identical products from AmazonBasics by keeping prices low and quality high, and he constantly launched new gadgets as the old ones became commoditized. But Thompson still harbored the sneaking fear that Amazon might suspend his listings at any time. In mid-2019, like Paul Saunders, Thompson capitalized on his goodwill with the company to get an audience in Seattle and delivered a twenty-page PowerPoint presentation outlining his dependence on the company and the danger he faced when products disappeared from the site arbitrarily. The solution was “no surprises,” and “less uncertainty,” one slide implored.

  But Thompson’s plea wasn’t heeded. With the arrival of thousands of new sellers onto the marketplace every month, Amazon’s enforcement staff was badly outgunned and the automated systems they set up were often gamed by bad actors. Just a few months after he delivered his presentation, on a Sunday in July, Thompson’s top-selling product, a laptop docking station that accounted for 40 percent of his sales, disappeared off the site.

  The listing finally returned after four days and $100,000 in lost sales—and only then because Thompson paid Amazon $60,000 a year for a premium service to engage the attention of an account manager, which “feels a bit like a protection racket,” he said. He never found out exactly why the laptop dock was suspended.

  The stories of these erstwhile Amazon allies underscored the problems that were laid out to the congressional subcommittee. Years ago, Jeff Bezos had given his marketplace team a few simple instructions: remove all friction to selling on Amazon; eliminate the barriers to cross-border trade; address any problems with innovative technology and automated systems, not costly manpower. One result was an explosion of low-priced selection that fueled the historic growth of Amaz
on’s e-commerce business. But another was the disintermediating forces of globalization that crushed Western sellers and created a dynamic that made it exceedingly difficult to protect intellectual property, prevent fraud, and fairly adjudicate disputes.

  Amazon knew about these problems but disguised them with its unrelenting corporate communications machine, which insisted that the company was a friend to entrepreneurs. “Third party sellers are kicking our first party butt. Badly,” Bezos wrote in the shareholder letter that was published in 2019, explaining how the marketplace was so successful that it was eclipsing Amazon’s retail business. A TV commercial that flooded U.S. airwaves in 2020, titled “Supporting Small Business,” depicted a woodworking shop opening up for the day. But as many Amazon sellers surely knew, those kinds of artisanal crafts makers could thrive on the bohemian enclave of Etsy, not on Amazon’s brutal and bloody capitalist frontier.

  Bezos was far removed from this battlefield. “The company has become so complex that it makes no sense for him to be aware of all the details of these things,” said James Thomson, a former Amazon Marketplace employee and chief strategy officer for the e-commerce consultancy Buy Box Experts. “But he should know that some of the things that Amazon works hard to tell a good story about are wildly broken.”

  * * *

  The final report from the antitrust subcommittee was published on October 6, 2020, and contained 450 pages of allegations and damning conclusions about the abusive practices of Amazon, Google, Facebook, and Apple. Lina Khan and her colleagues made a persuasive case: that the big tech platforms arbitrarily and self-interestedly controlled our political discourse, our financial lives, and the health of countless smaller companies—and that the failure to regulate them was a dangerous abdication of government responsibility.