HOFFMAN: Here’s Why Congress Should Tie Amazon’s Heavy Hand

REUTERS/David W Cerny

Adonis Hoffman Contributor
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On Wednesday, the House Judiciary Subcommittee on Antitrust will hold a hearing on “Big Tech.” One thing lawmakers should keep in mind when it comes to Amazon? The company doesn’t just want to dominate the market. It wants to be the market.

More than an online retailer

Despite its embarrassment of riches — including paying little or no federal tax — all is not well. Amazon, Facebook and Google are being scrutinized and criticized for their size, dominance, and business practices. Both the Department of Justice (DOJ) and the Federal Trade Commission (FTC) are investigating how these companies do business and their impact on consumers, competitors and the commercial market, and leading members of Congress have called for more regulation and oversight of Big Tech. European regulators have been all over the global behemoth for the very same business practices.

Last week, the Retail Industry Leaders Association, which includes Walmart, Target, Best Buy and other top retailers, submitted comments to the Federal Trade Commission, asking it “to take the next step with investigations and actions against companies that are impeding free market competition or deliberately deceiving consumers.” That surely includes Amazon and Google.

Taking advantage of small and minority-owned business

While Amazon might easily brush aside complaints from its big competitors as sour grapes, it will have a much harder time justifying its oppressive practices with small and minority sellers, who are merely pursuing the American Dream. Small sellers throughout the country see selling on Amazon as an entrepreneurial path not only to making a living but to financial freedom. In a perfect world, they would have no problem, but seller after seller has been disappointed by the way Amazon engages in practices that are unfair, deceptive and downright predatory.

For example, when a seller asks for basic information on how Amazon computes its reimbursements or calculates fees, he does so at his own peril. Among other things, Amazon does not like to be challenged by its sellers. If a seller persists, Amazon has been known to seize his funds, suspend his account and worst-case scenario, ban him from selling altogether. That is, of course, if the seller even gets to interact with a live person at all. Whether through intimidation, retaliation or just plain bullying, Amazon gets away with these practices because it is so big and sellers have no comparable place to go. If you are a seller on Amazon, you might as well be a sharecropping captive on its plantation, and when things go wrong, no one can hear you scream.

A bully playing by its own rules

Amazon is a bully that holds sellers to one set of rules, while operating under its own. It changes its policies without notice, and claims the right to do so at any time. The Amazon Sellers’ Agreement is structured to give Amazon every possible advantage over sellers.

It is an adhesion, “take-it-or-leave-it” contract that provides sellers with few rights and little recourse. It explicitly reserves the right to suspend or terminate sellers for any reason or no reason at all. When a legitimate dispute arises, Amazon may negotiate initially, but if a seller continues to challenge the company, Amazon has been known to retaliate. Mandatory arbitration is the law of the land, and the company rarely loses.

Stories of sellers who have been kicked off the platform and banned for life are heartbreaking, but increasingly common. Many have poured their life’s savings into the business only to meet with total banishment from the platform. Even today, few third-party sellers are willing to publicly criticize Amazon’s practice for the very real fear of total loss of business or livelihood.

Controlling demand supply, distribution and price

Sellers have little control over the price of their products because Amazon dictates what it wants the price to be. Amazon often withholds sellers’ funds arbitrarily and indefinitely. At any given time, Amazon holds hundreds of millions of dollars in sellers’ earnings on its own account. Provisions in Amazon’s sellers’ contract empower Amazon to collect and hold disputed funds from sellers, collate those funds with the funds of other sellers, invest those funds and earn interest on them. But the contract expressly states that Amazon will not pay interest to the sellers whose funds it has seized. Amazon denies sellers the right to review their own records beyond 18 months even though it has this information.

Third-party sellers on Amazon who sell directly to consumers generally earn more profit than vendors, who sell their goods to Amazon. Amazon can arbitrarily and without notice force a seller to work as a vendor, thereby decreasing the seller’s profit margin. The company has been known to auction off sellers’ goods without their knowledge or consent.

Usurping privacy and data by deception

Amazon routinely sells, trades and discloses proprietary and confidential data about sellers to third parties without the consent or knowledge of the sellers. Amazon refuses to give the seller’s access to their own sales data whenever there is a question about returns or refunds so that the seller can reconcile his own books. In addition, Amazon has been known to capture the voice of sellers when they are on the phone with Amazon, again without knowledge or consent, and with no disclosure as to how this information is used, stored or for what purpose.

While these practices are abhorrent, they are just the tip of the Amazon iceberg. As the company continues to dominate e-commerce, there is a deeper, darker side to Amazon. It is a side that subjects sellers to underhanded, deceptive, unfair, predatory, punitive and retaliatory practices and intimidates them into silence. As Amazon gives great shopper discounts on the one hand, it takes just as much from small business on the other. The U.S. needs to smack Amazon’s heavy hand.

Adonis Hoffman is chairman of Business in the Public Interest, Inc. He held senior legal positions in the U.S. House of Representatives and the FCC and is the author of “Doing Good: The New Rules of Corporate Responsibility, Conscience & Character.”

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.