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According to Reuters, David Zapolsky, senior vice president, global public policy and general counsel at Amazon, previewed the company’s argument at a private in-house meeting on Tuesday.
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At the two-hour meeting, Zapolsky expressed confidence in Amazon’s ability to stave off the litigation, calling the company’s tactics “absolutely defensible behavior,” according to the Reuters report.
Sourcing Journal reached out to Amazon for comment.
The FTC’s 172-page complaint focuses on Amazon’s alleged anti-discounting tactics—including a secret algorithm called “Project Nessie” that allegedly drove an additional $1 billion in profit for the e-commerce juggernaut.
Project Nessie was designed to identify specific products for which it predicts other online stores will follow Amazon’s price increases, the complaint states. The algorithm allegedly raises prices for those products and, when other stores follow suit, keeps the now-higher price in place. This means Amazon would maintain the lowest price alongside its competitors.
The FTC takes “issue with us refusing to show prices that are higher than our biggest competitors,” Zapolsky said on Tuesday, according to the transcript viewed by Reuters. “It’s not that we don’t let customers sell at these prices, we just don’t feature that product at that price.”
“We think this is absolutely defensible behavior because to feature it would be to lose customer trust by advertising something that is not a good deal for them,” Zapolsky said.
Jason Goldberg, chief commerce strategy officer, Publicis Groupe, told Sourcing Journal that much of the legal dispute is subjective
“When Amazon tells Tide, ‘We’re only going to sell Tide soap if you promise that we always have the lowest price on soap, and you promise to never sell soap at a lower price to Costco,’ the government will argue that’s a violation of the Sherman Act and these anti-pricing laws,” Goldberg said. “What Amazon will say is, ‘No, we’ve never told Tide they can’t sell soap at a cheaper price to Costco, we just said that if they do, we’re not going to advertise and promote their soap.”
Acknowledging the criticism around the FTC allegations or workplace safety, Zapolsky apparently even quoted Taylor Swift lyrics during the meeting, which was attended by top Amazon brass, including CEO Andy Jassy and other executives.
“The meme of the day, as a very scrutinized company, is to adopt the tao of Taylor Swift: ‘Haters gonna hate’ and you have to ‘shake it off,” Zapolsky said.
Zapolsky also addressed the FTC’s allegations that it forces sellers to use its distribution and logistics services. The claims extend to sellers’ ability to obtain Prime-eligibility for their products—which the FTC calls “a virtual necessity for doing business on Amazon.” The FTC also claims the packaging of Fulfillment by Amazon (FBA) with Prime eligibility has made it more expensive for sellers on Amazon to also offer their products on other platforms.
Goldberg said the fulfillment side of the antitrust case is “way more complicated and way less settled.”
“It’s semantics, right? Is it causation or correlation? Do people use FBA because it works and that’s why they sell more, or are they forced to use FBA and they’re unsuccessful if they don’t?” Goldberg said. “That’s what some of these arguments come down to. But it’s absolutely true that if you’re a big company, and the government is watching you, and you’re potentially going to get sued for antitrust, sometimes you decide not to do things that are totally legal. You just don’t want to do them, because it’s just not worth the trouble to defend it. You just don’t want to give the government a big antitrust target.”
A main contention of the FTC is the introduction and later cancellation of its Seller Fulfilled Prime (SFP) delivery program, which enabled third-party sellers to ship Prime-eligible products out of their own warehouses without having to use FBA services. While the commission claims Amazon executives realized SFP was fostering competition, the company has contended that most sellers using the program were not meeting Amazon’s two-day delivery standards.
Amazon revived the SFP trial program this summer.
“Featuring lower prices and offering customers faster delivery is absolutely consistent with antitrust laws,” Zapolsky said.
The antitrust lawsuit the FTC filed against Amazon on Sept. 26 accuses the company of operating as an illegal monopoly. The lawsuit, which was joined by 17 state attorneys general, was filed in federal court in Seattle and follows a four-year investigation into the company’s practices.
“The whole complaint is based on a very constrained and manufactured view that Amazon is a monopoly,” said Zapolsky. “This is at odds with not only how our competitors evaluate the marketplace, but also our own lived experience of how we shop.”
In the suit, the agency asked the court to consider forcing the online retail giant to sell assets as the government accuses Big Tech firms of monopolistic behavior.
Regarding the FTC, Zapolsky said, “Filing this lawsuit gets a lot of publicity.” But, he assured Amazon workers attending the private meeting, “We have seen this before.”
Ultimately, Goldberg says that for a company of Amazon’s immense size, the antitrust suit is just another part of doing business.
“If Amazon very clearly did nothing wrong, they would still be likely to be sued by various municipalities and they would still have to invest a bunch of money to defend themselves from those suits,” Goldberg said. “But even if they’re having to spend a fortune to defend themselves, it’s not clear that a judge or a jury is going to agree with Amazon’s lawyers at all. It’s not as simple as open and shut as their lawyers want to make it in an all-hands meeting.”