In a detailed Wall Street Journal report, Amazon has been accused of “juicing” search results “to more prominently feature listings that are more profitable for the company,” such as the company’s own private-labeled offerings. According to the WSJ, the relatively recent move was opposed by Amazon search engineers as being contrary to the mission of focusing on the customer’s best interests.
There was a similar report earlier this year that was released by Bloomberg that accused the e-commerce giant of undermining small merchants selling through its site by using data and search placement to boost its own private-label products at the expense of the merchants.
In the WSJ report, it was said that Amazon’s lawyers had raised red flags about utilizing search algorithms to generate more profit, saying that it could end up provoking regulators to come down on the company, and there is a good chance this could happen. In its defense, Amazon has denied favoring its own brands artificially at the expense of relevance or the customer’s best interest.
Based on the article, there seems to be an internal battle between Amazon retail executives and Amazon/A9 engineers who seek to stay independent. Former Amazon engineers were quoted substantiating claims that the company sought to make product profitability a prominent ranking factor.
“Executives from Amazon’s retail divisions have frequently pressured the engineers at A9 to surface their products higher in search results.” According to the WSJ:
Amazon retail executives, especially those in its private-label business, wanted to add a new variable for what the company calls “contribution profit,” considered a better measure of a product’s profitability because it factors in non-fixed expenses such as shipping and advertising, leaving the amount left over to cover Amazon’s fixed costs, said people familiar with the discussion.
According to previous judicial opinions, search algorithms are constitutionally protected speech under the First Amendment. That means that, in the abstract, Amazon is able to rank results in whatever manner they want.
Because of this, the inclusion of product profitability as a ranking variable or the boosting of the company’s own products would usually carry legal implications. At the same time, Amazon is facing a number of antitrust investigations. With the addition of this story, it is sure to draw even more scrutiny from US regulators during a period of time when most of the major U.S. tech companies are being investigated for alleged anticompetitive behavior.
There are a number of surveys that shows Amazon beating Google as a consumer starting point for product resuearch. eMarketer says that Amazon is the dominant online marketplace in the US. The company controls almost 40% of e-commerce. But can we characterize Amazon as a “monopoly” under the current antitrust law? That’s pretty questionable.
In response to the article and allegations Amazon said, “The Wall Street Journal has it wrong. We explained at length that their ‘scoop’ from unnamed sources was not factually accurate, but they went ahead with the story anyway. The fact is that we have not changed the criteria we use to rank search results to include profitability. We feature the products customers will want, regardless of whether they are our own brands or products offered by our selling partners. As any store would do, we consider the profitability of the products we list and feature on the site, but it is just one metric and not in any way a key driver of what we show customers.”