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Amazon Is Now Lobbying Sellers to Avoid Ending Their Private Label Brands

August 16, 2021 in Blog
Amazon Is Now Lobbying Sellers to Avoid Ending Their Private-Label Brands

Amazon has begun lobbying sellers to help fight proposed legislation aimed at limiting their alleged monopoly.

In emails sent to numerous sellers, Public Policy managers at Amazon have sent emails to high-volume sellers asking to have 1-on-1 phone calls to discuss the proposed legislation and its negative impact on sellers.

In one email, a Public Policy manager said “we are concerned that [proposed legislation] could potentially have significant negative effects on small and medium-sized businesses like yours that sell in our store. . . I’m hoping you might spare a few minutes later this week or next to chat on the phone.”

Later in the week, Amazon’s Vice President of Customer Trust & Partner Support emailed all sellers with a similar email with a link to Amazon’s own lobbying website, https://supportsmallsellers.us/, which will also help sellers get in touch with their elected officials.

The concerns would appear to be related to the proposed legislation released by Congress in late spring called “A Stronger Online Economy: Opportunity, Innovation, Choice” which seeks to limit power by Big Tech in a number of different forms.

Why Is Amazon Concerned?

The proposed legislation takes aim at Big Tech in a number of different ways from limiting the ability to merge with competitive threats to allowing consumers to switch platforms more easily through data portability.

However, the part Amazon would appear most concerned about is labeled the “The Ending Platform Monopolies Act” which is aimed at marketplaces that also sell their own products, specifically Apple, that offer their own products in the App Store, and Amazon, that offer over 150,000 private-label goods under their own brands.

Amazon has begun lobbying sellers of the potential negative impacts to sellers of proposed anti-monopoly legislation from Congress

If the legislation is passed, it could have serious ramifications, with Amazon potentially being required to spin off its private-label brands into their own entity, separate from the company. This would mean this new private label Entity would need to compete against third-party sellers on a more level playing field.

Amazon has a number of advantages when it comes to its own private label brands which it revealed in testimony to Congress earlier in the year, specifically:

  • Access to third-party seller data. While Amazon says it does not look at individual seller data when developing its own products, it does look at aggregated data amongst many sellers. As stated in testimony to CongressInternal teams are permitted to examine aggregated selling partner data for business purposes.”
  • Access to free marketing/advertising. Amazon promotes and advertises its own products with no direct costs to those products being advertised. As stated in testimony to Congress “Amazon highlights its private brands in promotions and marketing in the Amazon store when Amazon thinks they will be of interest to customers. “

Breaking off its private label brands into their own entities could remove these advantages for its private-label products.

How Would the Proposed Legislation Affect Amazon Sellers?

Amazon is trying to argue that in order to avoid competing with merchants and running afoul with the proposed legislation, Amazon would have to cease allowing third-party sellers to sell on the platform. In a written statement, Amazon said:

“More than a half million American small- and medium-sized businesses make a living via Amazon’s marketplace, and without access to Amazon’s customers, it will be much harder for these third-party sellers to create awareness for their business and earn a comparable income. Removing the selection of these sellers from Amazon’s store would also create less price competition for products, and likely end up increasing prices for consumers.”

amazon basics private label brand

The proposed legislation could see Amazon being required to spin off its private-label brands into their own entity.

The reality is that it is highly unlikely Amazon would remove third-party sellers as these sellers now make upwards of 60% of all products on Amazon and bring in significant profits, specifically through advertising, which grew at 87% year-over-year.

More likely is that Amazon’s private-label business would be unsustainable as its own entity, and Amazon would effectively cease to offer its own private-label products, such as Amazon Basics, on the platform. Many sellers would likely view this as a good thing, especially those who have products that compete directly with Amazon’s own private-label products.

However, Amazon ceasing to offer its own private-label products could potentially have negative effects on sellers. Amazon could argue that it only offers a small number of private-label products for consumers and does not compete with the vast number of sellers. Consumers being able to come to Amazon and find competitive prices on high-demand items like batteries and diapers means the vast majority of sellers benefit from more consumers shopping on the site. Elimination of Amazon’s private-label brands could decrease the number of consumers shopping on Amazon.

Whether the proposed legislation will ultimately be good or bad for sellers will remain to be seen. Ultimately, when and if the legislation will make it to the House floor is still unclear, so sellers will have to wait to see what the impact may be.

 

  • About The Author: Dave Bryant

    Dave Bryant has been importing from China for over 10 years and has started numerous product brands. He sold his multi-million dollar ecommerce business in 2016 and create another 7-figure business within 18 months. He's also a former Amazon warehouse employee of one week.

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6 Comments

  • Michael Shackelford
    August 17, 2021 Reply

    Nobody is calling Amazon's bluff on this. It's laughable when they act like they are defending businesses other than their own, just like when they send endless emails trying to get you to spend more on advertising to increase YOUR sales. Thanks for writing about it Dave.

    • Dave Bryant
      August 17, 2021 Reply

      Definitely it's a bit tone-deaf reaching out to sellers about Amazon's private label brands. Even if you don't have Amazon competing against you on a product, most people in the seller community know someone who has been victimized from one of Amazon's brands.

  • Anwar Aziz
    August 17, 2021 Reply

    I personally think this legislation could potentially be good for sellers, by slightly reduce the current unlimited power Amazon has. However I'm not sure if the "new" Amazon entity won't have indirect access to the data or loose the current advantages (access to data, marketing/ads).
    Nice one Dave!
    Thanks

    • Dave Bryant
      August 19, 2021 Reply

      It shouldn't have indirect access any more than any other entity, and if it did it would be a bigger foul than what they're doing now.

  • Ramesh Garg
    August 18, 2021 Reply

    I think Amazon should create a separate entity of its own private label brands by spinning off from its retail platform. This entity can, then, then raise capital on its own from the market by floating its own stock and bonds. Current stockholders will get a piece of ownership into this entity. This will enhance the value of their stock holding in Amazon. This would also satisfy the legislature as well as the third party sellers. This may be a win-win solution rather than contacting the third party sellers.

    • Dave Bryant
      August 19, 2021 Reply

      Unless the new entity would not be viable on its own as it's a loss leader for Amazon the marketplace.

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