Big Tech is Like a Department Store
When Sears Roebuck introduced Kenmore appliances and Craftsman tools in the 1920s and 1930s, it used its position as a retailer to compete directly with the independent brands it also stocked. Since it had access to sales data, it knew which products were most profitable, and could price its own versions aggressively because it paid no distribution markup to itself. Amazon has dialed this practice up to eleven: it aggregates sales data from third-party sellers to identify profitable categories, launches competing Amazon Basics versions, and uses control over search ranking and fulfillment priority to favor its own products.
Information asymmetry is central to this model. No independent third-party seller has access to market-wide data like Amazon, so Amazon-owned products benefit at every stage of the system. They are priced without the referral fee that third-party sellers pay on each transaction, they receive default eligibility for the Buy Box, and they are ranked by their owner’s search engine.
Securities law addresses a structurally identical conflict of interest by prohibiting it. Broker-dealers who execute customer orders are prohibited from trading against their clients using client order information (a practice called front-running). The prohibition exists because the broker has access to information about customer intent that no other market participant has, and using that information to trade ahead of the customer is a direct taking of value. This is exactly what Amazon does with third-party seller data, but the standards that financial regulators apply have not been imported into platform markets.
Amazon’s response to the 2019–2020 House Judiciary Committee investigation on digital markets illustrated how these conflicts operate in practice. Amazon representatives testified that the company did not use individual seller data to inform its private-label product decisions. Subsequent reporting, relying on internal documents obtained through the investigation, showed that Amazon employees had done exactly this. The company characterized the discrepancy as a policy violation by individual employees rather than standard practice, which is how banks usually respond to findings of insider train: misconduct labeled individual aberration, and the structural conditions that produced it are not addressed.
- Khan2017
- Lina Khan: “Amazon’s Antitrust Paradox.” Yale Law Journal, 126(3), 2017.
- Stoller2019
- Matt Stoller: Goliath: The 100-Year War Between Monopoly Power and Democracy. Simon & Schuster, 2019, 978-1501183089.