Amazon has said that its recent prioritisation of critical products during the coronavirus pandemic resulted in an “unintended variation” to its algorithm, causing certain Amazon product offerings to be featured over those from third-party sellers.
Earlier this month, Amazon informed third-party sellers and vendors that it would be temporarily prioritising certain high-demand products – household products and medical suppliers – for storage and shipping because of the covid-19 outbreak.
The result: some product offerings that would ordinarily be delivered within two days as part of Amazon’s Prime shipping service may be delayed up to a month.
Vox reported last week that, for certain product listings, earlier delivery dates were available for competitors to Amazon’s Fulfillment By Amazon (FBA) warehousing and shipping service.
But according to the report, Amazon’s algorithms had been preferencing FBA product offerings on a listings’ “buy box” despite the quicker delivery options from rivals.
Amazon said this “error” was unintentional.
“To address the need for high priority items and ensure customers are receiving deliveries as quickly as possible, we’ve made a number of adjustments to how our store works,” an Amazon spokesperson said in a statement.
“In this case, some of these changes have resulted in an error which, in some cases, resulted in an unintended variation in how we select which offers to feature. We are working to correct it as quickly as possible,” the spokesperson added.
For years, some third-party sellers and competition advocates have accused Amazon of unfairly preferencing its own products on its online retail platform – a claim Amazon has denied.
“[Amazon’s] algorithms are optimised to predict what customers want to buy regardless of the seller,” testified Nate Sutton, associate general counsel for competition at Amazon, during a Congressional hearing in July.
Sutton, a former trial attorney at the Department of Justice’s antitrust division, said Amazon uses the same algorithm criteria for products sold by third parties as it does for its own.
Private litigants have also ramped up the antitrust scrutiny of Amazon. Earlier this month, a class of Amazon customers accused the e-commerce company of “horizontal-price fixing” through contract provisions that prohibit third-party sellers from charging higher prices on Amazon than they would on other retail platforms.
Third-party sellers may struggle
Shaoul Sussman, a legal fellow at the Institute for Local Self-Reliance, argued in a piece this month that Amazon’s prioritisation of product storage and sales during the coronavirus pandemic could jeopardise tens of thousands of companies that rely on FBA services.
“The fragility of FBA at this time of crisis demonstrates, like the shortage in N95 masks or ventilators, the danger that consolidated markets pose at times when diversification of service and resources is essential to ensure the resiliency of our markets,” Sussman wrote.
In an interview with GCR USA, Sussman said this could be a “significant moment” for Amazon in further consolidating control of the market for fulfilment services.
He noted that Amazon announced the hiring of 100,000 new FBA employees to handle the increase in demand during the covid-19 pandemic.
“Even if [FBA is] overwhelmed by this… there is no true alternative,” Sussman said.
Sussman said there is no straightforward legal claim that Amazon’s prioritisation of its own products on its platform is illegal – comparing it to how a supermarket may put its own items on the most visible shelf. Competing offers are still listed, Sussman added, even if they are less visible.
James Thomson, a former executive at Amazon, said he did not think there was any concerted effort between FBA and those controlling Amazon’s algorithm to hide third-party offers with earlier delivery dates.
“Historically, Amazon has been a company that changes the engine mid-flight,” said Thomson, now a partner with Buy Box Experts, a firm that advises third-parties on how to sell through Amazon.
Amazon does not consider the impact a decision on one of its entities may have on another, he added.
“That’s nobody’s job to think about,” said Thomson. “Culturally, this is a company that moves very fast and never asks for permission.”
Amid all the antitrust scrutiny the company is facing, Thomson said he would not pick an initial fight over this most recent concern. He described this as just the latest example of the core issue with the company’s algorithm: “when in doubt, always let Amazon’s offers win out.”
Hiding competing offers in the buy box also likely hurt Amazon because customers frustrated by longer delivery dates might take their business elsewhere, Thomson said.
The pain inflicted by the coronavirus outbreak will likely be worse for third-party sellers reliant on FBA, as they may no longer be able to restock or sell certain products because of Amazon's recent adjustment to the health crisis, Thomson said.
He called it a “terrible, terrible” business decision for a third-party seller to rely solely on FBA for fulfilment services because of emergency scenarios like this, but conceded that there are not many other alternatives.
“There are not enough meaningful options. You’re either in [FBA] or you’re not.”