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Dirty Tricks By Some Sellers At Amazon To Eliminate Competitors. Is Its Resolution System The Best Amazon Can Do?

Amazon logo Many consumers like shopping at Amazon.com. What you may not realize are the dirty tricks and scams among some sellers -- the individuals and firms who provide the products you purchase at the site. The Verge reported:

"When you buy something on Amazon, the odds are, you aren’t buying it from Amazon at all... They are largely hidden from customers, but behind any item for sale, there could be dozens of sellers, all competing for your click. This year, Marketplace sales were almost double those of Amazon retail itself, according to Marketplace Pulse, making the seller platform alone the largest e-commerce business in the US... "

Reportedly, there are 6 million sellers in Amazon Marketplace. So, there's plenty of competition. The Verge article described one dirty track where a seller posted posted bogus 5-star reviews on a competitor's page within the site. When the bogus reviews were removed, the targeted seller was accused of falsely manipulating buyers' reviews -- a violation of the site's rules -- and suspended. The Verge described several attacks by scammers. Here's another:

"Scammers have effectively weaponized Amazon’s anti-counterfeiting program. Attacks have become so widespread that they’ve even pulled in the US Patent and Trademark Office... Scammers had begun swapping out the email addresses on their rival’s trademark files, which can be done without a password, and using the new email to register their competitor’s brand with Amazon, gaining control of their listings... Amazon appears not to check whether a listing belongs to a brand already enrolled in brand registry..."

No online shopper wants to buy products from a seller who has fraudulently taken over a valid seller's trademarks.

Punishment is harsh for violators within Amazon Marketplace: suspension, monies frozen, de-listed from the site, and unable to sell products online. If the suspension lasts long enough or if reinstatement doesn't happen fast enough, bankruptcy can result. And all of this happens behind the scenes unbeknownst to customers:

"For sellers, Amazon is a quasi-state. They rely on its infrastructure — its warehouses, shipping network, financial systems, and portal to millions of customers — and pay taxes in the form of fees. They also live in terror of its rules, which often change and are harshly enforced... Sellers are more worried about a case being opened on Amazon than in actual court, says Dave Bryant, an Amazon seller and blogger. Amazon’s judgment is swifter and less predictable, and now that the company controls nearly half of the online retail market in the US, its rulings can instantly determine the success or failure of your business, he says... Amazon already has something like a judicial system — one that is secretive, volatile, and often terrifying. Amazon’s judgments are so severe that its own rules have become the ultimate weapon in the constant warfare of Marketplace. Sellers devise all manner of intricate schemes to frame their rivals... They impersonate, copy, deceive, threaten, sabotage, and even bribe Amazon employees for information on their competitors."

So, rather than using the established, well-documented public courts and legal system, this happens secretly within a corporation's processes with some unintended consequences:

"... what’s a seller to do when they end up in Amazon court? They can turn to someone like Cynthia Stine, who is part of a growing industry of consultants who help sellers navigate the ruthless world of Marketplace and the byzantine rules by which Amazon governs it. They are like lawyers, only their legal code is the Amazon Terms of Service, their court is a secretive and semi-automated corporate bureaucracy..."

How byzantine? Consider:

"Many sellers can’t even figure out what Amazon is accusing them of. A suspension message will typically list an item along with a broad and tangentially related category of an infraction, like "used sold as new." Understandably, sellers respond by sending invoices that show that the items are, in fact, new. Actually, Stine says, the suspension usually has nothing to do with the item being used, but with something like a peeling label on the box. “The thing Amazon wants you to fix is the buyer perception,” Stine says... JC Hewitt, whose law firm frequently works with Amazon sellers, calls the system’s mandatory guilty pleas, arbitrary verdicts, and obscure language "a Kafkaesque bureaucracy with bad writing." Inscrutable rulings emerge as if from a black box. The Performance team, which handles suspensions, has no phone number; there’s no one to ask for clarification. The only way to interact with them is by filing an appeal, and when it’s rejected, sellers often have no idea why... The secrecy can be so frustrating that sellers have traveled to Seattle or Amazon’s London office to try to find a human, to no avail..."

Huh? What? I'll bet many Amazon customers don't know this. And the system seems to use a poor balance of automation and humans:

"... there were likely humans reading [a seller's] appeal, but they’re part of a highly automated bureaucracy, according to former Amazon employees. An algorithm flags sellers based on a range of metrics — customer complaints, number of returns, certain keywords used in reviews, and other, more mysterious variables — and passes them to Performance workers based in India, Costa Rica, and other locations. These workers choose between several prewritten blurbs to send to sellers. They may see what the actual problem is or the key item missing from an appeal, but they can’t be more specific than the forms allow... The Performance workers’ incentives favor rejection. They must process approximately one claim every four minutes, and reinstating someone who later gets suspended again counts against them..."

Is this the best system possible? Probably not. I hope not. My guess is many Amazon Prime customers would prefer a better system to resolve disputes between sellers. My guess is that most shoppers would want to avoid using sellers who abuse or frame other sellers. And no shoppers want to buy from a seller who has fraudulently taken over another seller's trademarks.

The situation raises several issues:

  • A private court system prevents amazon customers from knowing about and avoiding shopping at sellers who abuse or frame other sellers
  • A private court system prevents external reviews and/or oversight by independent parties
  • An algorithm-based system may save money, but a poor balance of humans and automation causes problems. Is this the best system possible?
  • Amazon determines what's in its customers' best interests (versus disclosure and then feedback from customers)
  • There seem to be few penalties for sellers who frame or setup other sellers. What fix is underway?
  • The current system smells like a bloated monopoly. With some transparency and input, a better system seems possible... preferred.

What are your opinions? What issues do you see? Is a private court system a good thing?

Comments

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Chanson de Roland

Every merchant who I know, who sells on Amazon, hates it. And they hate it because Amazon’s market power, especially relative to a small supplier, is a virtual monopsony for online sales, and, in their view Amazon exercises that power to unfairly drive down their selling price and enact unfair terms, which it can do because of its market power as a near monopsony buyer in the online retail market.

Unfortunately, it is hard to see how merchant suppliers have any road to quick relief. They could appeal to the FTC to see whether the FTC has authority under the FTC Act, but grounds for relief are not immediately. The grounds for attacking Amazon are that it is both a monopoly and monopsony, whose market power restrains fair competition in both the markets for online retailers and/or in the market for online marketplaces, which deprives consumers of the benefits of competition in those markets. Certainly, the relevant government agencies, the FTC and DOJ, should investigate whether Amazon is restraining competition in those markets in ways that harm consumers and/or merchant/suppliers.

The other relief may eventually come as the market adjust to provide more competition. Walmart may finally be effectively organizing its online retailing and has the advantage of better in-store pickup and even in-store shopping for just about everything. If Walmart’s online retailing continues to develop, it may offer effective competition to Amazon for both merchant/suppliers and consumers. But a duopoly of two online markets won’t be enough to provide the benefits of competition to either consumers or merchants. Perhaps Target will also develop into an effective competitor. Yet, while three competitors is better than just two, that will still probably be short of effective competition. So a government antitrust remedy may still be necessary.

Finally, but hardly least, there is us. We can not only divide our custom among Walmart, Amazon, Target, and other online retailers and online retail platforms, we can go out to shop at an actual store. They do still exist. And, as the Editor of this paper blogged, you can often find better deals in a brick-and-mortar store than you can find online, and you can usually take your purchases with you. And there is the benefit of the exercise of offline shopping.

So close the computer and put down the smartphone and shop in stores or, at least, offer some of your online custom to Amazon’s online competitors.

George

Everyone:

First, thanks to Roland for an informative, insightful comment. Second, The disturbing trend I see among tech companies (e.g., Facebook, Amazon) is that well-meaning executives set up highly profitable businesses assuming the best in human nature while either being naive about bad behavior, bad actors, privacy, and security or intentionally using business models (e.g., Google, Alphabet) that require tracking and surveilling both their customers and prospective customers (e.g., customers' privacy not valued). The problems at Amazon were an eye-opener, but probably have been there as long as Amazon Marketplace existed. Some business functions should not be deployed as social media.

2018 will probably be remembered as the year many people finally realized, i) that social media platforms can easily be weaponized, and ii) bad actors, scammers, and others have used this weaponization across several industries (e.g., social media, news, retail, elections, etc.). Changes are imperative.

George
Editor

George

Everyone:

Want to learn more? You may be interested:

"The company is known as the “everything store,” but in its dogged pursuit of growth, Amazon has come to dominate more than just e-commerce. It’s now the largest provider of cloud computing services and a maker of home security systems. Amazon is a fashion designer, advertising business, television and movie producer, book publisher, and the owner of a sprawling platform for crowdsourced micro-labor tasks. The company now occupies roughly as much space worldwide as 38 Pentagons. It has grown so large that Amazon’s many subsidiaries are difficult to track—so we catalogued them all for you. This is our exhaustive map of the Kingdom of Amazon."

Why It's Hard To Escape Amazon's Long Reach
https://www.wired.com/story/why-hard-escape-amazons-long-reach/

George
Editor
https://ivebeenmugged.typepad.com

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