Jan 29 2019

How To Stop Amazon From Swallowing The Internet (Forbes)

By Hal Singer [Forbes Contributor]

Just before Christmas, furniture maker Williams-Sonoma filed a lawsuit against Amazon in the Northern District of California, alleging that the e-commerce giant copied furniture designs and abused its dominant tech platform to gobble up a new product line.

Analysts had deemed Williams-Sonoma less exposed to an Amazon invasion because the furniture maker’s West Elm line was more suited to in-store purchasing. Turns out no one is immune to the great gobbling.

In addition to trademark infringement claims, the lawsuit alleges what we already knew—that Amazon can (1) predict what its customers want based on its vast and proprietary database of prior purchasing and search behavior on the Amazon site; and (2) offer similar products to those of an independent merchant and steer customers to its private label via its discriminatory search algorithm. In this second sense, what Amazon does is similar to how Google discriminates in favor of its own content in local search. Exploiting one's platform advantages to overtake a vertical is the opposite of competition on the merits.

The Williams-Sonoma lawsuit also alleges something that at least your fearless blogger didn’t know—that (3) Amazon advertises its private labels on Google using the same keywords shoppers use on Amazon, raising an independent rival’s costs to advertise on Google. As Sally Hubbard observes in The Capitol Forum, not only does Amazon control its own marketplace and uses that to favor its own goods, it also uses Google’s platform for the same purpose. Indeed, a former Amazon manager told Hubbard that “Google gives Amazon higher ranking than a brand itself can get” under Google’s search algorithm, which rewards Amazon’s high-traffic website. It’s as if the dominant platforms are coordinating in their assault on independent merchants! Gobble gobble.

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