ILSR Exposes Amazon’s Rigged Shopping Algorithm in ProMarket Piece

Date: 8 Nov 2019 | posted in: Retail | 0 Facebooktwitterredditmail

In a piece for the economics blog, ProMarket, ILSR’s co-director Stacy Mitchell, and legal fellow Shaoul Sussman, describe how Amazon rigs its shopping algorithm to produce results that favor its own interests, harming shoppers and the many businesses that rely on its platform to get to market.

Amazon, writes Sussman and Mitchell, gives itself perfect score on some of the metrics that feed its algorithm. This means that Amazon often “wins the Buy Box” — even when it has a significantly higher price than other sellers. Another way that Amazon games its algorithm is by giving its own shipping service a perfect score. This effectively forces sellers to purchase Amazon’s fulfillment services, even though Amazon’s on-time delivery rate isn’t very good, and has in fact been getting worse.

This is a form of “tying” that violates antitrust law. In this case, businesses that need to sell on the platform are forced to buy shipping services from Amazon — or get buried in search. Shoppers are harmed by this too. They assume Amazon is giving them the best seller for the product they want to buy. In fact, Amazon is quietly steering their choices, while steadily eroding the viability of competing brands and retailers over time.

To remedy this problem, Mitchell and Sussman make several policy recommendations. First, they advocate for a non-discrimination standard that forces dominant platforms to treat all participants equally. This would prohibit the kind of self-dealing they outline. Second, they recommend that dominant platforms spin off their retail divisions as separate companies, eliminating the platform’s conflict of interest. As Sussman and Mitchell point out, the success of a non-discrimination standard is entirely dependent on a spin-off, because without a break-up of this kind, the dominant platform (in this case, Amazon) could simply use its vertically-integrated power to evade the new non-discrimination regime.

Read more on ProMarket.

Follow Stacy Mitchell:
Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.

Follow Shaoul Sussman:
Shaoul Sussman

Shaoul Sussman is a Legal Fellow at the Institute for Local Self-Reliance. His research focuses on the intersection of antitrust law and big tech. Shaoul has published an academic paper and a number of articles about Amazon’s anticompetitive practices and the company’s negative influence on firms that rely on its e-commerce platform.