Amazon.com Inc has been repeatedly accused of knocking off products it sells on its website and of exploiting its vast trove of internal data to promote its own merchandise at the expense of other sellers. The company has denied the accusations.
But thousands of pages of internal Amazon documents examined by Reuters – including emails, strategy papers and business plans – show the company ran a systematic campaign of creating knockoffs and manipulating search results to boost its own product lines in India, one of the company's largest growth markets.
The documents reveal how Amazon's private-brands team in India secretly exploited internal data from Amazon.in to copy products sold by other companies, and then offered them on its platform.
The employees also stoked sales of Amazon private-brand products by rigging Amazon's search results so that the company's products would appear, as one 2016 strategy report for India put it, "in the first 2 or three … search results" when customers were shopping on Amazon.in.
Among the victims of the strategy: a popular shirt brand in India, John Miller, which is owned by a company whose chief executive is Kishore Biyani, known as the country's "retail king." Amazon decided to "follow the measurements of" John Miller shirts down to the neck circumference and sleeve length, the document states.
The internal documents also show that Amazon employees studied proprietary data about other brands on Amazon.in, including detailed information about customer returns.
The aim: to identify and target goods - described as "reference" or "benchmark" products - and "replicate" them.
As part of that effort, the 2016 internal report laid out Amazon's strategy for a brand the company originally created for the Indian market called "Solimo." The Solimo strategy, it said, was simple: "use information from Amazon.in to develop products and then leverage the Amazon.in platform to market these products to our customers."
The Solimo project in India has had international impact: Scores of Solimo-branded health and household products are now offered for sale on Amazon's US website, Amazon.com.
The 2016 document further shows that Amazon employees working on the company's own products, known as private brands or private labels, planned to partner with the manufacturers of the products targeted for copying. That's because they learned that these manufacturers employ "unique processes which impact the end quality of the product."
The document, entitled "India Private Brands Program," states: "It is difficult to develop this expertise across products and hence, to ensure that we are able to fully match quality with our reference product, we decided to only partner with the manufacturers of our reference product." It termed such manufacturer expertise "Tribal Knowledge."
This is the second in a series of stories based on internal Amazon documents that provide a rare, unvarnished look, in the company's own words, into business practices that it has denied for years.
Amazon has been accused before by employees who worked on private-brand products of exploiting proprietary data from individual sellers to launch competing products and manipulating search results to increase sales of the company's own goods.
In sworn testimony before the US Congress in 2020, Amazon founder Jeff Bezos explained that the e-commerce giant prohibits its employees from using the data on individual sellers to help its private-label business.
And, in 2019, another Amazon executive testified that the company does not use such data to create its own private-label products or alter its search results to favour them.
But the internal documents seen by Reuters show for the first time that, at least in India, manipulating search results to favour Amazon's own products, as well as copying other sellers' goods, were part of a formal, clandestine strategy at Amazon – and that high-level executives were told about it.
The documents show that two executives reviewed the India strategy – senior vice presidents Diego Piacentini, who has since left the company, and Russell Grandinetti, who currently runs Amazon's international consumer business.
In a written response to questions for this report, Amazon said: "As Reuters hasn't shared the documents or their provenance with us, we are unable to confirm the veracity or otherwise of the information and claims as stated. We believe these claims are factually incorrect and unsubstantiated."
The company did not elaborate. The statement also did not address questions from Reuters about the evidence in the documents that Amazon employees copied other companies' products for its own brands.
The company said the way it displays search results doesn't favour private-brand products. "We display search results based on relevance to the customer's search query, irrespective of whether such products have private brands offered by sellers or not," Amazon said.
Amazon also said that it "strictly prohibits the use or sharing of non-public, seller-specific data for the benefit of any seller, including sellers of private brands," and that it investigates reports of its employees violating that policy. Piacentini and Grandinetti didn't respond to requests for comment.
The unfiltered insight the documents offer into Amazon's aggressive use of its market power could intensify the legal and regulatory pressure the company is facing in many countries.
Amazon is under investigation in the United States, Europe and India for alleged anti-competitive practices that hurt other businesses. In India, the allegations include unfairly favouring its own branded merchandise. Amazon declined to comment on the investigations.
Jonas Koponen, an antitrust attorney with Linklaters LLP in Brussels, said the Reuters findings on Amazon's practices in India would likely interest the European Commission, which is probing whether the company has used non-public seller data to boost its own retail business.
India has cooperation agreements with the United States and the European Commission to exchange information related to enforcement of antitrust laws.
"When any one competition authority is looking into aspects of one of these globally present organisations' behaviour, they will certainly be interested in understanding what evidence there is in other parts of the world and the extent to which that evidence relates to the practices that they themselves are investigating," Koponen said.
The documents also support criticism of Amazon laid out by Lina Khan, the new chair of the US Federal Trade Commission, or FTC. Khan published a paper in 2017 that argued that Amazon's private-brand business raised anti-competitive concerns.
It is third-party sellers who bear the initial costs and uncertainties when introducing new products" - Lina Khan of the US FTC
"It is third-party sellers who bear the initial costs and uncertainties when introducing new products; by merely spotting them, Amazon gets to sell products only once their success has been tested," she wrote. "The anti-competitive implications here seem clear."
Amazon filed a petition in June with the FTC asking that Khan recuse herself from all matters related to the company because of "her repeated proclamations that Amazon has violated the antitrust laws."
Khan and the FTC didn't respond to requests for comment.
In the first article in this series, Reuters reported in February that Amazon had for years given preferential treatment to a few big sellers on its Indian platform, and used those sellers to circumvent regulations designed to protect the country's small retailers.
That report triggered action by India's main financial crime-fighting agency, which sought information and documents from Amazon. In addition, the nation's antitrust watchdog submitted the story as an exhibit in a court battle with Amazon over its investigation into the company's alleged anti-competitive practices. The court rejected Amazon's request to halt the probe.
"We are committed to extending cooperation to all authorities in India and are confident about our compliance," Amazon said in its statement to Reuters.
Like many other retailers, Amazon views its own brands as a major driver of increased profitability. Private-brand products often have higher profit margins than normal retail brands because production and marketing costs can be lower.
An internal email sent by Amazon executive Grandinetti to a group of company executives in December 2018 stated: "We believe that over the next several years, Private Brands will be one of the most important growth and profitability drivers in the Consumer business." Grandinetti added that company executives believed private brands "can achieve 10% penetration" of the company's consumer business worldwide over the next five years.
Introducing Amazon's own brands was especially critical in India. The company began its e-commerce foray there in 2013, and soon recorded millions of dollars in losses, one internal document shows.
To make the business "sustainable in the long run," the 2016 Private Brands document notes, Amazon embarked on a strategy centered on introducing its existing private brands, such as AmazonBasics, and new ones tailored to India.
The 2016 document stated a goal: offer Amazon's own goods in 20% to 40% of all product categories on Amazon.in within two years. Amazon would achieve profitability in its private-brand business by "only launching products that will provide more margin than comparable reference brand products."
Amazon predicted private-brand sales would reach nearly $600 million (€519 million) by 2020 in India, according to a 2017 internal business strategy document. "We will be amongst the Top 3 brands in each sub-category that we play in," the document stated.
Whether it achieved that sales goal isn't clear; Amazon doesn't disclose its private-brand sales in India. The company didn't comment on the strategic goals and other details from the documents reported in this article.
An Amazon press release in 2018 revealed just how successful its private-brand business was becoming in India. Celebrating "record sales" during an annual promotion, the release stated, "Amazon Brands saw its best performance ever with 11X jump over last Great Indian Festival."
Today, Amazon.in lists thousands of Amazon-branded offerings – from garbage bags, bedsheets and soap to air conditioners and televisions. According to the website, many are best-sellers.
One key person involved in 2016 with Amazon's private-brand business in India was Amit Nanda, who later became a country director of the programme, according to his LinkedIn profile. He holds an MBA from the Indian Institute of Management, Ahmedabad, one of the nation's top business schools. Before joining Amazon in 2014, according to his LinkedIn profile, he worked at Citibank and the Indian arm of consumer-goods giant Unilever.
As Amazon was reviewing its private-brand strategy in India in 2016, Amazon India employees had a meeting with Grandinetti. A longtime Amazon manager, at the time he was in charge of content for Kindle, the company's popular reading device. But Amazon had announced that he would soon lead its international consumer business, including India.
During the meeting, Nanda was assigned various tasks, according to one Amazon document. Among them: The India private brands "business should be large and profitable. Build for scale." Nanda declined to comment for this story.
With its population of 1.3 billion people and a growing middle class, India represents a huge and potentially lucrative market for Amazon. But it's also a country where foreign e-commerce players face a complex and protectionist regulatory regime.
The country's brick-and-mortar retailers comprise an important political constituency for Indian Prime Minister Narendra Modi. Concerned that predatory pricing could hurt these merchants, India prohibits foreign e-commerce players from selling most goods directly to consumers, as they do in many other countries.
Amazon and other foreign companies are restricted to operating an online marketplace of third-party sellers, with no one vendor allowed to hold an advantage over another. As a result, Amazon sells most of its private brands through other vendors.
In launching its private-brand business, internal documents show how Amazon used its Indian website to gain a clear edge for its own products on the platform. The creation of its Solimo brand offers a case study.
According to the internal documents, the word Solimo is derived from Solimões - the name for the upper stretches of the Amazon River in Brazil.
With the Solimo line, Amazon aimed to offer items that equalled or exceeded the quality of competing brands but were 10% to 15% cheaper, the 2016 Private Brands document shows. Amazon employees studied different product categories, and compared their overall market size with how well those segments were doing on Amazon.in.
Controversy over the business practices of foreign e-commerce companies in India has heated up in recent months. In June, the government proposed draft regulations that threaten to impose further restrictions on Amazon and other e-commerce companies, including local players, after receiving complaints by consumers and traders of unfair business practices.
The proposed rules could restrict Amazon and others from selling their own private-brand products in India.
Later that month, India's commerce minister accused large e-commerce companies of flouting local laws and said he had observed "a little bit of arrogance," particularly by American ones. The other big platform in India is Flipkart, owned by American retail giant Walmart Inc. Flipkart didn't comment.
In early July, Amazon announced it would introduce to India a program it already offers businesses elsewhere. Called the "Intellectual Property Accelerator" program, it gives certain sellers on Amazon.in access to services provided by intellectual-property experts and law firms.
One aim, Amazon said, is to help sellers "protect their brands." - Reuters