By Dana Mattioli and Joe Flint
Amazon.com Inc. last year told smart-thermostat maker Ecobee it
had to give the tech giant data from its voice-enabled devices even
when customers weren't using them. The Canadian company said
The smaller company feared that complying with the demand would
violate customer privacy, said a person familiar with the episode.
Ecobee's devices work with Alexa, Amazon's voice-powered assistant,
and it already shared some data with Amazon, the person said.
Moreover, the company worried Amazon would glean insights from
Ecobee's users that it could use in competing products.
Amazon responded that if Ecobee didn't serve up its data, the
refusal could affect Ecobee's ability to sell on Amazon's retail
platform, the person said.
Amazon's tactic of leveraging dominance in one business to
compel partners to accept terms from another is a familiar one,
said former Amazon executives and officials at companies on the
receiving end. Amazon's tactics, they said, go beyond typical
product bundling and tough negotiating in part because the company
threatens punitive action on vital services it offers, such as its
Partners often acquiesce to Amazon's demands, the executives and
officials said, because of its power in a range of market
An Amazon spokesman, Jack Evans, said Ecobee still sells on its
site. Ecobee spokeswoman Andie Weissman said "Amazon continues to
be a valued Ecobee partner." The person familiar with the
negotiation said talks continue.
David Barnett, chief executive of PopSockets LLC, maker of
cellphone accessories, said Amazon employees can make these kinds
of threats because the company is so powerful. "Their employees are
going to try to hit their goals by whatever means they can,
including these asymmetric relationships," he said.
Mr. Barnett, who testified before the U.S. House Antitrust
Subcommittee last year, said Amazon used its retail-platform power
and a promise to rid its marketplace of counterfeit PopSockets
products to compel PopSockets to spend more on Amazon's ad
In his testimony, he said: "One has to ask how is it that such a
successful business maintains partnerships with so many companies
while bullying them." Because of Amazon's power, he said "they have
to tolerate it."
Amazon's Mr. Evans said the company doesn't require payment for
counterfeit services like those offered to PopSockets.
"Amazon always tries to negotiate the best terms for our
customers -- we would be doing them a disservice if we didn't," Mr.
Evans said. "And it shouldn't surprise anyone that we negotiate
across our business units -- that's normal practice anywhere. Many
of our customers and partners do this, and usually are seeking to
include other aspects of our business in their agreements with
Opportunities for Amazon to link business lines are significant,
with its broad operations in retail, cloud computing, digital ads,
streaming content, voice-assistant technology and logistics. It is
one of very few companies that command such sizable positions in so
many disparate industries.
It is No. 1 or No. 2 by market share in many businesses it
operates in, according to estimates by research firms and
congressional findings. Amazon's online retail platform is by far
the largest in the U.S. and the company is the third-largest
digital advertiser by revenue in the U.S., according to research
firm eMarketer. It is the biggest cloud-computing company globally
by revenue, according to research firm Gartner Inc. Amazon's Fire
TV devices account for a third of all streaming media player
installed base in the U.S., according to research firm Parks
Associates. It commands major positions in areas such as
voice-enabled speakers, book sales and online grocery.
When a company uses its dominance in a market to impose terms on
customers, it can raise antitrust concerns. Regulators have long
examined whether a dominant company is limiting customer choice by
forcing buyers that want one product or service to also buy
another, a tactic sometimes called "tying." Federal authorities
have pursued tying allegations as part of antitrust lawsuits
against companies ranging from John D. Rockefeller's Standard Oil
Co., broken up in 1911, to Microsoft Corp., which in 2001 reached a
settlement with the Justice Department over several allegations,
without admitting wrongdoing, including that it unfairly tied its
internet browser to its operating system.
U.S. lawmakers, the Federal Trade Commission and regulators in
multiple states are examining competitive practices of Amazon and
other tech giants. In October, the Antitrust Subcommittee completed
a 16-month investigation into potential anticompetitive practices
of Amazon, Apple Inc., Facebook Inc. and Alphabet Inc.'s Google.
The committee concluded that Amazon had "monopoly power" over its
sellers, and cited evidence that Amazon had leveraged its dominance
in online commerce as pressure in negotiations with firms in other
lines of business.
Amazon disputed the report's conclusions, saying in a blog post
that "large companies are not dominant by definition, and the
presumption that success can only be the result of anti-competitive
behavior is simply wrong."
Antitrust specialists say proving that behavior such as tying is
illegal can be difficult. Tying is "hard to enforce easily," said
Gary Reback, a lawyer at Carr & Ferrell LLP who has worked on
major antitrust lawsuits and was an opponent of Microsoft in its
legal battles over competition. Litigators tend to focus on
"monopoly maintenance" in antitrust lawsuits rather than trying to
prove tying, he said.
Ecobee had long dealt with Amazon. It was a recipient in 2016 of
funding from the Alexa Fund, Amazon's venture-capital arm, which
remains a minority shareholder. Amazon sometimes competes with
companies it invests in.
Amazon's Alexa assistant is one of several voice assistants that
big technology companies have promoted in recent years to embed
their products deeper into people's lives, competing with Apple's
Siri and Google Assistant. When customers use the "Alexa command"
in a product that is enabled by Alexa to perform tasks such as
turning on the lights or raising the temperature, Amazon receives
details of those interactions.
More recently, Amazon has asked Ecobee and other
Alexa-enabled-device sellers to share "proactive state" data, which
would update Amazon about the device's status at all times, even
when the customer isn't using the Alexa command, said executives at
companies who say they have been asked by Amazon to provide such
data. That could give Amazon information such as the temperature of
a user's home, whether the user's doors are locked and when the
user last opened the garage doors, for instance.
Amazon's online retail platform accounts for two-fifths of
e-commerce sales, according to eMarketer. Losing that sales channel
could devastate a company like Ecobee.
Amazon had also told Ecobee that if it didn't comply with the
data demands, it could potentially not retain Alexa certification
on future models or have access to big selling events such as Prime
Day, said one of the people.
Last year, Amazon pressured AT&T Inc.'s WarnerMedia to put
its new HBO Max streaming service on Amazon's Prime Video if it
wanted the service to go on another Amazon platform, said people
involved in the discussions. The AT&T unit's HBO service that
came before Max had a channel on Prime Video, part of Amazon's
Relationships between programmers and Amazon's Prime Video have
often been tense. Amazon sells subscriptions to other entertainment
companies' channels in return for a significant cut of that revenue
as well as a slice of advertising inventory if the platform has
commercials. Amazon also retains nearly all the valuable customer
data and viewing habits, according to executives who have struck
deals for Prime Video channels.
As WarnerMedia was preparing to launch HBO Max, it told Amazon
it didn't want the service to be a channel on Prime Video, but did
want to be on Amazon's Fire TV, part of a separate unit, said the
people involved in the discussions. Amazon replied to WarnerMedia
that it couldn't be on Fire TV without being on Prime Video, they
Amazon's Mr. Evans said Amazon pushed for HBO Max to be on both
platforms because that is better for customers.
When HBO Max launched in May 2020, it was absent from Fire TV
and Prime Video. It took nearly six months of behind-the-scenes
battling for that to change, The Wall Street Journal reported at
the time. WarnerMedia eventually agreed to keep HBO on Prime Video
until this year's end. To help seal the deal to get HBO Max on Fire
TV, it extended a lucrative contract with the cloud-computing arm
Amazon Web Services, or AWS, said the people involved in the
discussions. The Information, an online news publication, earlier
reported some details of the negotiations and HBO Max's expanded
Executives from HBO Max complained about Amazon's behavior
during the negotiations to the House Antitrust Subcommittee
investigating Amazon's business practices, said people familiar
with the investigation.
Amazon's Mr. Evans said that there are occasions, including its
talks with HBO, where companies are interested in exploring
partnerships across multiple Amazon businesses.
A former longtime senior AWS executive said that in recent years
AWS has discussed how to better leverage its cloud clout in broader
Amazon negotiations. Because of Amazon's size, it is common for
companies to work with many different business units within Amazon.
Some AWS customers also sell large volumes of their products on
Amazon's Mr. Evans said that negotiations often don't occur in a
silo and that Amazon and its partners often seek to negotiate
agreements that cover multiple aspects of their businesses and
Amazon over the years has used its established muscle to build a
new business in advertising. That business has grown from a
relatively small unit a decade ago to what is now the third-largest
digital-ad operation by revenue in the U.S. after Google and
Facebook, according to eMarketer, with revenue of $21.5 billion
In 2013, in a previously unreported episode, Prime Video was in
negotiations with Viacom Inc. -- now part of ViacomCBS Inc. -- to
buy more than $200 million in content from the media company to
stream on Amazon's Prime platform, said people involved with the
Amazon's advertising business at the time was nascent, and
Amazon's management team wanted to expand it quickly, said people
involved in the talks. Prime Video and advertising both fell under
the purview of Jeff Blackburn, an Amazon executive who belonged to
the circle of top advisers to CEO Jeff Bezos.
In the middle of negotiations, he instructed his team to tell
Viacom that Amazon would buy the content only if Viacom bought
millions of dollars in advertising across Amazon's properties, said
people involved in the deal. Viacom reluctantly agreed.
Mr. Blackburn, who left Amazon this year, didn't respond to
inquiries. Amazon's Mr. Evans said the company's "individual
businesses build partnerships independently with other
In 2018, AMC Networks Inc.'s contract was up for negotiation
with Amazon Prime, where it had channels for its Shudder and
Sundance Now franchises. The new terms Amazon was proposing were
much more lucrative for Amazon than they had been in the prior
contract, said people involved in the deal. Amazon was demanding
more revenue from subscriptions of the channels and pressed AMC to
spend significant amounts on advertising across its platforms,
including Fire TV and Amazon's IMDb movie website, the people
AMC pushed back on the terms, the people said. Weeks before the
contract was set to expire, Amazon disabled the ability for Amazon
Prime members to subscribe to AMC's channels, they said. The timing
coincided with Halloween. The weeks around the holiday are the
busiest time of year for AMC to sign up new subscribers, with
around a quarter of new subscribers enrolling during that period,
the people said.
Within two weeks of Amazon's suspending subscriptions, AMC
agreed to pay Amazon a higher revenue share, although not as high
as Amazon was asking, and agreed to the advertising terms, they
An AMC spokeswoman said: "We had productive renewal
conversations with Amazon in 2018 around our targeted streaming
services Shudder and Sundance Now. Since then, we have expanded our
relationship with the launch of AMC+ and Amazon continues to be a
great partner that has contributed to the service's fast
Rep. Pramila Jayapal, the Democrat who represents Amazon's home
district and is vice chair of the House Antitrust Subcommittee,
said Amazon also has used tying tactics to build part of its
logistics arm, called Fulfillment by Amazon, or FBA.
Amazon takes a percentage of sales on its platform by outside
vendors. Since 2006, it has also charged sellers who sign up to
have FBA handle warehousing, processing and shipping of their
items. Today, nearly two-thirds of sellers on Amazon.com in the
U.S. use FBA, according to Marketplace Pulse, a research firm. FBA
is a pillar of the Amazon Logistics unit that is separate from the
retail operation and that rivals FedEx Corp. and United Parcel
Ms. Jayapal said sellers testified privately that Amazon
compelled them to use its fulfillment service by making it harder
to sell goods on its retail platform. In particular, access to
Amazon's coveted "Buy Box," which determines which seller of an
item is featured for a sale, and getting good placement in search
results, are contingent upon a seller's participating in the
fulfillment program, she said.
Jerry Kavesh, who sells apparel and footwear on Amazon, said he
recently pulled some inventory from FBA because he couldn't afford
the cost. Since then, he said, he has noticed a slowdown in sales
for those items compared with ones he kept in the fulfillment
"There's a ramification for not using FBA," he said. "It impacts
your search-ability and impacts your Buy Box opportunities because
FBA trumps everything when it comes to the Buy Box."
Amazon has said that using its fulfillment service is voluntary
for sellers. Closely guarded algorithms determine the Buy Box and
search ranking on Amazon.com.
Amazon's Mr. Evans said that FBA participation isn't part of the
algorithms for the Buy Box or search ranking but that speed of
delivery is. Products offered through Amazon's logistics network
generally provide a better experience for customers than
fulfillment through other means, he said.
In PopSockets' case, its hit product -- a collapsible handle
that attaches to smartphones -- was contending with counterfeits on
Amazon, said Mr. Barnett, the CEO. For more than a year, the
Boulder, Colo., company made regular complaints to Amazon about the
fakes, he said. It asked for its products to be "gated" on Amazon's
site, which would require resellers of PopSockets products to be
vetted for authenticity. Amazon repeatedly turned PopSockets down,
In 2017, Mr. Barnett flew to Seattle to meet with Amazon. The
executives in the meeting offered a solution, he said: If
PopSockets agreed to spend $1.8 million on marketing on Amazon, it
would gate the company's products.
He said Amazon never puts the terms in writing. "It's always
implemented during phone calls, or in person, but never in emails,"
he said. Mr. Barnett said he agreed to Amazon's terms and the
counterfeits immediately disappeared.
PopSockets took a break from selling to Amazon, estimating it
lost $10 million in 2019 revenue from not selling on the site, then
resumed sales on Amazon -- without paying the extra marketing tab,
Mr. Barnett said.
"We are fortunate to have grown so fast and have a healthy
business that we were able to say 'no' and take a big hit and
survive," he said. "Most businesses can't afford to say no."
Write to Dana Mattioli at email@example.com and Joe Flint at
(END) Dow Jones Newswires
April 14, 2021 10:49 ET (14:49 GMT)
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