10/18/18 Update: EBay Inc. filed a lawsuit against Amazon.com Inc. on this matter on Oct. 17 in California Superior Court in San Jose. The suit claims Amazon interfered with contractual relations and violations of California’s penal code and business and professions code. It is seeking monetary damages and a court order barring Amazon from poaching eBay sellers.
The battle for marketplace market share is taking an ugly turn.
EBay Inc. alleges that sales representatives at rival Amazon.com Inc. are illegally trying to poach its sellers by using eBay’s own messaging system to recruit new blood.
EBay on Monday sent a cease-and-desist letter to Amazon to halt what eBay claims has been an international and coordinated effort over several years to persuade eBay sellers to migrate to their competitor’s marketplace.
“We have uncovered an unlawful and troubling scheme on the part of Amazon to solicit eBay sellers to move to Amazon’s platform,” an eBay spokesperson says in a statement. “We have demanded that Amazon end its unlawful activity, and we will take the appropriate steps, as needed, to protect eBay.”
According to the spokesperson, eBay was alerted to Amazon’s alleged actions about 10 days ago after a seller notified the company of being contacted by an Amazon employee under false pretenses. This sparked an internal eBay probe, and the company says once it looked into the matter, investigators discovered an orchestrated, high-volume push of “many” hundreds of unsolicited messages from Amazon representatives in at least seven countries.
EBay says Amazon employees created dummy eBay seller accounts with no intent to transact but with the fraudulent goal of accessing the member-to-member messaging center and sending uninvited communications to target top eBay sellers. The pitches allegedly often mentioned Amazon’s understanding of seller needs in particular product categories.
Amazon declined to answer any questions on the cease-and-desist letter or its recruitment practices. “We are conducting a thorough investigation of these allegations,” an Amazon spokesperson says in a statement.
Amazon’s alleged misconduct is not just unethical—it also violates California’s Comprehensive Computer Data Access and Fraud Act, a law that prohibits misuse of computer systems, eBay says. If Amazon representatives did, in fact, set up fake eBay seller accounts to exploit the messaging feature, that would be a breach of eBay’s policies and user agreement. The terms of use ban members from communicating with others to promote sales outside of eBay’s platform; send spam, which would include unsolicited messages that are commercial in nature; and request or trade contact information, including email addresses and phone numbers.
EBay says it appears that employees at Amazon, No. 1 in the Internet Retailer 2018 Top 1000, participated in systematic efforts to avoid being detected with some sly maneuvers. To bypass automated monitoring programs designed to catch and prevent unauthorized use of eBay’s email system, Amazon representatives allegedly disguised their company by inserting hyphens and periods between letters to vary their employer’s name, with references camouflaged as “a-m-a-z-o-n,” “A.MZ.N.” and “AMZ.” EBay claims Amazon employees also pushed sellers to continue conversations outside of eBay’s platform and offered their contact information by spelling out email characters like “at” and “dot com” and using unconventional phone number formats to skirt content flagging.
The news of this potential misconduct comes on the heels of Amazon confirming last month that it’s investigating claims that its employees are selling confidential data on sales and searches to independent merchants that operate on the site.
Of the retailers ranked in the Top 1000, 287, or 28.8%, sell on Amazon and 155, or 15.6%, sell on eBay. The two groups have a fair amount of overlap with 105 merchants selling on both marketplaces. It’s common for retailers to sell through multiple platforms since it’s relatively easy to manage multiple channels once the first is set up, but sellers typically focus efforts on one primary marketplace.
While eBay operates as a pure marketplace and doesn’t own any of the inventory sold on its site—leaving it ineligible for inclusion in the Top 1000 ranking—Amazon makes money both from selling its own merchandise and from commissions and fees charged to independent third-party merchants that list on the marketplace.
In 2017, Amazon saw 21.1% growth in sales, which include first-party product sales, subscription services and third-party seller services but exclude revenue from brick-and-mortar stores and Amazon Web Services, the company’s profitable cloud-computing division. Revenue from third-party seller services—which include commissions Amazon earns on other merchants’ sales, related fulfillment and shipping fees plus other services—are a growing portion of the retail behemoth’s bottom line.
In 2016, third-party seller services raked in $22.993 billion, or 18.6% of Amazon’s total web sales of $123.768 billion. Last year, this segment accounted for $31.881 billion, or 21.3% of $149.957 billion for the fiscal year. And the trend is continuing in 2018. Through the first half of the year, seller services hit $18.966 billion, taking a 23.8% share of Amazon’s total web sales of $79.581 billion. That’s up from $13.429 billion in the first half of 2017, when the segment accounted for 20.9% of the $64.113 billion total.
EBay, No. 4 in the Internet Retailer 2018 Online Marketplaces ranking, grew the value of goods sold on its marketplace 5.5% in 2017, from $83.76 billion the prior year to $88.40 billion last year. As it fiercely wages war against Amazon, eBay has invested in a rebranding campaign to modernize its reputation and attract more customers and sellers by promoting new features.
Bloomberg contributed to this report.
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