(Bloomberg) —Amazon.com Inc., No. 1 in Internet Retailers Top 500, should be investigated by U.S. regulators over undisclosed paid endorsements on Prime Day, a consumer advocacy group says.
Washington-based Public Citizen asked the Federal Trade Commission in a letter dated Tuesday to examine the online retailer’s associates program, which is used by Amazon to build word-of-mouth sales on the platform in exchange for commissions.
“When consumers consider an associate’s recommendation for a ‘best buy,’ it is of material interest to them if the associate has a monetary interest in ensuring that the consumer does, in fact, buy,” Public Citizen President Robert Weissman wrote.
The complaint comes as Seattle-based Amazon is facing increasing scrutiny in Washington over whether it’s harming competition. As part of an agreement with the Justice Department, the FTC took responsibility for a potential antitrust investigation into Amazon. The agency enforces deceptive advertising cases against companies.
“All associates must follow our associates guidelines, which include obligations to identify as an associate and provide all legally required disclosures,” Amazon said in a statement. “Those who don’t are subject to action including potential closure of their account.”
Amazon Prime Day, a two-day summer sales event, was started in 2015 to lure new Prime members, who pay monthly or annual fees for shipping discounts and other perks.
Under Amazon’s associates program, selected reviewers refer their audiences to products on Amazon in exchange for a commission on subsequent sales. Public Citizen argued they function as endorsers who are paid for the endorsement, which requires disclosure.
Public Citizen said it found numerous examples of Prime Day recommendations like posts on Instagram with no disclosures or inadequate disclosures. It acknowledged some reviews may be genuinely independent.
Democrat David Cicilline questions truth of Amazon testimony
A House Democrat leading a broad antitrust investigation into large technology companies suggested that an Amazon.com Inc. executive may not have been fully truthful during testimony about the company’s practices.
Representative David Cicilline expressed dissatisfaction with Amazon’s answers at a July 16 hearing before the House antitrust panel, according to a letter he sent to the company Tuesday. He also wrote to Facebook Inc. and Alphabet Inc.’s Google.
“I was deeply troubled by the evasive, incomplete, or misleading answers received to basic questions directed to these companies by members of the subcommittee,” Cicilline said in a statement, adding it wasn’t clear “whether these responses stemmed from their lack of preparation, purposeful evasion, or a failure by these companies to select appropriate witnesses for the hearing.”
Cicilline is targeting the companies amid heightened scrutiny in Washington by lawmakers and antitrust enforcers and broadsides by President Donald Trump. The giants of the industry are under fire over massive collection of user data, failing to police content on their platforms, and claims that are harming competition in their markets.
The Rhode Island Democrat focused on testimony by Amazon lawyer Nate Sutton that the company doesn’t use data it collects on sales to favor its own products over third-party sellers.
Cicilline cited a media report in which a former Amazon employee in product management claimed to have pulled “sellers’ data to look at what the best products were,” according to an excerpt in the lawmaker’s letter.
The letter asked questions about Amazon’s relationship with third parties that sell on its platform. Critics of the company have said it can use the data it collects about sales to favor its own products and squelch competition. The letter also asks about Amazon’s share of the online retail market and about its cloud-computing business.
Cicilline queried Google on whether its “guiding principle” is to send users off its own sites after they conduct a search as well as an agreement with Apple Inc., No. 2 in Internet Retailers Top 500, for Google to be the default search engine on Apple devices. He asked Facebook about its evaluation of start-ups for acquisitions, among other issues.
Apple, which also testified at the hearing, did not receive a letter, a spokesman for Cicilline said.
Spokeswomen for Amazon and Facebook didn’t immediately respond to requests for comment on the letters. A spokeswoman for Google declined to comment.
On July 16, Cicilline said his inquiry is still in the fact-gathering stage but should eventually lead to legislative steps that go beyond self-regulation, including potentially new resources for antitrust agencies.
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