Boeing Co. will pay $200 million to settle civil charges by the U.S. Securities and Exchange Commission that it misled investors about its 737 MAX, which was grounded for 20 months after two fatal crashes killed 346 people, the agency said on Thursday. Boeing knew after the first crash that a flight control system posed a safety issue, but assured the public that the 737 MAX airplane was “as safe as any that has ever flown the skies,” the SEC said in announcing the settlement.
The SEC also said former Boeing Chief Executive Dennis Muilenburg had agreed to pay $1 million to settle charges. Both Boeing and Muilenburg did not admit or deny the SEC’s findings, the agency said. A fund will be established for the benefit of harmed investors, it said. Boeing shares rose 0.4% in after-hours trading.
“In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets,” SEC Chair Gary Gensler said in a statement. Boeing and Muilenburg “failed in this most basic obligation,” he said. The SEC charged Boeing and Muilenburg “with making materially misleading public statements following crashes of Boeing airplanes in 2018 and 2019.”
Boeing, which noted that it did not admit or deny wrongdoing in the settlement agreement, said it had made “fundamental changes that have strengthened our safety processes” and said the “settlement is part of the company’s broader effort to responsibly resolve outstanding legal matters related to the 737 MAX accidents.”
The first crash, of a Lion Air flight in Indonesia, occurred in October 2018. After the second crash, in Ethiopia in March 2019, the SEC said, “Boeing and Muilenburg assured the public that there were no slips or gaps in the certification process with respect to MCAS, despite being aware of contrary information.”
Boeing has resolved most claims from the two fatal crashes. Last year it acknowledged liability for compensatory damages in lawsuits filed by families of the 157 people killed in the 2019 Ethiopian Airlines 737 MAX crash. A small number of trials are expected to begin in 2023 to help resolve claims.
The Federal Aviation Administration required 737 MAX pilots to undergo new training to deal with MCAS as well as mandating significant new safeguards and other software changes to the flight control system before allowing the planes to return to service. The crashes cost Boeing more than $20 billion and led Congress to pass sweeping legislation reforming how the FAA certifies new airplanes. Boeing faces a December deadline to win approval from the FAA of the 737 MAX 7 and 10 variants, or it must meet new modern cockpit-alerting requirements.
In January 2021, Boeing agreed to pay $2.5 billion in fines and compensation to resolve a U.S. Justice Department criminal investigation into the 737 MAX crashes. The Justice Department settlement, which allowed Boeing to avoid prosecution, included a fine of $243.6 million, compensation to airlines of $1.77 billion, and a $500 million crash-victim fund over fraud conspiracy charges related to the plane’s flawed design.
The families of some people killed in the Boeing crashes have asked a judge to declare the government violated their legal rights when it reached the settlement. In December 2019, Boeing fired Muilenburg after the company clashed with regulators over the timing of the 737 MAX’s return to service. A lawyer for Muilenburg, who did not admit or deny wrongdoing, did not immediately respond to a request for comment.
Muilenburg departed Boeing with $62 million in compensation and pension benefits but received no severance pay. “Boeing and Muilenburg put profits over people by misleading investors about the safety of the 737 MAX all in an effort to rehabilitate Boeing’s image following two tragic accidents that resulted in the loss of 346 lives and incalculable grief to so many families,” said SEC Enforcement Director Gurbir Grewal.
Last November, Boeing’s current and former company directors reached a $237.5 million settlement with shareholders to settle a lawsuit over the board’s safety oversight of the 737 Max.
agreed to pay more than $2.5 billion to settle a criminal probe with the U.S. Justice Department, which accused the company of concealing information about its 737 Max airplane that was involved in two crashes that claimed 346 lives, federal prosecutors announced Thursday. The deferred prosecution agreement closes the DOJ’s roughly two-year probe and drops all charges after three years if there aren’t additional violations.
Prosecutors said Boeing “knowingly and willfully” conspired to defraud the United States by undermining the Federal Aviation Administration’s ability to evaluate the safety of the plane. Boeing admitted that two of its 737 Max flight technical pilots “deceived” the FAA about the capabilities of a flight-control system on the planes, software that was later implicated in the two crashes, the Justice Department said.
The $2.51 billion fine consists of a $243.6 million criminal penalty, a $500 million fund for crash victims family members and $1.77 billion for its airline customers. The company said it already accounted for a bulk of those costs in prior quarters and expects to take a $743.6 million charge in its 2020 fourth-quarter earnings to cover the rest.
“The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers,” Acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division, wrote in a release. “Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 Max airplane and engaging in an effort to cover up their deception.”
The company admitted to the wrongdoing and waived its rights to a trial as part of its deal with the DOJ to settle the charges. The agreement also didn’t implicate top executives there, saying the misconduct wasn’t pervasive nor were senior managers involved. “This is a substantial settlement of a very serious matter, and I firmly believe that entering into this resolution is the right thing for us to do — a step that appropriately acknowledges how we fell short of our values and expectations,” CEO Dave Calhoun said in a note to Boeing employees.
The crashes plunged Boeing into its worst-ever crisis that has cost Boeing about $20 billion. They sparked a worldwide grounding of its bestselling plane that lasted nearly two years, numerous investigations and damaged the reputation of one what was the world’s biggest aircraft manufacturer.
Two damning congressional investigations after the crashes found management, design and regulatory lapses in the 737 Max’s development and certification. This led to new legislation passed last year to reform aircraft certification, giving more control over the process to the FAA. House Transportation and Infrastructure Committee Chairman Peter DeFazio, an Oregon Democrat whose committee led one of the reports and introduced the new certification law, slammed the settlement with the Justice Department.
“This settlement amounts to a slap on the wrist and is an insult to the 346 victims who died as a result of corporate greed,” he said in a statement. “Not only is the dollar amount of the settlement a mere fraction of Boeing’s annual revenue, the settlement sidesteps any real accountability in terms of criminal charges.”
Lawyers representing the family members of victims in Ethiopian Airlines Flight 302 said they intend to continue with their lawsuit against Boeing. “This agreement, including the ‘crash-victim beneficiaries fund’, has no bearing on the pending civil litigation against Boeing, which we plan to prosecute fully to ensure the families receive the justice they deserve,” they said.
You can’t see them, but Meta’s trackers are embedded in millions of websites all over the internet, collecting data about where you go and what you do and sending it back to Meta. A recent investigation shows that those trackers are on sites that even the most cynical among us might expect to be off-limits: those belonging to hospitals, including patient portals that are supposed to be protected by health privacy laws.
This week, the Markup, a nonprofit news outlet that covers technology’s harms, has been publishing the latest findings of its investigation into Meta’s Pixels, which are pieces of code developers can embed on websites to track their visitors. So far, those stories reveal how websites owned by the government, pregnancy counseling centers, and hospitals are sending data to Meta through Pixels, much of which would be considered sensitive to the users who unwittingly provided it.
It’s easy and understandable to blame Meta for this, given the company’s much-deserved, less-than-stellar reputation on user privacy. In Pixel and other trackers, Meta has played an instrumental role in building the privacy-free, data-leaking online world we must navigate today. The company supplies a tracking system designed to suck up user data from millions of sites and spin it into advertising gold, and it knows very well that there are many cases where the tool was implemented poorly at best and abused at worst.
But this may also be a rare case of a Meta-related privacy scandal that isn’t entirely Meta’s fault, partly because Meta has done its best to place that blame elsewhere. Or, as security researcher Zach Edwards put it: “Facebook wants to have their data cake and not eat the violations, too.” Businesses choose to put Meta’s trackers on their websites and apps, and they choose again which data about their visitors to send up to the social media giant.
There’s simply no good excuse, in this day and age, for developers that use Meta’s business tools not to understand how they work or what user data is being sent through them. At the very least, developers shouldn’t put them on health appointment scheduling pages or inside patient portals, which users have every reason to expect not to be secretly sending their data to nosy third parties because they’re often explicitly told by those sites that they aren’t. Meta created a monster, but those websites are feeding it.
How Pixel makes tracking too easy
Meta makes Pixel available, free of charge, to businesses to embed in their sites. Pixel collects and sends site visitor data to Meta, and Meta can match this to a user’s profile on Facebook or Instagram, giving it that much more insight into that user. (There are also cases where Meta collects data about people who don’t even have Meta accounts.) Some data, like a visitor’s IP address, is collected by Meta automatically. But developers can also set Pixel up to track what it calls “events”: various actions users take on the site.
That may include links they click on or responses in forms they fill out, and it helps businesses better understand users or focus on specific behaviors or actions. All this data can then be used to target ads at those people, or to create what’s known as “lookalike audiences.” This involves a business asking Meta to send ads to people who Meta believes are similar to its existing customers. The more data Meta gets from businesses through those trackers, the better it should be able to target ads.
Meta may also use that data to improve its own products and services. Businesses may use Pixel data for analytics to improve their products and services as well. Businesses (or the third-party vendors they contract to build out their sites or run advertising campaigns) have a lot of control over what data about their customers Meta gets. The Markup discovered that, on some of the sites in its report, hospital website appointment pages were sending Meta the name of someone making an appointment, the date and time of the appointment, and which doctor the patient is seeing.
If that’s happening, that’s because someone on the hospital’s end set Pixel up to do that. Either the hospital didn’t do its due diligence to protect that data or it didn’t consider it to be data worth protecting. Or perhaps it assumed that Meta’s tools would stop the company from collecting or using any sensitive data that was sent to it. In its most recent hospital investigation, the Markup found that a third of the hospitals it looked at from a list of the top 100 hospitals in the country had a Pixel on appointment scheduling pages, and seven health systems had Pixels in their patient portals. Several of the websites removed Pixel after being contacted by the Markup.
How can a hospital justify any of this? The only hospital that gave the Markup a detailed response, Houston Methodist, claimed that it didn’t believe it was sending protected health information to Meta. The Markup found that the hospital’s site told Meta when someone clicked “schedule appointment,” which doctor they scheduled the appointment for, and even that the doctor was found by searching “home abortion.”
But Houston Methodist said scheduling an appointment didn’t mean the appointment was ever confirmed, nor that the person who scheduled the appointment was the person that appointment was actually for. Houston Methodist might think it isn’t violating patient privacy, but its patients may well feel differently. But they’d also have no way of knowing this was happening in the first place without using special tools or having a certain level of technical knowledge. Houston Methodist has since removed the Pixel.
Another health system the Markup looked at, Novant Health, said in a statement that the Pixel was placed by a third-party vendor for a campaign to get more people to sign up for its patient portal system, and was only used to see how many people signed up. But the Markup found far more data than what was being sent to Meta, including medications that users listed and their sexual orientations. That third-party vendor appears to have made some mistakes here, but Novant’s the one that has a duty to its patients to keep their information private on websites that promise to do so. Not the third-party vendor, and not Meta.
This is not to let Meta off the hook. Again, it created the Pixel tracking system, and while it has rules and tools that are supposed to prevent certain types of sensitive information — like health conditions — from being sent to it, the Markup’s reports are evidence that those measures aren’t enough.
Meta told Recode in a statement that “our system is designed to filter out potentially sensitive data it detects.” But the Markup found those filters lacking when it came to data from at least one crisis pregnancy center’s website. Meta didn’t respond to Recode’s questions about what it does if it finds that a business is violating its rules. Edwards, the security researcher, was even less charitable about how much blame Meta should get here. “It’s 100 percent Facebook’s fault, in my opinion,” he said.
Meta also didn’t respond to questions from Recode asking what it does to ensure businesses are following its policies, or what it does with the sensitive information businesses aren’t supposed to send it. As it stands, it looks as though Meta is making and distributing a tracking tool that can materially benefit Meta. But if that tool is exploited or used incorrectly, someone else is responsible. The only people who pay the price for that, it seems, are the site visitors whose privacy is unknowingly invaded.
What you can do to avoid Pixel
There are a few things you can do to protect yourself here. Browsers like Safari, Firefox, and Brave offer tracker blockers. Todd Feathers, one of the reporters on the Markup’s hospital story, told Recode they used Chrome browsers with no privacy extensions for their tests. Speaking of privacy extensions, you can get those, too. VPNs and Apple’s paid private relay service can obscure your IP address from the sites you visit.
Finally, Meta has controls that limit tracking and ad targeting off of its platforms. The company claims that turning off “data about your activity from partners” or “off-Facebook activity” will stop it from using data collected by Pixel from being used to target ads to you. This means placing some trust in Meta that its privacy tools do what it claims they do.
And there’s always, of course, asking your lawmaker to push for privacy laws that would make some of these practices explicitly illegal, or forcing companies to inform and get user consent before collecting and sending their data to anyone else. A few new federal privacy bills or draft bills have been introduced as recently as this week. The interest is there among some members of Congress, but not in enough of them to come close to passing anything yet.
This 2003 electron microscope image made available by the Centers for Disease Control and Prevention shows mature, oval-shaped monkeypox virions, left, and spherical immature virions, right, obtained from a sample of human skin associated with the 2003 prairie dog outbreak.
A leading doctor who chairs a World Health Organization expert group described the unprecedented outbreak of the rare disease monkeypox in developed countries as “a random event” that might be explained by risky sexual behavior at two recent mass events in Europe.
A leading adviser to the World Health Organization described the unprecedented outbreak of the rare disease monkeypox in developed countries as “a random event” that might be explained by risky sexual behavior at two recent mass events in Europe.
In an interview with The Associated Press, Dr. David Heymann, who formerly headed WHO’s emergencies department, said the leading theory to explain the spread of the disease was sexual transmission among gay and bisexual men at two raves held in Spain and Belgium. Monkeypox has not previously triggered widespread outbreaks beyond Africa, where it is endemic in animals.
“We know monkeypox can spread when there is close contact with the lesions of someone who is infected, and it looks like sexual contact has now amplified that transmission,” said Heymann. That marks a significant departure from the disease’s typical pattern of spread in central and western Africa, where people are mainly infected by animals like wild rodents and primates and outbreaks have not spilled across borders.
To date, WHO has recorded more than 90 cases of monkeypox in a dozen countries including Britain, Spain, Israel, France, Switzerland, the U.S. and Australia. Madrid’s senior health official said on Monday that the Spanish capital has recorded 30 confirmed cases so far. Enrique Ruiz Escudero said authorities are investigating possible links between a recent Gay Pride event in the Canary Islands, which drew some 80,000 people, and cases at a Madrid sauna.
Heymann chaired an urgent meeting of WHO’s advisory group on infectious disease threats on Friday to assess the ongoing epidemic and said there was no evidence to suggest that monkeypox might have mutated into a more infectious form.
Monkeypox typically causes fever, chills, rash, and lesions on the face or genitals. It can be spread through close contact with an infected person or their clothing or bedsheets, but sexual transmission has not yet been documented. Most people recover from the disease within several weeks without requiring hospitalization.
Vaccines against smallpox, a related disease, are also effective in preventing monkeypox and some antiviral drugs are being developed. So far, public health agencies in Europe have confirmed cases in the UK, Spain, Portugal, Germany, Belgium, France, the Netherlands, Italy and Sweden.
In a statement on Friday, the WHO said that the recent outbreaks “are atypical, as they are occurring in non-endemic countries”. It said it was “working with the affected countries and others to expand disease surveillance to find and support people who may be affected”.
It is not yet clear why this unusual outbreak is happening now. One possibility is that the virus has changed in some way, although currently there is little evidence to suggest this is a new variant. Another explanation is that the virus has found itself in the right place at the right time to thrive.
Monkeypox may also spread more easily than it did in the past, when the smallpox vaccine was widely used. WHO’s Europe regional director Hans Kluge warned that “as we enter the summer season… with mass gatherings, festivals and parties, I am concerned that transmission could accelerate”.
He added that all but one of the recent cases had no relevant travel history to areas where monkeypox was endemic. The first case of the disease in the UK was reported on 7 May. The patient had recently travelled to Nigeria, where they are believed to have caught the virus before travelling to England, the UK Health Security Agency said.
There are now 20 confirmed cases in the UK, Health Secretary Sajid Javid said on Friday. Authorities in the UK said they had bought stocks of the smallpox vaccine and started offering it to those with “higher levels of exposure” to monkeypox. Spanish health authorities have also reportedly purchased thousands of smallpox jabs to deal with the outbreak, according to Spanish newspaper El País.
Australia’s first case was detected in a man who fell ill after travelling to the UK, the Victorian Department of Health said. In North America, health authorities in the US state of Massachusetts confirmed that a man has been infected after recently travelling to Canada. He was in “good condition” and “poses no risk to the public”, officials said.
On the heels of yet another year of record sales, Amazon is dealing with a couple of unwelcome updates in the new year. The Senate Judiciary Committee has announced it will soon be marking up the American Innovation and Choice Online Act, an antitrust bill targeting Amazon and other Big Tech companies. This follows reports that the Federal Trade Commission is ramping up its years-long antitrust investigation into Amazon’s cloud computing arm, Amazon Web Services, or AWS.
It’s clearer now than ever that Amazon, which was allowed to grow mostly unhindered for more than two decades, is caught in the middle of an international effort to check Big Tech’s power.
The Senate bill, one of several bipartisan antitrust bills in Congress, would prohibit Amazon from giving its products preferential treatment, among other things. It’s the bill that would affect the company the most, and the one it has been fighting hardest against. Meanwhile, the renewed scrutiny from the FTC about alleged anti-competitive behavior from AWS, which represents a significant and largely invisible source of Amazon’s profits, could threaten Amazon’s long-term dominance in a number of industries.
Just because a company is successful and dominates a market (or even several markets) doesn’t mean it’s violating any antitrust laws. But Amazon’s critics say it illegally uses its power to harm competition and consumers, particularly with its Marketplace, where outside, or third-party, businesses can sell their products to Amazon customers alongside Amazon’s own wares.
Amazon has been accused of copying popular products to sell under its own labels, using non-public seller data to inform its own decisions, and forcing sellers into agreements that essentially prohibit them from offering lower prices elsewhere. Amazon denies some of these allegations and says other actions are simply meant to provide the services its customers want at the best price.
Some of these complaints have been around a while, but 2022 may be the year that Amazon faces meaningful and real consequences for them. There are still caveats. State attorneys general are rumored to be looking into some of Amazon’s business practices, but only one has filed a lawsuit so far.
The FTC is still waiting for the confirmation of a fifth Democratic commissioner who would break up the deadlock of two Republican and two Democratic commissioners. And while antitrust bills are making progress in Congress, Democratic lawmakers currently seem focused on other initiatives ahead of the midterm elections — elections that could give Republicans a majority in one or both houses of Congress.
Amazon isn’t the only Big Tech company that’s been targeted, but it might have more reason than anyone else to worry about the FTC in particular. One of two federal agencies that enforce antitrust laws, the FTC is now run by Lina Khan, who basically built her career on research surrounding her 2017 Yale Law Journal paper, “Amazon’s Antitrust Paradox.”
The paper detailed how Amazon’s rise showed the flaws in antitrust laws and led to Khan becoming known as Amazon’s antitrust antagonist. Since her appointment to the FTC last June, it hasn’t seemed like the question is whether the agency will take on Amazon, but rather when and how. Amazon, meanwhile, has asked that Khan recuse herself from any antitrust matters involving the company.
Khan “is best suited to understand the various issues and problems with Amazon,” said Alex Harman, a competition policy advocate at Public Citizen, a consumer advocacy group. “And we are very excited that she will be able to bring a significant action against them.”
In response to questions about whether its size and market share were too big in too many sectors, Amazon told Recode it faces “intense competition” in all of its lines of business. It says its expansion is part of a long-running strategy to make “big bets over the long term to reinvent the customer experience.”
Sarah Miller, executive director of the American Economic Liberties Project, an anti-monopoly advocacy group, sees it differently: “Amazon leverages its power in one space to take over a new space, which is core to their business practice. They have the ability to combine the competitive advantages of different aspects of their business to take over new sectors of the economy.”
While the FTC, for now, seems interested in AWS (and Amazon’s attempt to buy MGM), most of the antitrust attention we’ve seen elsewhere is focused on Amazon’s retail business and how it treats the businesses that sell products through its Marketplace platform. Critics say Amazon uses its power to give its own wares an unfair advantage over third-party sellers, and effectively forces them to pay for extra services and make agreements that could inflate prices everywhere.
“That’s where there’s a lot of obvious harms, and where you have businesses who are unhappy with how they’re being treated,” Miller said.
Consumers may be paying more and missing out on new products, companies, and innovations that a more competitive retail space would have produced. And that may be a violation of the antitrust laws we have now, or those to come.
How Amazon’s power might lead to higher prices
Many antitrust complaints about Amazon’s practices are based on its position as both a platform and a seller on that platform. This gives Amazon a great deal of power over the companies it’s competing against, as well as an incentive to favor its products over theirs. About 60 percent of Amazon’s online sales come through Marketplace.
This can be a mutually beneficial relationship. Marketplace’s sellers — currently more than 2 million of them — get access to Amazon’s huge customer base, and Amazon gets a vastly expanded selection that has helped make it the first and only website many online shoppers visit.
This model brings in hundreds of billions of dollars in revenue every year for Amazon, which now has an estimated 40 percent share of the e-commerce market in the United States. The company with the second-largest e-commerce market share, Walmart, has just 7 percent.
At the same time, Amazon likes to say it has but a small sliver — 1 percent — of a competitive global retail market. But that’s online and offline combined, and it includes many industries in which Amazon doesn’t sell anything at all. Amazon is also on track to edge out Walmart and become the most dominant retailer, online and off, in the United States as soon as this year.
No company has the kind of ecosystem Amazon built around its retail business beyond Marketplace. Amazon collects tons of data about its shoppers — data it uses to optimize its services and to fuel its burgeoning and increasingly lucrative advertising business.
Meanwhile, Amazon Prime and its fast free shipping has not only created an intensely loyal customer base but also compelled Amazon to build up its own shipping and logistics arm, Fulfillment by Amazon, to reduce its reliance on outside services and give it more control over its sellers. Many of Amazon’s rival retailers — namely, Walmart and Target — do some or all of these things to a lesser extent, but they’re just playing catch-up.
Smaller companies simply don’t have the scale or money to offer such services. Amazon, which has turned itself from a bookstore to an “everything store” to an everything platform, is in a class by itself.
“There are dynamics in digital that are fundamentally different,” Andrew Lipsman, principal analyst at eMarketer, told Recode. “Access to data is fundamentally different than we’ve ever had before. And all the other things that has enabled — all these digital businesses that Amazon has spun off — are underpinned by completely different economics than traditional retail economics.”
Amazon is happy to tell you how good it’s been for the small- and medium-sized businesses making money using its platform and how proposed antitrust actions could harm them. Others argue that Amazon makes even more money off of third-party sellers who have to play by Amazon’s rules because their businesses wouldn’t survive without the e-commerce giant and its customer base. And those rules, they say, aren’t always fair.
Last May, the attorney general of Washington, DC, Karl Racine, sued Amazon for antitrust violations over its treatment of Marketplace sellers. In September, he amended that lawsuit to include the wholesalers, or first-party sellers, from which Amazon buys products before selling them to its customers.
Racine told Recode that he started to wonder what the price of Amazon’s much-touted “customer obsession” was, especially after seeing accusations that Amazon copied popular products on its platform and then sold its own similar products for a lower price. (Amazon says it’s standard practice for retailers to use data about customers’ interests to help determine what to make for their own private labels.)
“I found that offensive,” Racine told Recode. “I felt like Amazon was just a copycat and burying a creative source. They were not focused only on the customer. They were also focused on their bottom line.”
The DC attorney general’s office investigated and found that “Amazon, the dominant player, seeks to maximize its profits at the expense of consumers, third-party sellers, and wholesalers,” Racine said. “It’s kept prices for goods artificially high, hampered competition, stifled innovation, and illegally tilted the playing field, all in its favor.”
Racine’s suit echoes some of the issues raised in other lawsuits and investigations as well as those identified in a recent report from the Institute for Local Self-Reliance, a nonprofit that advocates for locally owned businesses.
The big sticking point is that Amazon’s policies can effectively force other companies to give Amazon the lowest price for their goods. This is due to Amazon’s “fair pricing” policy, which says it can downgrade or stop sales of third-party sellers’ products if they’re priced “significantly higher” on Amazon than at other outlets.
Meanwhile, wholesalers have to agree to give Amazon a certain cut of their products’ sales. But Amazon also sets the prices of those products. If it reduces them to price match another outlet, the wholesaler may end up eating the difference and even losing money. That keeps wholesalers from selling their wares to anyone else for less.
Amazon sees all this as looking out for its customers and making sure they’re getting the lowest prices. But Racine and those who have filed similar lawsuits believe sellers and wholesalers are being stopped from selling their products for lower prices in other stores.
Because of this, competitors can’t offer lower prices to get an advantage over Amazon, and customers end up paying Amazon’s prices even if they don’t shop at Amazon — and paying more. Sellers and wholesalers can choose not to sell to Amazon, but few of them have the size and brand recognition needed to survive in a world where so many shoppers do most, if not all, of their online shopping on Amazon.
“That’s the power of brands: Nike is able to say, ‘You know what, Amazon? We don’t need you,’” Lipsman said. “The more commoditized your product is, the more likely you have to sell through Amazon, and you’re dependent on that channel.”
Amazon has filed a motion to dismiss the DC attorney general’s lawsuit, arguing that it’s simply making sure its customers are getting the lowest prices. The policies don’t force sellers to offer the lowest price on Amazon, Amazon says; they simply discourage them from offering higher prices on Amazon than they do elsewhere. But this hasn’t always been the case.
Just a few years ago, Amazon had a price parity policy, which more explicitly said sellers couldn’t offer lower prices anywhere else. Amazon ended this practice in Europe years ago amid scrutiny there, and then did the same thing in the United States in 2019. Racine says the fair pricing policy that replaced it serves the same function and is similarly anti-competitive.
How Amazon uses its power over sellers to squeeze them for money and data
Even though one of Amazon’s selling points is its low prices, critics say those aren’t necessarily the lowest prices possible, in part due to the increasing costs to sell on Marketplace. Amazon charges sellers a referral fee, typically 15 percent, for items sold. Then it piles on optional services that many sellers feel compelled to buy if they want their businesses to survive, cutting into their margins and forcing some to raise their prices to maintain a profit.
Fulfillment by Amazon, or FBA, is one example of this. Amazon doesn’t require that its sellers use its fulfillment and shipping service, but doing so makes them eligible for Prime, and it’s exceedingly difficult to qualify for Prime if they don’t.
That recognizable Prime badge is important. There’s a higher likelihood that Amazon’s customers will buy Prime products, because the shipping is free for Prime members and because Amazon gives preference to Prime items when it assigns what’s known as the “Buy Box.” When multiple sellers offer the same product, the Buy Box winner is added to carts when customers click “buy.” More than 80 percent of an item’s sales go to the Buy Box winner, so sellers are very motivated to do everything possible to get it. That may include using FBA even if it costs them more than shipping items themselves.
This practice has already gotten Amazon into trouble abroad. In December, Italy’s antitrust regulators fined Amazon about $1.3 billion for giving sellers who use FBA benefits over those who don’t. Amazon says it’s planning to appeal the decision, but more trouble could be on the way: The company is facing a similar investigation from the European Union’s European Commission, and India is also investigating Amazon for violating its antitrust laws.
Sellers have also complained about ads, which give their items better placement in search results. Reports say that Amazon hasincreased the number of ads, upping its revenue and pushing organic results down even further — which, in turn, compels sellers to buy ads to regain the prominent placement they used to get for free. Amazon told Recode that sellers wouldn’t use FBA or buy ads if those services didn’t add value or come at the best price, as they can always use other fulfillment services and buy ads elsewhere.
But it’s not just fees that Amazon gets from its sellers. Critics say the company uses data it collects from third-party sellers to give itself a competitive advantage. This was the subject of a “statement of objections” from the European Union, and as the DC attorney general has made clear, Amazon is notorious for creating its own versions of popular products sold by third parties.
The company recently opened up some of its data to sellers, possibly in an effort to ward off some of this criticism, and says it prohibits the use of non-public data about individual sellers to develop its own products. But founder Jeff Bezos told Congress he couldn’t guarantee that policy has never been violated, and multiplepressreports suggest that it has.
The company has also been accused of self-preferencing, or giving its products preferentialtreatment — and a competitive advantage — over those sold by third parties. This could take the form of giving its own products the Buy Box or prominent search rankings they didn’t earn. Amazon has total control over its platform, so the company can really do whatever it wants, and there isn’t much sellers can do about it.
Self-preferencing has become a catch-all term for many of Amazon’s alleged anti-competitive practices. It’s attracted the most attention from regulators so far. The company denies that it gives preference to its own items in search results and says the reports that it does are inaccurate. Many legislators aren’t buying that and have proposed bills forbidding self-preferencing, with Amazon specifically in mind.
How Amazon could be changed by new antitrust laws
Per its policies, the FTC has stayed mum on what, if anything, it’s investigating on Amazon. Congress, on the other hand, has been very public.
The House Judiciary Committee spent 16 months looking into competition and digital markets, focusing on Amazon as well as Apple, Google, and Facebook. Last year, a bipartisan and mostly bicameral group of lawmakers proposed a package of Big Tech-focused antitrust bills. The House’s bills made it through committee markup last June, but have yet to be put to a vote.
The American Innovation and Choice Online Act is the only Senate bill to be scheduled for markup so far. The House’s Ending Platform Monopolies Act, which still doesn’t have a Senate equivalent, is likely the most expansive of the bills in the antitrust package, forbidding dominant digital platforms from owning lines of business that incentivize them to give their own products and services preference over third parties. Should that bill become law, it could have a huge impact on Amazon, forcing it to split off its first-party store from its sales platform.
Amazon has fought back against the bills. It has sent emails to certain sellers and set up an informational website warning them about how the bills, if they become law, could negatively impact them. Amazon claims that it might have to shut down Marketplace or limit its ability to offer Prime services. The bills’ supporters say that companies would still be able to offer all of those services, but could finally compete on a level playing field.
“We urge Congress to consider these consequences instead of rushing through this ambiguously worded bill,” Brian Huseman, Amazon vice president of public policy, told Recode in a statement. He added that the bills should apply “to all retailers, not just one.”
While Amazon waits to see what the FTC and Congress do, its antitrust battles, real and potential, haven’t seemed to harm its bottom line. Business is good, growing, and disruptive. Amazon is even reportedly preparing to take on Shopify, a platform that helps businesses create their own online shops and has grown exponentially during the pandemic, with a similar offering that could come out as early as this year. If true (Amazon wouldn’t comment), it shows that Amazon isn’t afraid of going after potential threats even while under more scrutiny than it’s ever experienced.
That’s exactly the attitude Racine, the DC attorney general, takes issue with. “Amazon claims to be all about consumers,” he said. “What our evidence shows is that Amazon is all about more profit for Amazon, at the cost of competition and at the expense of consumers. And we’re looking forward to proving that in court.
Sara Morrison covers Big Tech and antitrust regulation, in addition to personal data and privacy. She previously covered technology’s impact on the world for Vocativ. Her work has also appeared in the Atlantic, Jezebel, Boston.com, Nieman Reports, and Columbia Journalism Review, among others.
France’s data protection regulator on Thursday hit Google and Facebook with fines of €150 million ($170 million) and €60 million ($68 million), respectively, for failing to provide internet users an easy way to disable online trackers, marking the latest in a series of fines faced by the two American tech giants for failing to comply with European privacy laws.
Key Facts
In a statement outlining its investigation, French regulator CNIL noted that Facebook, Google and Youtube’s websites offered a button that allowed users to immediately accept cookies but did not provide a similar button to easily refuse them.
The regulator added that the process of refusing the online trackers was several steps longer.
The CNIL ruled that this process affects users’ freedom of consent as it influences their choice of accepting or rejecting cookies.
While cookies can be essential for a website’s functioning—allowing for user authentication and remembering preferences among other things—they can also be used to track a user’s online behavior and serve them advertising.
In addition to the hefty fines, both companies have been ordered to update their interface for French users—making it easier for them to reject cookies—within three months.
Key BackgroundThe fines against Google and Facebook follow a series of similar regulatory actions facing U.S tech giants including Apple and Amazon in Europe. In December 2020, Google and Amazon were hit with similar fines for their handling of web cookies to track user activities without seeking proper consent..
Last year, regulators in France, the U.K., and the EU initiated formal antitrust probes into Google and Facebook’s online advertising business. The European Union’s General Data Protection Regulation (GDPR) which went into effect in May 2018 has dramatically increased the powers of the bloc’s privacy enforcers. Under the law, serious privacy breaches can lead to fines of as much as 4% of a company’s annual global revenue.
Wickelgren, Abraham (2001). “Damages for Breach of Contract: Should the Government Get Special Treatment?”. Journal of Law, Economics & Organization. 17: 121–148. doi:10.1093/jleo/17.1.121.
The SEC also said former Boeing Chief Executive Dennis Muilenburg had agreed to pay $1 million to settle charges. Both Boeing and Muilenburg did not admit or deny the SEC’s findings, the agency said. A fund will be established for the benefit of harmed investors, it said. Boeing shares rose 0.4% in after-hours trading.
In January 2021, Boeing agreed to pay $2.5 billion in fines and compensation to resolve a U.S. Justice Department criminal investigation into the 737 MAX crashes. The Justice Department settlement, which allowed Boeing to avoid prosecution, included a fine of $243.6 million, compensation to airlines of $1.77 billion, and a $500 million crash-victim fund over fraud conspiracy charges related to the plane’s flawed design.
