At least 10 Amazon employees took bribes to help third-party merchants boost sales on the company’s website, according to a federal indictment filed Friday.
The indictment charged six U.S.- and India-based consultants, working on behalf of third-party merchants who sold on Amazon’s Marketplace platform, with conspiracy and wire fraud. The consultants allegedly paid nearly $100,000 in bribes to Amazon employees, who in exchange reinstated merchants’ suspended accounts and products on Marketplace, facilitated attacks against competitors, gave away network access privileges, shared proprietary information and circumvented internal regulations to boost merchants’ sales.
No Amazon employees were charged, but that doesn’t preclude future action against the workers who took bribes, said U.S. attorney spokesperson Emily Langlie.
“The investigation is ongoing,” she said. “While this indictment focuses on the consultants, there’s always the potential for future charges.”
All told, the U.S. attorney estimates the scheme took a monetary toll in excess of $100 million. Part of that sum represents the merchants’ proceeds from Marketplace sales between 2017 and the present, secured by bribes that brought them unfair competitive advantages. The rest comprises lost sales on the part of competitors, and costs to Amazon.
An Amazon spokesperson did not respond to questions about how the company regulates Marketplace, where more than 2.5 million third-party merchants sell goods comprising nearly 60% of the products listed on Amazon.
The case is the latest in a string of revelations painting Marketplace as a Wild West of e-commerce. The company is also facing class-action lawsuits and a congressional inquiry over alleged price-fixing and data-scraping on Marketplace that some merchants claim gives the Seattle-headquartered giant an unfair advantage in online sales.
For third-party merchants on Amazon, the margins can be slim — and the competition is fierce, leading some merchants to resort to dirty dealing for a leg up.
In this case, the merchants and consultants “turned to bribery and fraud in order to gain the upper hand” after “realizing they could not compete on a level playing field,” said Seattle FBI agent Raymond Duda in a statement.
Consultants paid Amazon employees for intelligence on competitors’ revenue, customers, advertising campaigns and supplies, as well as to suspend competitors’ accounts and flood their product listings with false and negative reviews, the indictment alleged.
In some instances, the consultants launched “self-styled ‘takedowns’ ” against competitors, replacing product listings with “lewd and offensive” content “designed to drive away consumers and intimidate the victims,” according to the indictment.
One such image, included in the indictment, was of a smiley face raising a middle finger. Another was of a Guy Fawkes mask.
The consultants also bribed Amazon employees to steal information on the company’s proprietary review-ranking algorithm, enabling clients to order reviews tailor-made to vault over competitors in search results, according to the indictment. Tactics included “aging” fake user accounts “through a pattern of fictitious product purchases of an extended duration of time,” tricking the algorithm into believing that “fraudulent product reviews had been posted by bona fide purchasers.”
Bribes also secured additional storage space in Amazon warehouses.
The indictment provides a clue into why consumer watchdogs have continued to find goods listed on Marketplace that are dangerous or fake, despite Amazon efforts to swiftly remove counterfeits.
On Marketplace, things like recalled nutritional supplements and exploding batteries share online shelf space with knockoff soccer jerseys and iPhone cables. California lawmakers recently tabled a bill that would have held Amazon liable for the products listed on its platform, even those sold by third parties.
The indictment alleged that employees were bribed to reinstate accounts and goods on Marketplace even after those had been suspended over consumer-safety and intellectual property complaints.
“Dietary supplements that had been suspended because of customer-safety complaints, household electronics that had been flagged as flammable, [and] consumer goods that had been flagged for intellectual-property violations” were all returned to the platform after bribes were paid, according to a statement from the U.S. attorney.
Bribes also greased the wheels for merchants to sell restricted products — including nutritional supplements and copyrighted media — that Amazon’s regulations otherwise would not have allowed them to list on Marketplace, according to the indictment.
It’s not clear, however, that any of those goods were necessarily harmful or illicit. Third-party merchants have been known to file meritless consumer-safety complaints against competitors’ products to get them banned from the site, according to reporting from online technology magazine The Verge.
The indictment cites consultants allegedly ginning up a fake website, purporting to be an intellectual property law firm, to file a false complaint against competitors.
When asked, prosecutors declined to specify whether the bribes resulted in dangerous or illicit goods reappearing on the site.
Regardless, U.S. Attorney Brian T. Moran said in a statement, the “ultimate victim from this criminal conduct is the buying public who get inferior or even dangerous goods that should have been removed from the marketplace.”
Amazon also sustained losses as a result of the scheme, the U.S. attorney alleged. In exchange for bribes, Amazon employees erased shipping information from the company’s computer network, prompting Amazon to issue refunds to the sellers.