Amazon has been meeting with and investing in startups, only to later make
products that directly compete with them, according to a new report from The
Wall Street Journal.
The Journal spoke with startups who said Amazon made similar hardware
and software products after purchasing stakes in the companies. In one
example, Amazon invested in a hardware startup Nucleus, only to unveil
an Echo device that directly competed with Nucleus' product.
A spokesperson for Amazon told Business Insider that "any legitimate
disputes about intellectual property ownership are rightly resolved in
The report comes as Amazon is facing antitrust scrutiny from Congress
and the Federal Trade Commission. CEO Jeff Bezos will testify before the
House Judiciary Committee about the company's business practices on
The Journal spoke with dozens of startup founders, investors, and
advisers, who said Amazon met with or invested in their companies, only to
later build its own products that directly competed with the smaller
company. The Amazon-made products often went on to crush the competition,
the Journal found.
The Journal discovered several examples of Amazon's investments leading
to in-house product development. LivingSocial, a deals website, told the
Journal that after Amazon took a 30% stake in the company, it began
requesting troves of data from the company, hiring away employees, and
contacting LivingSocial's clients to offer better deals.
In another example, investors from the Alexa Fund purchased a stake in
the startup Nucleus, which made a video communication device for the home.
Eight months later, after gaining access to Nucleus' plans and financials,
Amazon announced the Echo Show, an Alexa-enabled device with a large video
screen. Sales of Nucleus' consumer device quickly declined and the company
has since pivoted to selling to the healthcare market, the Journal
Amazon later settled with Nucleus for $5 million but did not admit any
wrongdoing, according to the report.
Other companies, like DefinedCrowd, Vocalife, and Ubi — which made a
voice-operated speaker similar to the Echo — also told the Journal Amazon
had met with them or invested in them, then later seemed to use their
In many instances, the smaller companies said they could no longer
compete in the space, and downsized or closed.
"We ended up burning through our cash and ended up having to downsize
most of the company," Leor Grebler, who created the voice-operated speaker
Ubi, an Echo predecessor, told The Wall Street Journal.
Amazon told Business Insider that it does not use confidential
information that companies share when Amazon invests to create competing
"For 26 years, we've pioneered many features, products, and even whole
new categories. From amazon.com itself to Kindle to Echo to AWS, few
companies can claim a track record for innovation that rivals Amazon's,"
an Amazon spokesperson told Business Insider. "Unfortunately, there will
always be self-interested parties who complain rather than build. Any
legitimate disputes about intellectual property ownership are rightly
resolved in the courts."
The Journal's report comes as Amazon is facing scrutiny about potentially
anticompetitive behavior. The House Judiciary Committee is holding
an antitrust hearing on Monday at which Amazon CEO Jeff Bezos and
other prominent tech executives will testify.
Federal Trade Commission is also looking into "hundreds" of
acquisitions by Amazon and other tech firms to determine whether they
gained any unfair advantages by purchasing "nascent competitors." The FTC
has also spoken with sellers on Amazon's platform after a
Journal investigation from April found that Amazon used data from
third-party vendors to launch competing products.
anticompetitive practices by Amazon, Facebook, and Google have
corroded democracy and sabotaged the nation’s pandemic response.
Next week, the House
Judiciary Antitrust Subcommittee will bring the CEOs of Google,
Facebook, Amazon, and Apple to Washington and ask them about their
anticompetitive business practices. Except for Apple, there’s only one
answer: We are guilty.
Though anticompetitive practices were prohibited more than a century
ago, deregulation has prevailed since Ronald Reagan took office in
1981. Believing the market would always allocate resources optimally,
the federal government stopped playing its traditional role as
capitalism’s umpire. The Reagan Revolution unleashed economic growth
that led to a long period of prosperity and a concentration of
economic power. Over the past 20 years, the rich got much richer,
while half of the country struggled with static incomes. Nowhere is
this lawlessness more rampant today than among large tech companies,
who’ve used their power to crush competitors, suppliers, business
partners, and even customers.
Roger McNamee (@Moonalice) is the
author of the New York Times best seller Zucked:
Waking Up to the Facebook Catastrophe. He spent 34 years as a
technology investor and was an early investor in Facebook and an
adviser to Mark Zuckerberg.
Now the Covid-19 pandemic has exposed intolerable flaws in the status
quo across the economy, including poor pay and protection for the most
essential and dangerous jobs, an inability to increase personal
protective equipment manufacturing and testing capacity, and a health
care system that continues to struggle to adapt. Worst of all,
internet platform monopolies sabotaged the nation’s pandemic response
by amplifying disinformation.
Economic policy and the concentrated power that resulted from it are
partially to blame for our failure to contain the pandemic. We need
new policy that encourages competition, innovation, and adaptability,
with less focus on shareholders. The hearing on July 27 is an early
test of Congress’ readiness to join its constituents in demanding a
new vision for America.
Google, Facebook, and Amazon have exploited their popularity as a
shield from regulators, but that may be ending. The harm they cause to
suppliers, competitors, and advertisers, the threat they pose to the
economy and consumer welfare, can no longer be excused. Having four
CEOs testify together ensures the hearing will accomplish little of
substance. Each CEO should be subject to his own multiday hearing.
Still, the hearing can increase awareness of harmful business
Among Google’s many monopolies, those of ad tech infrastructure and
web browsers do particular harm. Google is rapidly displacing the open
web with a closed environment of its own making, undermining news and
many other industries that depend on advertising and web traffic.
Facebook has exploited its market power to crush partners and
would-be competitors, limiting innovation and leaving our democracy
vulnerable to extremism.
Amazon’s dominance of online commerce has created convenience for
customers, but at great cost to other forms of retail, suppliers, and
employees, who have no power to fight back.
The issues with Apple are different and, in my view, not comparable.
Apple’s anticompetitive behavior in the AppStore does not threaten the
economy or society, and its approach to privacy and consumer
protection, especially compared with Amazon, Facebook, and Google, is
History shows that eliminating monopolies and encouraging competition
is good for the economy. Consumers and investors benefit. This has
been the case in tech since 1956, when the Justice Department Consent
Decree with AT&T limited the monopoly to regulated telecom
markets, creating the computer industry as we know it. Subsequent
antitrust interventions played a role in enabling separate industries
for software, personal computers, data networking, mobile
communications, and the internet.
The nation’s antitrust laws were created in response to the
anticompetitive business practices of monopolies in oil, railroads,
steel, banking, and other industries. No one denied that Standard Oil
and the other “trusts” created value that benefited society. The issue
was whether monopolies were the best way to grow an economy.
Trustbusters argued that monopoly, which had historically been a tool
of autocratic governments, undermined democracy by concentrating
economic power. The Sherman (1890), Clayton (1914), and Federal Trade
(1914) Acts created rules to govern business practices that broke up
monopolies and ushered in a long period when corporations were
required to respect the interests of consumers, suppliers, and
In the 1970s, solicitor general Robert Bork popularized an
alternative theory of antitrust that eliminated all considerations
except for one: consumer prices. So long as prices didn’t go up,
there’d be no violation, irrespective of other harms. The Reagan
administration embraced Bork’s interpretation, triggering a 40-year
trend of consolidation that concentrated economic power. This has
reduced consumer choice, undermined the balance between employers and
workers, and left the economy unable to respond to a shock like the
pandemic. Brittle supply chains and short-term thinking boosted stock
prices, but they are also partially responsible for the country’s
unique inability to control the spread of Covid-19.
Google, Facebook, and Amazon have prospered during the pandemic. They’ve
enabled Americans to stay in touch with loved ones, to work, and to shop
from home. Unfortunately, Google and Facebook have also enabled
disinformation that undermined the nation’s pandemic response, from
spreading the Plandemic conspiracy to politicizing face masks. Covid
deniers, antivaxers, and white supremacists exploit Facebook’s tools and
infrastructure to organize and to amplify their harmful messages. Amazon
has been slow to protect its employees from the virus and consumers from harmful products available
in its marketplace.
Google, Facebook, and Amazon all invade privacy. Google and Facebook also
undermine democracy and public health. Each of these harms results from
monopoly power, but antitrust regulations created for the industrial era
will not be enough to address them. In parallel with antitrust, Congress
needs to implement laws that require tech companies to prove that new
products are safe and free from bias prior to shipment, that reduce
incentives to algorithmically amplify targeted harassment, disinformation,
and conspiracy theories, and limit the ability of corporations to gather
and exploit personal data.
Forty years of deregulation have given America’s largest corporations the
ability to impose their will on competitors, suppliers, customers,
employees, and communities. The pandemic, the economic contraction, and
the murder of George Floyd have combined to trigger a national
conversation about values and priorities. The time to rebuild them has
Internet platform monopolies are bad for the economy and for democracy,
but reduced funding and neglect caused our government’s regulatory
capabilities to atrophy. It is imperative that the antitrust subcommittee
shine a light on the harms inflicted by these internet monopolies and
demonstrate a commitment to competition and fairness in American
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