Fact Checker: Would Grassley’s Bill End Amazon Prime?

Republican U.S. Senator Chuck Grassley of Iowa speaks on September 24 during a question-and-answer session on public safety at Mr. Beans’ house in Marion. (Jim Slosiarek / The Gazette)

The gigantic online retailer Amazon has become a staple for many Americans, especially as the pandemic lockdown has encouraged many to purchase supplies from home.

So, is it true that new legislation would prevent Amazon from selling its private label products?

In a series of targeted online ads, Chamber of Progress, a liberal coalition advocating for technology companies, claimed that a bill sponsored by Republican U.S. Senator Chuck Grassley of Iowa “would prevent Amazon from offering its Basics brand products at low prices ”.

“His bill would ban Amazon from offering free shipping on certain products through Amazon Prime,” the group said in another announcement posted on The Gazette’s website.

The Progress Chamber is supported by Amazon, as well as other big tech companies.

Analysis

The ad refers to S. 2992, or the American Innovation and Choice Online Act, which was introduced by Grassley and U.S. Senator Amy Klobuchar, D-Minn., in the Senate last month. There was also a accompanying invoice presented to the House earlier this year.

The bipartisan legislation is part of a growing desire by members of Congress to regulate big tech companies like Amazon, Facebook, Apple, and Google.

Among its proposals, the bill aims to prohibit dominant platforms “from abusing their guarding power” by favoring their own products over competitors who use their platforms, the Senators said in a statement.

It is clear that the bill’s proposals target Amazon’s self-preference practices.

Amazon has around 100 private labels with products ranging from food and drink, clothing, and electronics, among others. Basics, Amazon’s first private label, was established in 2009, according to Utah Based Ecommerce Accelerator.

Amazon is known to promote its own products at the top of its search results, according to ProPublica, the Washington Post and the the Wall Street newspaper, and even data retrieved from other third-party vendors on his site to create his own merchandise.

For example, the first page of battery search results on Amazon has dozens of options, but the majority are Basics products.

If the bill is passed and enacted, Amazon would not be allowed to promote its products to third-party sellers, making it easier to find these other items.

The Progress Chamber argued that the provision “would effectively prohibit the sale of Amazon Basics in the Amazon Marketplace,” a spokesperson said in an email response to the Fact Checker.

“Amazon Basics’ lower rank and their removal from top search results make them hard to find and unviable, effectively prohibiting Amazon from selling Amazon Basics products,” Chamber of Progress wrote in a statement.

It’s fair to say that Amazon would take a hit on sales of its Basics products, but nothing in the bill would prevent Amazon from selling any of its private labels. This first part of the claim obtains an F.

The second announcement also claimed that Grassley’s and Klobuchar’s legislation would prohibit Amazon from offering free shipping on products.

Membership in Amazon Prime guarantees free shipping on certain products, made possible through a program called Fulfillment By Amazon in which third-party sellers can automate order fulfillment and shipping for a fee.

Nothing in the bill prevents Amazon from continuing its free shipping program, according to a document from the Klobuchar team that was tweeted by the founder of the Chamber of Progress Adam Kovacevich.

Instead, the bill would prevent Amazon from requiring third-party sellers on its platform to use logistics and fulfillment services, “but sellers would still have the option of using those services. ‘they want it,’ the document reads.

In addition, the bill would prohibit dominant platforms – in this case Amazon – from making the placement of other companies on the platform conditional on whether or not they purchase other services, Hal Singer, a antitrust economist with consulting firm EconOne, told Politico.

Although Kovacevich agreed that Amazon can still offer free shipping on Prime, he wrote in a blog post on Medium this language in the bill would prevent the company from funding shipping costs through merchant fees and force officials to drop the in-house enforcement requirement.

“So in reality the bill would eliminate both the funding model and the logistics model that make Prime possible,” he said.

Again, Chamber for Progress argues that Amazon will have an impact, but the bill’s proposals don’t go as far as the ad claims. For this, he obtains a C.

Conclusion

The Progress Chamber argues that the US Innovation and Online Choice Act would deal a serious blow to Amazon’s business. But between the two announcements we analyzed, it goes too far in claiming that legislation will block the sale of Basics products and ban free shipping. Between an F and a C, we assign these claims a D overall.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate or national candidate about Iowa, or in advertisements that appear in our marketplace.

Complaints must be independently verifiable. We assign marks from A to F based on accuracy and context.

If you spot a complaint that you think needs to be verified, email us at [email protected]

The members of the Fact Checker team are Erin Jordan, Michaela Ramm and Marissa Payne. This Fact Checker was researched and written by Michaela Ramm.



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Virginia C. Taylor