Amazon Private Brands: Self-Preferencing Versus Traditional Retailing

Amazon’s retail operation is, in many ways, structured like that of a traditional brick-and-mortar retail chain. It manages a digital platform for the sale to consumers of branded consumer goods manufactured by third-party firms. In recent years, Amazon has followed the example of countless western retailers by launching its own private label (PL) products that compete against branded products in various consumer goods categories.

However, Amazon’s PL programs have recently been under intense scrutiny by competition authorities in the United States and Europe. Specifically, competition authorities have expressed concerns that Amazon has access to consumer behavior data, including data on users’ web browsing and purchases of national brands (NBs). This data allegedly gives Amazon an unfair advantage in developing and selling PL products that compete with third-party brands. Since Amazon also manages the digital retail platform, its marketing of PLs is perceived as a form of self-preferencing.

Allegations of self-preferencing by digital platforms have led to broad calls for regulation in Europe (e.g., the Digital Markets Act) and the proposed American Innovation and Choice Online Act (AICOA)). In their current form, these initiatives merely prohibit self-preferencing on large digital platforms. However, their likely impact would be to restrict or prohibit Amazon’s PL practices. Further, Amazon is singled out as the only retailer to be subject to such restrictions.

In this article, I focus on the retail industry and demonstrate that Amazon follows an off-the-shelf approach to its management of PLs that is standard for many western retail chains. Many retail chains: (1) have been using granular, consumer-transaction-level data to manage their PL programs for decades; (2) have gone far beyond merely selling PLs, in some instances fully vertically integrating the manufacture and distribution of PLs; (3) routinely engage in self-preferencing of their PL products both online and offline, a practice recommended by marketing textbooks and marketing strategy consultants; and (4) use PLs that mimic the trade dress of established NBs.

Moreover, Amazon’s PL products are relatively new and small compared to those of other retail chains. PL sales on Amazon.com account for around 1% of sales. In contrast, total U.S. PL sales have been growing steadily for at least 20 years, reaching $228.6 billion in 2022 (18.9% of retail sales) and accounting for nearly one in every five retail products sold. Many established retail chains of comparable size to Amazon and with orders-of-magnitude larger PL programs would not be subject to existing and pending regulations that could apply to Amazon’s PL program.

Singling out Amazon for its PL practices sets a complicated double standard in retail. While Amazon currently accounts for 37% of online U.S. retail sales, Walmart remains the largest retailer overall. Further, subjecting Amazon’s PL practices to the broad regulations targeted toward digital platforms without regard for how Amazon’s business model (as a retailer) differs from those of Google and Meta, for instance, will likely have the unintended consequence of harming consumers. The extant academic literature has found that the growth of PLs ultimately benefits consumers by offering them parity products at lower prices and, in recent years, genuinely innovative new products. Moreover, antitrust authorities and economists have concluded that such practices by established chains do not have an adverse effect on competition.

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