Fact Checker: Would Grassley’s bill end Amazon Prime?

The mammoth online retailer Amazon has become a household staple for many Americans, particularly as the pandemic lockdown encouraged many to shop for supplies from home.

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

In a series of online targeted ads, Chamber of Progress, a liberal advocacy coalition representing technology companies, claimed a bill sponsored by Republican U.S. Sen. Chuck Grassley of Iowa “would block Amazon from offering its low-cost Basics brand products.”

"His bill would ban Amazon from offering free shipping on select products through Amazon Prime,“ the group stated in another ad, which appeared on The Gazette’s website.

The Chamber of Progress is backed by Amazon, along with other major technology companies.

Analysis

The ad is referring to S. 2992, or the American Innovation and Choice Online Act, that was introduced by Grassley and U.S. Sen. Amy Klobuchar, D-Minn., to the Senate this past month. There was also a companion bill introduced to the House earlier this year.

The bipartisan legislation is part of a growing desire from congressional members to regulate Big Tech companies like Amazon, Facebook, Apple and Google.

Among its proposals, the bill aims to prohibit dominant platforms from “abusing their gatekeeper power” by favoring their own products over competitors that use their platforms, the senators stated in a news release.

It’s clear the bill’s proposals take aim at Amazon’s practices of self-preferencing.

Amazon owns roughly 100 private-label brands with products that range from food and beverage, clothing and electronics, among others. Basics, Amazon’s first in-house brand, was created in 2009, according to Utah-based e-commerce accelerator Pattern.

Amazon has been known to promote its own products at the top of its search results, according to ProPublica, the Washington Post and the Wall Street Journal, and has even scooped data from other third-party sellers on its site to create its own merchandise.

As an example, the first page of search results for batteries on Amazon yields dozens of options, but the majority are made up of Basics products.

If the bill passes and is signed into law, Amazon would not be allowed to promote its products over third-party sellers, making those other items easier to find.

The Chamber of Progress argued this provision “would effectively prohibit Amazon Basics from being sold on Amazon’s marketplace,” a spokesman said in an emailed response to the Fact Checker.

"Down-ranking Amazon Basics and removing them from primary search results makes them hard-to-find and unviable, effectively prohibiting Amazon from selling Amazon Basics goods at all,“ Chamber of Progress wrote in a statement.

It is fair to say Amazon would take a hit on sales of its Basics products, but there’s nothing n the bill that would prevent Amazon from selling any of its private-label brands. This first part of the claim gets a F.

The second ad also claimed Grassley’s and Klobuchar’s legislation would ban Amazon from offering free shipping on products.

Amazon Prime membership 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.

There’s nothing in the bill stopping Amazon from continuing its free shipping program, according to a handout from Klobuchar’s team that was tweeted by the Chamber of Progress founder 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 to use those services if they want,” the handout reads.

Furthermore, the bill would forbid dominant platforms — in this case, Amazon — from conditioning other companies’ placement on the platform on whether they purchase other services, Hal Singer, an antitrust economist at consulting firm EconOne, told Politico.

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

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

Again, Chamber for Progress makes a strong argument that Amazon will see an impact, but the bill’s proposals don’t go quite as far as the ad claims. For that, it earns a C.

Conclusion

Chamber of Progress contends that the American Innovation and Choice Online Act would deal a huge blow to Amazon’s business. But between the two ads we analyzed, it goes too far in claiming the legislation would block the sale of Basics products and ban free shipping. Between a F and a C, we give these claims a D overall.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/officeholder or a national candidate/officeholder about Iowa, or in ads that appear in our market.

Claims must be independently verifiable. We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@thegazette.com.

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