A report reveals that the commercial giant Amazon misused the intellectual property of small businesses to then compete against their products, harming them to Amazon’s own advantage.
In one of the cases, Amazon participated in the Nucleus startup to produce an electronic sound reproduction device, used in Alexa, which it then produced on its own to compete with the Nucleus device, according to The Wall Street Journal of July 23.
“They are using market forces in a really Machiavellian way,” said Jeremy Levine, a partner at the venture capital firm Bessemer Venture Partners. “It’s like they are not in any way, shape, or form the proverbial wolf in sheep’s clothing. They are a wolf in wolf’s clothing.”
More than two dozen companies fell victim to different strategies used by Amazon, whose main shareholder and CEO Jeff Bezos is considered one of the most powerful men on the planet by wealth.
These facts become especially relevant in light of testimony that Bezos will present before the House Judiciary Committee on the company’s business practices on Monday, July 27, in a government antitrust action.
“Any legitimate disputes about intellectual property ownership are rightly resolved in the courts,” an Amazon spokesman told Business Insider.
Another company that fell victim to Amazon’s controversial practices was LivingSocial. By investing in LivingSocial, Amazon acquired a 30% stake and access to some inside information, hired away LivingSocial employees, and eventually contacted customers directly to offer them better deals.
The commercial effects caused to nascent entrepreneurs are devastating and force them to reduce the size of their ventures or close down, in the worst-case scenario.
“We ended up burning through our cash and ended up having to downsize most of the company,” said Leor Grebler, creator of one of Echo’s pioneering sound players, produced by Amazon, shared by the Wall Street Journal.
The Federal Trade Commission is investigating many other purchases made by Amazon in the field of technology, focusing on whether or not there were unfair advantages in these transactions.
Antitrust laws generally seek to protect consumers who are often harmed when large companies overprice their products, given the absence of other competing companies that are sometimes eliminated by those companies through controversial strategies.