The Amazon War and the Evolution of Private Law

It’s well known that to boost their sales, sellers sometimes post fake 5-star reviews on Amazon. Amazon tries to police such actions by searching out and banning sites with fake reviews. An unintended consequence is that some sellers now post fake 5-star reviews on their competitor’s site.

The Verge: As Amazon has escalated its war on fake reviews, sellers have realized that the most effective tactic is not buying them for yourself, but buying them for your competitors — the more obviously fraudulent the better. A handful of glowing testimonials, preferably in broken English about unrelated products and written by a known review purveyor on Fiverr, can not only take out a competitor and allow you to move up a slot in Amazon’s search results, it can land your rival in the bewildering morass of Amazon’s suspension system.

…There are more subtle methods of sabotage as well. Sellers will sometimes buy Google ads for their competitors for unrelated products — say, a dog food ad linking to a shampoo listing — so that Amazon’s algorithm sees the rate of clicks converting to sales drop and automatically demotes their product.

What does a seller do when they are banned from Amazon? Appeal to the Amazon legal system and for that you need an Amazon lawyer.

The appeals process is so confounding that it’s given rise to an entire industry of consultants like Stine. Chris McCabe, a former Amazon employee, set up shop in 2014. CJ Rosenbaum, an attorney in Long Beach, New York, now bills himself as the “Amazon sellers lawyer,” with an “Amazon Law Library” featuring Amazon Law, vol. 1 ($95 on Amazon). Stine’s company deals with about 100 suspensions a month and charges $2,500 per appeal ($5,000 if you want an expedited one), which is in line with industry norms. It’s a price many are willing to pay. “It can be life or death for people,” McCabe says. “If they don’t get their Amazon account back, they might be insolvent, laying off 10, 12, 14 people, maybe more. I’ve had people begging me for help. I’ve had people at their wits’ end. I’ve had people crying.”

Amazon is a marketplace that is now having to create a legal system to govern issues of fraud, trademark, and sabotage and also what is in effect new types of intellectual property such as Amazon brand registry. Marketplaces have always been places of private law and governance but there has never before been a marketplace with Amazon’s scale and market power. It’s an open question how well private law will develop in this regime.

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'It’s an open question how well private law will develop in this regime.'

No, it is not an open question. Amazon owns Amazon's marketplace, and the development of private law in that marketplace will be squarely based on what Amazon feels is to Amazon's benefit.

Just ask a libertarian how that works.

Either libertarians like Amazon marketplaces as ideal, or libertarians are lazy, stupid, incompetent for failing to do to amazon what it did to ebay, which was not that long ago the biggest in the world ever, of libertarians are simply wrong on theory.

Of course, Jack Ma certainly rejects the claim Amazon marketplace is the biggest.

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Amazon is a marketplace that is now having to create a legal system to govern issues of fraud, trademark, and sabotage
Well, it "has to" do this because it set up a cheap, automated system that is easily gamed because it didn't want to spend the money to do actual review in the first place. It still doesn't - it's making the sellers pay here, as we can see. It can do this because of its market power, but it sure doesn't seem like a _good_ system. And we certainly shouldn't pretend that it's anything other than voluntary on Amazon's part, or that they had no choice but to do it in this bad way.

Yes, Amazon has an interest in it a cost-effective system (as do it's customers -- a high-cost, labor intensive system would obviously be reflected in prices after all). But it certainly doesn't have an interest in having an easily-gamed system that results in untrustworthy reviews and/or underhanded vendors gaining an advantage over their honest competitors.

'But it certainly doesn't have an interest in having an easily-gamed system'

Well, apart from the fact that is exactly what Amazon seemingly possesses at the moment, and the only one responsible for what Amazon does is Amazon. In other words, '... we certainly shouldn't pretend that it's anything other than voluntary on Amazon's part, or that they had no choice but to do it in this bad way.'

How would *you* detect fake / paid-for product reviews and then punish vendors caught using fake reviews, but then without enabling competing vendors from hiring fake reviewers to then take down their competitors? Are there obvious solutions to these problems that Amazon is avoiding (because, presumably, they're stupid, evil, and all big corporation-ey)?

You might entertain the possibility that they're struggling with this because they don't actually know how to solve it.

Amazon does not do a good job in other areas where such fraud is easily detectable.

While looking at facial masks, I noticed only the top 10-20 reviews were for masks, the older reviews were for a sewing kit. Basically, someone sold their sewing kit listing to a cosmetics firm looking for a highly reviewed listing. Then they add on a few fake positive reviews and voila, a listing with 3,000 5 star reviews. (Once over 21 reviews, research shows few people read the reviews, so this is fairly safe.)

I informed Amazon. They did...NOTHING. I complained as a consumer. It would be trivial to confirm what I said, and its against their rules. But nope..Amazon decided to not care. My guess is they make too much money from fake reviews. Y'all might think they don't work, but what if they do work?

A WSJ story came out with a similiar story, if you want to check.

When looking into Amazon products for quality, I often encounter products with only 5 star reviews. I dug a little deeper, and found that all the reviews were within the last days, and the reviewers had made dozens of reviews within the last days.

I agree Amazon is complicit.

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Trump/GOP tax cuts have unlocked $5 trillion in weallgth to funnd startups that kill off west coast global elite evil like Bezos, Gates, etc destroying America, so, if your so smart, why are you talking instead of doing?

Or you could go talk to Jack Ma so he can do it, given he already created the biggest marketplace ever.

Or go to ebay which was the biggest marketplace ever, supposedly.

Those that can do, those who can't write. I'm past doing, so i write about idiots who either do, or those who can't do anything but bitch.

Bezos is a real capitalist who didnt need Trump, or Bush, tax cuts because he pays all the money he gets to workers, the biggest income (profits) tax "tax dodge".

The free lunch economists bitching about Amazon while calling for less goverment and government taxes paying workers in order to reward businesses not paying workers are hardly in a position to bitch that Amazon is not losing even more money paying more workers to do what you don't want to pay for.

I'm not much of a grammarian and I'm not stoned, but that last para reads like a capitalist version of Ulysses. Whither the dogbloat?

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'How would *you* detect'

How many billion dollars are you willing to give me? It isn't as if Amazon needs to search the sofa for spare change to keep various types of utterly predictable fraud at bay, especially in settings they created and own in the first place.

'Are there obvious solutions to these problems that Amazon is avoiding'

Well, depends on how one looks at 'engagement' as an important metric for an Internet retailer, doesn't it? How about using a Consumer Reports approach - or even just paying Consumer Reports to provide information. Again, the question is how many billions are you willing to spend? - likely Consumer Reports entire budget for a year is what Amazon spends on electricity in a week.

'presumably, they're stupid, evil, and all big corporation-ey'

Well, apart from the big corporation part (which is self-evident, obviously, and the hook for this discussion of private law), why would anyone presume stupid or evil when talking about Amazon?

"How many billion dollars are you willing to give me?"

Suggesting you could solve the problem if money were no object, is irrelevant. Every dollar you spend is going to have to be added to the cost of the goods for sale. Amazon has orders of magnitude more vendors and products than Consumer Reports has ever tested and a large proportion of them are low-cost, low-margin items (a search for 'bluetooth speakers' yielded 400 pages of results while 'electric tea kettle' produced 200 pages). Consumers Union could not possibly begin to make a dent in testing and rating even a tiny fraction of the items available through Amazon -- the idea is silly. And CU testing would be worse than Amazon ratings anyway, since CU suffers from short time windows and very small sample sizes (except for autos, where they do collect data from members). Try again.

'Suggesting you could solve the problem if money were no object, is irrelevant. '

Why? Amazon undoubtedly spends a lot of money to ensure that it is not defrauded by its landlords, suppliers, contractors, etc.

'Every dollar you spend is going to have to be added to the cost of the goods for sale.'

Yet Amazon still spends money in a way guaranteed to add to the cost of goods for sale. Unless you say Amazon should not do any marketing at all, to give one example of something that adds to the cost of goods for sale, but which Amazon seems to feel represents money well spent.

'Amazon has orders of magnitude more vendors and products than Consumer Reports has ever tested'

Absolutely - and yet who is the entity that decided to open its marketplace to low-cost, low-margin items?

'Consumers Union could not possibly begin to make a dent in testing and rating even a tiny fraction of the items available through Amazon'

And again, who chose how diverse Amazon's offerings would be?

'Try again'

Why? Apparently, spending a cent is a waste, and Amazon is apparently not in charge of what it offers anyways.

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You do realize that Amazon retail loses about $2 billion a quarter?

This is a business segment hemorrhaging cash.

Your response is that they should invest, with a “money is no object” mentality no less, in a money pit.

'You do realize that Amazon retail loses about $2 billion a quarter?'

Um - not really? At least not if Q2 is a guide (could not find, with casual searching, such a straightforward breakdown of Q3) - 'North American retail sales increased by 44%, to land at $32.2 billion. This division produced $1.84 billion of segment-level operating income, up from $436 million a year earlier. That works out to a 5.7% operating margin for this business unit.

International retail sales stopped at $14.6 billion, a 27% gain as reported, or 21% when you back out currency exchange effects. Here, Amazon recorded an operating loss of $494 million compared to a $724 million loss in the year-ago period.' https://www.fool.com/investing/2018/07/26/amazoncom-inc-earnings-saw-18-billion-in-domestic.aspx

Ah, the Motley Fool delivered a bit of information for Q3 2018 - 'Segment-level operating income was evenly split between North American e-commerce and AWS at roughly $2 billion each, while the international division suffered an operating loss of $385 million.' https://www.fool.com/investing/2018/10/25/amazoncom-earnings-strong-results-modest-
guidance.aspx

'This is a business segment hemorrhaging cash.'

Um - not really? Though possibly, you don't consider operating income profit.

Lol. No.

Do you have SP GMI, Thompson R etc accounts?

Do real people look up financial information like this? With google? Mother of god.

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Very interesting. You get dropped for fake reviews, or low conversion rate. The company that sent me tracking information unrelated to the product I purchased, and had a full 98% negative reviews, for not shipping, was till there to mess with me. Amazon had 3+ months to detect the fraud.

Amazon used to have its own Feedback Score visibile to consumers. But then it fell to like 93% so they removed that.

You can see 3P sellers, and you can see Amazon Warehouse, but Amazon itself decided its score was secret.

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This is just negotiation, within a specialized context. Other companies have formal "appeals" processes as well, insurers being perhaps the most familiar. These are just designated offices given authority to negotiate the application of the company's terms of service as to particular customers. Public law, more properly referred to simply as "the law," remains available if the terms of service are violated, or if any party commits fraud or defamation.

No one ever expresses academic interest about the development of "private law" at State Farm or Aetna; it's only because Amazon emerged from the tech sector that this seems exciting.

'it's only because Amazon emerged from the tech sector that this seems exciting'

Along with the fact that Amazon seems to be operating on a frontier where 'the law' has not yet arrived, in contrast to the insurance industry, which remains heavily regulated.

Not disputing just how easily Prof. Tabarrok seems to be attracted to tech sector things like this. As seen from a site called pirate bay, with a .com ending (meaning it has never had anything to with the (in)famous site, though it seems like an address to download a digital product that Prof. Tabarrok is involved in is filtered at MR too) - 'Walk the plank into the future of digital content

You'll be downloading LBRY - the first ever truly decentralized way to share and discover digital content.'

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You get similar dispute resolution fun with credit cards, transaction processors, and even something like Uber or Lyft. Google has experience here too, with their website delisting.

If anything, Google is the better comparison to Amazon, in the sense that there's Google search on one side, which needs to be attractive to consumers, and a set of firms that compete for good rankings, which can take direct aggressive, yet not necessarily illegal actions to harm the competition directly. It's just that Google has been at fighting this kind of crap almost 20 years. In that environment, you had Search Engine Optimization 'experts' selling their wares, along with shadier alternatives to just harm competitors. In Google's case, since there is no actual public rules, as many ways to detect fraud become far weaker the moment you make them public, This SEO industry makes lawyers look respectable.

Having worked on fraud detection in other industries, Amazon looks to me like it's in a bind regarding reviews because they promote things that make it harder to use traditional techniques. For instance, there's companies preventing credit card fraud at different levels, and the most successful methods rely on having a whole lot of consumers, an overwhelming majority of which are interacting with the system honestly all the time. With so much data to run anomaly detection at once, cheating takes a lot of dedication: Those companies hire economists to try to model the bad actors, and try to make their business unprofitable.

Most people, however, don't leave Amazon reviews and there's people that are consider to be legitimately receiving products for free in exchange for reviews. This makes any of those tried and true anomaly detection systems very weak, just because the training data is orders of magnitude weaker.

I for one am very concerned about Amazon in this regard, because they've had plenty of fraud problems in the past that are customer-facing, and have done only the bare minimum to keep the customers. Doing something like buying a charger for an Apple device, supposedly genuine, and supposedly from Amazon itself, not a third party, and getting something with the right packaging and the right shape, but hazardous electrionics is something that can happen, and only consumers who open the charger will know the difference (unless the charger kills the hardware or sets the house on fire). Until people abandon Amazon (and I don't see that happening any time soon, as the competitors aren't close), Amazon few incentives to have a really good system, and improvements that don't change the number of legitimate reviews that are generated are not going to be cheap to make.

+1

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Yeah categories certain product categories, mobile phone accessories in particular, are simply not worth buying on Amazon due to the extremely high number of fake listings and poor quality products.

Take this for example :

https://www.amazon.co.uk/Apple-Lightning-Headphone-Jack-Adapter-White-x/dp/B01LWAUW1P/ref=mp_s_a_1_3?ie=UTF8&qid=1546277200&sr=8-3&pi=AC_SX236_SY340_QL65&keywords=lightning+to+3.5mm+adapter&dpPl=1&dpID=21aIHO%2BtQLL&ref=plSrch

It purports to be a genuine apple product, has an "Amazon's choice" label applied and is even fulfilled by Amazon, but a brief glance at the most recent reviews seems to suggest that a pretty high number of cheap knock offs have entered the supply chain (Amazon's warehouse system is also fairly easy to game I believe). As long as Amazon continue trying to automate so much of their back end with stuff which obviously isn't up to scratch, this will continue.

I've gone back to buying only books from Amazon, and since there are competitors around the same price point my preference is to use them, since prime delivery seems mostly to be an exercise in shifting costs onto workers.

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Whoever does that should get life in prison.

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'Private Law' is an empty and misleading term here.

This is all just normal contractual negotiation/agreement under the umbrella of normal 'Contract Law".

Amazon posting of product-reviews from "customers" is totally optional and Amazon has no legal requirement to validate/certify such reviews .
Caveat Emptor.
However, from a business/marketing perspective, Amazon's deserved reputation for conveying a large percentage of phony reviews... probably ain't good for business, long term.

Apparently, Amazon management has thus far determined that phony reviews are not impacting sales ... and therefore has no need to spend significant resources fixing that problem.
Sellers unhappy with Amazon policies can attempt negotiations... or stop contracting with Amazon.

It's all private business decisions ... not 'Private Law'

If private law is misleading why is there a “Amazon sellers lawyer,” with an “Amazon Law Library” featuring Amazon Law, vol. 1.

'If private law is misleading why is there a “Amazon sellers lawyer”

Possibly because the “Amazon sellers lawyer” not need to worry about being misleading with that chosen marketing moniker?

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@Linda:

... most lawyers are "private" lawyers, but "law" is government concept, practiced in government courts.

Private lawyers routinely compose and negotiate private business contracts outside of the courts ... but those contracts are ultimately enforced by courts under government Contract Law.

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Is public/private even a meaningful distinction?

Yes. Amazon does not have prosecutors that can jail or fine you for breaking Amazon Law, vol. 1 ($95 on Amazon), for example.

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Yes. Amazon doesn't have a perpetual land-based covenant which allows it to use offensive force and collect rents.

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Didn't Captain Bolsonaro fight in the Amazon wars?

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The fundamental role of government isn't to just to defend the borders, or enforce order, but to establish a safe trusted space for markets to operate.
What we have with Amazon is a marketplace which isn't safe, and can't be trusted.

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As far as I can tell, this has literally nothing to do with IP, for a few reasons. 1. This is about fraud, at best, or violation or private contractual access rules. IP has nothing to do with fraud. And IP is an in rem right. Contractual provisions can only set up an in personam (contractual) regime. 2. The main IP rights of concern are patent and copyright, which have zero to do with fraud. 3. Trademark law pretends to be about fraud, but it not. (a) the standard is "likelihood of confusion" to consumers, which is not a fraud standard. (b) trademark law basically amounts to a reputation right, like defamation law, which, as Rothbard showed, is unlibertarian.

Of course, lots of people pontificate on IP policy while knowing almost nothing about IP law, so this is not surprising at this point.

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Some possible ideas:

1. Only accept reviews from accounts that purchased the product through Amazon at some point in the past.

2. Verified reviewers for stars. You can write as many reviews as you please but you can't vote with stars unless you're verified by Amazon.

3. Review reviewers, top reviewers count more heavily than lowly ranked ones.

4. Review quota. Three reviews per week with an extra review for any item actually purchased by the user.

5. 'Trusted reviewers' kind of like Wikipedia's more elite editors reviewers designated trusted would be free to post more reviews. This might be necessary for things like books where you have heavy duty readers who aren't going to buy their entire library from Amazon.

6. Reviewer bonds. Reviewers can post a bond with Amazon if they want to present themselves as 'key opinion leaders'. The bond becomes forfeit and split with Amazon and whistle blowers if they are caught doing unethical practices.

"Amazon tries to police such actions by searching out and banning sites with fake reviews. An unintended consequence is that some sellers now post fake 5-star reviews on their competitor’s site."

A libertarian perspective here might be that crappy law enforcement is worse than no law enforcement. What's clearly happening here is Amazon's haphazard attempt to enforce things becomes weaponized. In a free for all world, the market might find a balance of power prevails since armies of bad/good review bots could be deployed by anyone against anyone else. At some level the reviews become so poor that buyers stop relying on them and at that point it isn't economical to spend on reviews anymore.

7. Outsourced review apps? Say Amazon opens its database up to, say, Consumer Reports. If you download the CP 'app', CP reviews appear in place of Amazon reviews wherever they are available.

AI and Machine Learning could then be deployed to clean up Amazon's native reviewers. A sure sign that review fraud is at play would be app reviews for a product or seller that deviate dramatically from the Amazon reviewers. Rather than going after the merchant, Amazon could lower the weight of suspect reviewers cross the entire database thereby taxing and diminishing the fraud aspect on the millions of products professional outlets like CP lack the capacity to review in depth.

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This is a serious issue, affecting Amazon and other Platform companies. (I had to close my company because the same happened to us in the Apple App Store). The issue is that a platform company like Amazon has no incentives to create a serious 'private law' system that also forces Amazon to review each case; because the cost of this system would be to high compared to the alternative to close one account, when there are many others providing similar products to the platform. People that provide the services on this platforms end up having no rights, which I think is very alarming

I'm not at all clear why a half-assed 'private law' system is even necessary. If the reviews are littered with bots and fake pro-con reviews, why not simply dispense with them entirely? Get rid of the stars and instead let people have something like the comment page that is here. People could read the comments if they like but they won't be added up into a 'score' nor used as part of the ranking and recommendation algorithms.

Eliminate the power of the comments, except in that customers may find them helpful, and you eliminate the need to 'reform' a 'justice system' punishing people unfairly for messing with the comment section.

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