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Welcome to India, Mr. Bezos. Here’s an Antitrust Complaint.

MUMBAI, India — Amazon’s founder and chief executive, Jeff Bezos, is visiting India this week for the first time in over five years.

Instead of garlands, India’s government is welcoming him with a new antitrust case.

The Competition Commission of India, the country’s antitrust regulator, opened a formal investigation on Monday into the practices of Amazon and Flipkart, the Indian e-commerce giant mostly owned by Walmart.

The inquiry was prompted by complaints from an association of small traders, after several rounds of regulations failed to curb the market power of the two e-commerce platforms, particularly in the online sales of mobile phones. Indian merchants have lobbied Prime Minister Narendra Modi to take tougher action against the companies.

India requires foreign-owned e-commerce firms to be neutral marketplaces, much like eBay, to protect local retailers and distributors from deep-pocketed competition. In the United States, Amazon both operates a marketplace and sells many products — including diapers, batteries and books — like a traditional retailer, buying them wholesale and then reselling them to consumers. Under Indian law, the site is supposed to rely on independent sellers who post their products on Amazon.

But both Amazon and Flipkart give preference to some sellers, the Indian regulator said, by using affiliated companies, discounts and their global relationships with manufacturers to influence who sells what and at what price.

For example, Amazon sells its own brands, like AmazonBasics luggage and Solimo paper products, on its Indian site through companies in which it holds an equity stake. And Flipkart features a small group of preferred, high-volume sellers on its service.

The commission will investigate whether those arrangements violate India’s antitrust law.

India is one of Amazon’s fastest-growing markets as well as an important location for its customer service and research operations. But Mr. Bezos has made just three trips to the country.

On Wednesday, he is expected to discuss opportunities for small businesses on Amazon at a conference in New Delhi. He is also expected to meet Mr. Modi and plans to travel to Mumbai, home to India’s Bollywood film industry, to rub elbows with Bollywood stars like the actor Shah Rukh Khan and the director Zoya Akhtar.

In a statement, Amazon said, “We welcome the opportunity to address allegations made about Amazon; we are confident in our compliance, and will cooperate fully with C.C.I.”

Flipkart said it was complying with all laws in India governing e-commerce and noted the large number of sellers on its platform. “We take pride in democratizing e-commerce in India,” the company said in a statement.

Amazon, the world’s biggest online retailer, faces other antitrust inquiries around the world. The scrutiny in Europe and the United States has also focused on its relationship to its third-party sellers, which account for about 60 percent of sales.

The Federal Trade Commission and the House Judiciary Committee are examining whether Amazon treats unfairly sellers that do not use some of Amazon’s services, such as its fulfillment network. The European Union’s antitrust commission has opened an investigation into whether Amazon misuses information from its marketplace sellers to decide what products it sells directly to customers, including its own private-label offerings.

Amazon has maintained that it faces strong competitors, such as Walmart, and is a small player in the overall retail market, which is still dominated by physical stores.

Karen Weise contributed reporting from Seattle.

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Plight of Newspapers Generates Uncommon Bipartisan Unity

CORNELIA, Ga. — When a sport utility vehicle swerved out of its lane several weeks ago, slamming into a pickup truck and killing a teenager, a reporter from The Northeast Georgian raced to the scene. Within hours, the paper had posted the news on Facebook and updated it twice. It was shared by hundreds of people on the social network.

The fatal wreck consumed the town of Cornelia, Ga., nestled near the Chattahoochee National Forest about 90 miles northeast of Atlanta. The Northeast Georgian was the first to report the news, but unless the people who shared its story on Facebook follow a link to its website, either to see an ad or to subscribe to its twice-weekly print edition, the paper won’t get paid.

As with many small papers across the country, that business strategy is not working for The Northeast Georgian. The paper’s five employees do not just report and write. They also edit the articles, take photographs and lay out the newspaper.

“My grandmother used to say, ‘Honey, if you let them get milk through the fence, they’ll never buy the cow,’” said Dink NeSmith, chief executive of Community Newspapers Inc., which owns The Northeast Georgian and 23 other local papers.

But the tough economics facing small newspapers like Mr. NeSmith’s has generated rare bipartisan agreement in Washington.

Anger toward big technology companies has led to multiple antitrust investigations, calls for a new federal data privacy law and criticism of the companies’ political ad policies. Perhaps no issue about the tech companies, though, has united lawmakers in the Capitol like the decimation of local news.

Lawmakers from both parties blame companies like Facebook and Google, which dominate the online ad industry.

Senator Mitch McConnell, Republican of Kentucky and the majority leader, gave a big boost last week to a bill that may provide some papers a lifeboat. The proposal would give news organizations an exemption from antitrust laws, allowing them to band together to negotiate with Google and Facebook over how their articles and photos are used online, and what payments the newspapers get from the tech companies. (The bill is backed by the News Media Alliance, a trade group that represents news organizations including The New York Times Company.)

The proposal was sponsored by Representative Doug Collins, a conservative Georgia Republican whose district includes Cornelia. It was written by Representative David Cicilline, a liberal Democrat from Rhode Island. Senator John Kennedy, Republican of Louisiana, sponsored an identical version in the Senate. Prominent co-sponsors joined, including Democrats like Cory Booker of New Jersey and Amy Klobuchar of Minnesota, and Rand Paul, Republican of Kentucky.

For the politicians, the issue is personal. They see news deserts in places where one or two local newspapers used to track their campaigns and official actions, keep local police departments and school boards accountable, and stitch together communities with big layouts on Main Street holiday parades and high school sports stars.

“I am a free-markets guy and have fought against the idea that just because something is big it is necessarily bad,” Mr. Collins said. “But look, I’m a politician and live with the media and see its importance. These big, disruptive platforms are making money off creators of content disproportionately.”

Facebook and Google declined to comment about the legislation. Representatives of the companies say their businesses have spent hundreds of millions of dollars on programs to bolster local journalism. The companies also work with news organizations to promote their articles and videos, driving traffic to their websites.

Facebook recently announced partnerships with major news organizations, including The New York Times, The Wall Street Journal and CNN, that would see some of the publishers paid for the content they share.

“We know this is a challenging time for journalism,” Campbell Brown, Facebook’s vice president of global news partnerships, said in a statement. “And we are working closely with publishers to find new ways to address those challenges.”

A Google spokeswoman said, “Every month, Google News and Google Search drive over 24 billion visits to publishers’ websites, which drive subscriptions and significant ad revenue.”

Newspapers have faced devastating financial losses for years. One in five newspapers have closed since 2004 in the United States, and about half of the nation’s more than 3,000 counties have only one newspaper, many of them printing weekly, according to a report by the University of North Carolina published in late 2018. In the last year alone, Facebook and Google added tens of thousands of employees and reported billions of dollars in profits.

Take Mr. Collins’s district in northern Georgia. The Atlanta Journal Constitution, the state’s biggest newspaper, has cut its staff by half in the past eight years. In Mr. Collins’s hometown, The Gainesville Times, one of the biggest papers in its region, cut its weekly print publication schedule to five days from seven a year ago.

The demand for local news remains. One day shortly after the fatal car crash, all of the discussion at Fender’s Diner, a 1950s-inspired eatery in Cornelia, was about the victim and allegations that the woman behind the wheel of the S.U.V. had been drinking.

“I care more about the people who walk through my front door of my place and the issues that matter to them than anything going on in Washington,” said Bradley Cook, the owner of the restaurant.

Many local leaders say the power of local newspapers was on display recently in Jesup, in southeastern Georgia. One of Mr. NeSmith’s papers in the area, The Press Sentinel in Wayne County, discovered that an Arizona-based company backed by wealthy investors, including Bill Gates, had quietly applied to dump 10,000 tons of coal ash per day in Jesup.

The paper published more than 70 articles about the application, and Mr. NeSmith wrote several editorials. The attention led to public hearings, and the company, Republic Services, to delay its plans.

Many officials also say that without robust local coverage, they are constantly fighting against misinformation that spreads on social media. After the Board of Commissioners in Habersham County, Ga., proposed a bond issue to expand the county jail, speculation spread online about the motivations for the project and the burden for taxpayers, said Stacy Hall, the board’s chairman. Voters defeated the proposal in November.

“Disinformation on social media is our No. 1 problem,” Mr. Hall said. “There is a crisis in getting the facts — the basic facts that only community newspapers can provide.”

The proposed antitrust exemption for news organizations still faces hurdles. Congress passed few bills of note in 2019 — and it may pass even fewer this year, in the face of impeachment and the November election. Conservative think tanks and some consumer groups are pushing back on the bill, wary of giving any antitrust exemptions to businesses.

“Instead of trying to innovate and find solutions that way,” said Neil Chilson, a senior research fellow for technology and innovation at the Charles Koch Institute, “they are trying to make better deals with people with more money, and that doesn’t solve their basic business-model problems.”

Supporters of the legislation said it was not a magic pill for profitability. It could, they say, benefit newspapers with a national reach — like The Times and The Washington Post — more than small papers. Facebook, for instance, has never featured articles from Mr. NeSmith’s newspaper chain in its “Today In” feature, an aggregation of local news from the nation’s smallest papers that can drive a lot of traffic to a news site.

“It will start with larger national publications, and then the question is how does this trickle down,” said Otis A. Brumby III, the publisher of The Marietta Daily Journal in Georgia.

But the supporters say it could stop or at least slow the financial losses at some papers, giving them time to create a new business model for the internet.

“The tech industry platforms benefit from our news,” said Robin Rhodes, the executive director of the Georgia Press Association, which supports the proposal. “And we need to be on a level playing ground.”

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Amazon.com Inc Antitrust Laws and Competition Issues Computers and the Internet e-commerce Google Inc Inventions and Patents Regulation and Deregulation of Industry Sonos Inc Speakers (Audio) Suits and Litigation (Civil) Uncategorized

Sonos, Squeezed by the Tech Giants, Sues Google

SANTA BARBARA, Calif. — In 2013, Sonos scored a coup when Google agreed to design its music service to work easily with Sonos’s home speakers. For the project, Sonos handed over the effective blueprints to its speakers.

It felt like a harmless move, Sonos executives said. Google was an internet company and didn’t make speakers.

The executives now say they were naïve.

On Tuesday, Sonos sued Google in two federal court systems, seeking financial damages and a ban on the sale of Google’s speakers, smartphones and laptops in the United States. Sonos accused Google of infringing on five of its patents, including technology that lets wireless speakers connect and synchronize with one another.

Sonos’s complaints go beyond patents and Google. Its legal action is the culmination of years of growing dependence on both Google and Amazon, which then used their leverage to squeeze the smaller company, Sonos executives said.

Sonos advertises its speakers on Google and sells them on Amazon. It built their music services and talking virtual assistants directly into its products. Sonos workers correspond via Gmail, and run the business off Amazon’s cloud-computing service.

Then Google and Amazon came out with their own speakers, undercutting Sonos’s prices and, according to Sonos executives, stealing its technology. Google and Amazon each now sell as many speakers in a few months as Sonos sells in one year.

Like many companies under the thumb of Big Tech, Sonos groused privately for years. But over the past several months, Patrick Spence, Sonos’s chief executive, decided he couldn’t take it anymore.

Image
Credit…Adam Amengual for The New York Times

“Google has been blatantly and knowingly copying our patented technology,” Mr. Spence said in a statement. “Despite our repeated and extensive efforts over the last few years, Google has not shown any willingness to work with us on a mutually beneficial solution. We’re left with no choice but to litigate.”

Sonos executives said they had decided to sue only Google because they couldn’t risk battling two tech giants in court at once. Yet Mr. Spence and congressional staff members have discussed his testifying to the House antitrust subcommittee soon about his company’s issues with them.

Jose Castaneda, a Google spokesman, said Google and Sonos had discussed both companies’ intellectual property for years, “and we are disappointed that Sonos brought these lawsuits instead of continuing negotiations in good faith.”

“We dispute these claims and will defend them vigorously,” he added.

A spokeswoman for Amazon, Natalie Hereth, said the company did not infringe on Sonos’s technology. “The Echo family of devices and our multiroom music technology were developed independently by Amazon,” she said.

Sonos sued Google in Federal District Court in Los Angeles and in front of the United States International Trade Commission, a quasi-judicial body that decides trade cases and can block the import of goods that violate patents. Sonos sued Google over only five patents, but said it believed Google and Amazon had each violated roughly 100. Sonos did not say how much it sought in damages.

The evolving relationship between Sonos and the tech giants reflects an increasingly common complaint in the corporate world: As the biggest tech companies have become essential to reach customers and build businesses, they have exploited that leverage over smaller companies to steal their ideas and their customers.

After mostly keeping those grievances private for years because they feared retaliation, many smaller companies are now speaking out, emboldened in an age of growing scrutiny of America’s largest tech firms.

Credit…Adam Amengual for The New York Times
Credit…Adam Amengual for The New York Times

Mr. Spence and other Sonos executives said they had agonized over the decision to sue Google, largely because Google still underpins their business. Sonos executives suspect that their pressure on the patent issue has complicated other areas of the relationship, though they can’t say for sure.

After Sonos intensified its demands that Google license its technology, Google pushed Sonos to comply with stricter rules for using Google’s virtual assistant. Those proposed rules included a mandate to turn over the planned name, design and targeted start date of its future products — which Google would compete directly against — six months in advance, up from 45 days in the current deal, Sonos executives said.

“The fear of retaliation is a real fear. Any of these companies could bury them tomorrow. Google could bury them in their search results. Amazon can bury them in their search results,” said Sally Hubbard, a former assistant attorney general in New York’s antitrust bureau who now works at Open Markets Institute, a think tank. “It’s really hard to find any industry where corporations are not dependent on one of the big tech giants.”

Fifteen years ago, home sound systems typically meant a tangled network of wires and speakers and complicated instructions on how to make it all work. Then Sonos came along in 2005, promising wireless sound throughout a house, seamlessly controlled from a hand-held device. Its early ads boasted: “Any song. Any room.

Sonos quickly began patenting its innovations, a stockpile of intellectual property it now proudly displays on its website.

Its devices made life a bit more comfortable for consumers who could afford them, and they made for a nice little business for Sonos, which is based a few miles from the Southern California coast in Santa Barbara. Sales of its devices took off after the advent of the smartphone and music streaming. Sonos now employs about 1,500 people and sells more than $1 billion in speakers a year.

When Sonos teamed up with Google in 2013, it gave Google engineers detailed diagrams on how its speakers interacted wirelessly with one another. At the time, Google was not a competitor.

Two years later, Google released a small device that could turn an old speaker into a wireless one, much like Sonos’s original product. A year after that, Google released its own wireless speaker, the Google Home. The device, marketed around Google’s talking virtual assistant, quickly began outselling Sonos’s offerings.

Sonos bought the Google devices and used a technique called packet sniffing that monitored how the speakers were communicating. They discovered that Google’s devices used Sonos’s approach for solving a variety of technological challenges. Sonos executives said they had found that Amazon’s Echo speakers also copied Sonos technology.

In August 2016, Sonos told Google that it was infringing. Google had little response. As Google released more products, it violated more patents, Sonos executives said. Over the next three years, Sonos told Google four more times, eventually handing over a list of 100 patents it believed Google had violated. Google responded that Sonos was also infringing on its patents, Sonos executives said, though it never provided much detail.

When Sonos delivered a proposed model for Google to pay licensing fees, Google returned its own model that resulted in its paying almost nothing, Sonos executives said.

Sonos executives said their complaints were hardly just about patents, however. They are concerned that Google and Amazon are flooding the market with cheap speakers that they subsidize because they are not merely conduits for music, like Sonos’s devices, but rather another way to sell goods, show ads and collect data.

Sonos’s entry-level speaker is about $200. Amazon and Google’s cheapest speakers are $50, and they often offer them at much steeper discounts.

In the third quarter of 2019, Amazon shipped 10.5 million speakers and Google six million, according to Strategy Analytics. For the 12 months ending in September, Sonos said it had sold 6.1 million speakers.

“Amazon and Google are making it a mass-market product at a price point that Sonos can’t match,” said Jack Narcotta, a Strategy Analytics analyst.

Amazon said that it was focused on creating the best experience for customers and that its virtual assistant had generated “billions of dollars” for developers and device makers.

To compete, Sonos has had to yield even more power to the companies. When consumers became hooked on Google’s and Amazon’s virtual assistants, Sonos also built them into its speakers.

But Sonos had a strategy to still stand out on store shelves. Instead of being locked into using just one of the assistants, Sonos customers could use both simultaneously. Sonos engineers patented the technology to enable the assistants to work side by side, and executives lobbied Amazon and Google to let it happen.

At first, the companies hated the idea. Hours before a New York news conference in October 2017, Sonos was preparing to unveil its first speaker with virtual assistants when the Amazon product chief Dave Limp called Mr. Spence. Mr. Limp had just found out that Google would also be onstage, and he said Amazon was now pulling out of the event as a result, according to two people familiar with the conversation. After negotiations, Amazon relented.

Sonos executives said Google and Amazon had ultimately forced them to make users select one assistant when setting up their speaker. Amazon said it had never asked Sonos to force users to choose its assistant or Google’s version.

Amazon later changed its position and joined an alliance with Sonos and other companies to make virtual assistants like Alexa function together. Google, along with Apple and Samsung, did not join the alliance.

Google has maintained, Sonos executives said, that it will pull its assistant from Sonos’s speakers if it works alongside any assistant from Amazon, Apple, Microsoft or Baidu, the Chinese internet company. Sonos has followed Google’s orders.

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Prime Power: How Amazon Squeezes the Businesses Behind Its Store

Image
Credit…Andrea Chronopoulos

Twenty years ago, Amazon opened its storefront to anyone who wanted to sell something. Then it began demanding more out of them.


SEATTLE — For tens of millions of Americans, it is so routine that they don’t think twice.

They want something — a whisk, diapers, that dog toy — and they turn to Amazon. They type the product’s name into Amazon’s website or app, scan the first few options and click buy. In a day or two, the purchase appears on their doorstep.

Amazon has transformed the small miracle of each delivery into an expectation of modern life. No car, no shopping list — no planning — required.

But to make it all work, Amazon runs a machine that squeezes ever more money out of the hundreds of thousands of companies, from tiny start-ups to giant brands, that put the everything into Amazon’s Everything Store.

In more than 60 interviews, current and former Amazon employees, sellers, suppliers and consultants detailed how Amazon dictates the rules for those businesses, sometimes changing those rules with little warning. Many spoke on the condition of anonymity, for fear of retaliation by Amazon.

Amazon punishes the businesses if their items are available for even a penny less elsewhere. It pushes them to use the company’s warehouses. And it compels them to buy ads on the site to make sure people see their products.

All of that leaves the suppliers more dependent on Amazon, by far the nation’s top online retailer, and scrambling to deal with its whims. For many, Amazon eats into their profits, making it harder to develop new products. Some worry if they can even survive.

“Every year it’s been a ratchet tighter,” said Bernie Thompson, a top seller of computer accessories who Amazon has highlighted in its marketing to other merchants. “Now you are one event away from not functioning.”

Tumi, the luxury bag maker, sold its products at wholesale prices to Amazon for years. But executives said Amazon sometimes misjudged consumer demand, keeping too few bags in stock, and regularly demanded more in marketing and other fees. Last year, Tumi decided to sell its bags to another company, which then listed the items on Amazon. The arrangement gave Tumi more control over inventory and better sales data.

A few months later, Amazon gave Tumi an ultimatum: Stop selling through the middleman, or do not sell to the retailer’s 150 million customers at all.

“Some guy we had never talked to gave us a call and was like, ‘We have changed the rules,’ ” said Charlie Cole, who runs Tumi’s online business. He pushed back, but wasn’t successful.

“It was like talking to a brick wall,” he said. “They want to be able to control everything.”

Companies struggling to navigate Amazon’s growing chaos fill Facebook groups, private message boards and industry conferences. One session at a leading retail meeting next year is called “The Big Question: Is Selling on Amazon Worth the Hassle?” More than 12,000 people signed a petition on Change.org asking Amazon to alter an arcane rule on counterfeit products that they said could “destroy” an entire business.

Many sellers and brands on Amazon are desperate to depend less on the tech giant. But when they look for sales elsewhere online, they come up short. Last year, Americans bought more books, T-shirts and other products on Amazon than eBay, Walmart and its next seven largest online competitors combined, according to eMarketer, a research company.

“The secret of Amazon is we’re happy to help you be very successful,” said David Glick, a former Amazon vice president who left the company last year. “You just have to kiss the ring.”

Amazon says that its operation is so massive, the rules are necessary to give customers a quality experience. The company said the health of sellers was a top priority, and that it had invested billions of dollars to support them. It said that about 200,000 sellers surpassed $100,000 in sales in 2018, roughly a 40 percent increase from the year before.

“If sellers weren’t succeeding,” said Jeff Wilke, the chief executive of Amazon’s consumer business, “they wouldn’t be here.”

Jack Evans, a spokesman for the company, said that Amazon only succeeded when sellers succeed, “and claims to the contrary are wrong.” Merchants can choose the products they sell, how they are priced and how they fulfill the orders, he said.

The policy change that affected Tumi, Mr. Evans said, was to make sure that Amazon had the best prices and availability for popular products. He said that Tumi’s prices were high when it sold through the middleman.

Amazon has faced harsh criticism in the past for displacing Main Street brick-and-mortar retailers. Now, the diverging fortunes of Amazon and many of the companies selling products on its own site are at the heart of the antitrust scrutiny Amazon faces in Washington and Europe. Investigators at the Federal Trade Commission and the House Judiciary Committee are examining whether Amazon abuses its position as the central online connection between people making products and those buying them.

Amazon collects 27 cents of each dollar customers spend buying things its merchants sell, a 42 percent jump from five years ago, according to Instinet, a financial research firm. That does not include what companies pay to place ads on Amazon, a business that Wall Street considers as valuable as Nike.

The pennies add up. Last year, the profit from retail was so high that it surprised even some senior leaders close to the business, according to two of the people involved.

Thanks to the retail success, the company’s profit exceeded its own Wall Street projections by more than $3 billion.

Jeff Bezos, Amazon’s founder and chief executive, lumps the many parts of the company into two buckets, according to the two people close to the business. One bucket is investments, or bets on the future like Alexa, its virtual assistant. The other is contributors, or the profitable businesses that provide money for Amazon’s investments.

To him, the retail operation is a contributor that can be squeezed for cash.

Billions of dollars generated from selling products online go into investments like Alexa, which has 10,000 employees working on it, and the company’s expensive Hollywood productions. And still, Amazon’s consumer businesses, including Alexa and other pricey projects, produced $5 billion in operating profit last year.

The financial success stems from a big strategy shift that was underappreciated when Mr. Bezos made it two decades ago.

From the day the company started shipping orders in 1995, Amazon offered customers products the same way as traditional retailers like Target, buying them at wholesale and reselling them at a higher price. Four years later, Mr. Bezos and his team decided that Amazon would also let companies list items on the site for a cut of the sale, more like eBay and Alibaba. The change allowed Amazon to offer a wider variety of products.

“We want to try and build a place where people can come to find and discover anything that they might want to buy online,” Mr. Bezos said that year.

The decision eventually turned Amazon into the one-stop shop it’s known as today. Shoppers could find not only well-known brands like Tide detergent, but also obscure Christmas ornaments.

Initially, the move empowered sellers and gave them access to millions of customers. They could ship their products however they wanted. And they could set their own price.

Bit by bit, the sellers lost control.

When Amazon opened its doors to sellers, the fulfillment industry — for storing, packing and shipping online orders — was in its infancy. Many top sellers on Amazon ran their own warehouses.

Seeing a competitive advantage in offering faster delivery times, Amazon opened cavernous warehouses near major cities. Inside, workers navigated endless rows to pick products from bins and pack them into boxes.

The expansion left Amazon with extra space to fill, and the company turned to sellers. It pitched them on the idea of paying Amazon to store and ship their products, even those sold on other sites.

James Thomson, a Canadian with a doctorate in marketing, managed a team responsible for signing up sellers, leading them on tours of Amazon’s facilities near Reno, Nev., Phoenix and elsewhere. “Look how vast this is,” he recalled telling sellers. “Look at how we can easily absorb your 10,000 orders a month.”

“You do have a bigger warehouse than mine,” Mr. Thomson remembered them saying, “but I have good rates.”

Several years later, Amazon’s focus changed, and so did its pitch.

In early 2011, only a few million people were Prime members, paying $79 a year for unlimited two-day shipping. But Amazon knew those members spent far more on the site. Executives wanted more people to sign up for Prime, and they wanted to sell those customers even more stuff.

That year, Amazon began adding more perks to Prime. Most notable was unlimited video streaming of TV shows like “Mister Rogers’ Neighborhood” and movies like “The Girl With the Dragon Tattoo.”

As more people became members, products eligible for Prime shipping became more popular. Amazon reminded sellers that if they used the company’s warehouses, their items would be Prime eligible, too.

“That is what we were selling,” Mr. Thomson said.

It worked. The number of sellers using Amazon’s warehouses increased by 65 percent in 2013, according to a letter sent to investors. The company has since spent billions of dollars to continue building out its fulfillment network.

Mr. Bezos noted how intertwined sellers, warehouses and Prime had become in a note to investors in 2015. “At this point, I can’t really think about them separately,” he wrote.

Amazon has since flipped back and forth over whether outside sellers must use Amazon’s warehouses to sell Prime products. But for most types of goods, like pet supplies, cameras and baby gear, more than 85 percent of the top-selling items ship out of Amazon’s warehouses, according to Jungle Scout, which provides data to Amazon sellers.

Amazon handles packing and shipping for the most popular products sold on its site, even for products sold by outside sellers.

The 1,000 top-selling

products in each category

Orders sold and fulfilled

by outside sellers

Kitchen/dining

Pet supplies

Camera/photo

Beauty/personal care

Computers/accessories

Orders sold

and fulfilled

by Amazon

Orders fulfilled

by Amazon

for outside

sellers

Clothing, shoes/jewelry

Video games

Home/kitchen

Toys/games

Musical instruments

Cell phones/accessories

Tools/home improvement

Industrial/scientific

Patio, lawn/garden

Grocery/gourmet food

Sports/outdoors

Automotive

Arts, crafts/sewing

Health/household

Appliances

Electronics

Office products

Percentage of total

sales within each group

The 1,000 top-selling products in each category

Kitchen/dining

Pet supplies

Camera/photo

Beauty/personal care

Computers/accessories

Orders fulfilled

by Amazon

for outside

sellers

Orders

sold and

fulfilled

by outside

sellers

Orders sold

and fulfilled

by Amazon

Clothing, shoes/jewelry

Video games

Home/kitchen

Toys/games

Musical instruments

Cell phones/accessories

Tools/home improvement

Industrial/scientific

Patio, lawn/garden

Grocery/gourmet food

Sports/outdoors

Automotive

Arts, crafts/sewing

Health/household

Appliances

Electronics

Office products

Percentage of total sales within each group

Source: JungleScout

By Karl Russell

Amazon has surpassed DHL to become the largest provider of fulfillment and other logistics services in the world, according to The Journal of Commerce, a trade publication.

Many sellers say that the company charges fair rates to fulfill Amazon orders. But they say Amazon is charging them higher prices for other services. For example, because the warehouses operate near capacity, the company charges several times more than competitors to store items before they ship out.

The costs can be several times higher for sellers who use Amazon to ship orders made on other websites. Amazon charges $13.80 for one-day shipping on a T-shirt bought on a site other than Amazon, versus $3.68 when bought on Amazon.

In addition, Amazon had let sellers pay $1 to ship an order in a plain brown box without the company’s smile logo. But in 2016, the company said it would use only Amazon boxes. Sellers were told they could take their product back from Amazon’s warehouses if they wanted. “Return or disposal fees will apply,” it wrote to sellers.

Amazon says that its logistics services are optional and a great value. Sellers who choose to use it “enjoy high-quality fulfillment services that customers want,” the company told Congress’s investigators this year.

The company says it offers lower costs on Amazon orders because it makes other money from them, including commissions and advertising, that it does not get for sales made on other websites.

Shoppers on other sites turn away when products are not available in two days or less, said Karl Siebrecht, co-founder of Flexe, a start-up that connects retailers with a network of fulfillment centers.

“It’s new browser,” he said. “Amazon.com. Click. Buy. Done.”

This summer, Brandon Fishman, the founder of VitaCup, a start-up that infuses coffee with vitamins and nutrients, saw a promising opportunity.

Zulily, an e-commerce site that offers low prices in exchange for slower shipping, wanted to list VitaCup’s products 30 percent off for a short time. It was a chance for Mr. Fishman, whose 35-employee company gets the majority of its sales through Amazon and its own site, to reach new customers.

But Amazon’s software noticed the lower price and removed the bright “Buy Now” and “Add to Cart” buttons from its site. When those buttons are gone, shoppers get a bland text link that says, “Available from these sellers” and they must make more clicks to purchase an item. Those extra clicks are often the difference between success and failure for a seller.

Mr. Fishman’s Amazon sales tumbled, and he emailed Zulily to quickly take down the listing.

“I have told them about my rage many times,” Mr. Fishman said of Amazon. “It has not changed them.”

Amazon has pushed to keep prices low since the day it opened. That has become trickier as more sales came from outside sellers. According to antitrust law, each seller of goods should determine what to charge on its own. To avoid problems, an in-house lawyer is typically present when internal Amazon teams discuss pricing, according to two former employees.

In 2017, Amazon began reducing prices to match competitors; if the new price was lower than the one requested by the sellers, Amazon paid the difference. The company also alerted companies if their products were cheaper elsewhere.

Still concerned about news reports that prices on Amazon weren’t always the lowest, the company tried another approach, the one that hit VitaCup: removing the Buy Now and Add to Cart buttons when its software detected lower prices. When those buttons disappear, sales tumble as much as 75 percent, sellers say.

Executives at Amazon intended this as a tool to lower prices. The company has told Congress that the buttons amount to an endorsement, saying it only displays them on “offers that it is confident will present a great experience for its customers.”

But many brands raise their prices elsewhere to avoid losing the buttons. Or they decide to list their product only on Amazon. That is what happened to a health care supply company that worked with Jason Boyce, who advises online sellers.

“My client cut off Walmart — Walmart! — because it was hurting their Amazon business,” Mr. Boyce said. “If that’s not monopoly power, I don’t know what is.”

Amazon said in statement that sellers “have full control of their own prices both on and off Amazon,” and that the company helps them maximize sales by advising them how to earn the Buy Now and Add to Cart buttons.

The Zulily experience frustrated Mr. Fishman. But he boiled over after another move by Amazon.

One morning in June, Mr. Fishman opened his Amazon app and typed “VitaCup” into the search bar at the top of the screen. On the results page was an ad for Amazon’s own line of coffee.

He had been paying Amazon almost $200,000 a month for ads. Mr. Fishman posted a screenshot on LinkedIn and raged.

“I have a major problem with this!!!” he wrote.

For years, the question of whether Amazon should push ads on its site generated fierce debate among senior managers and executives inside the company, according to eight current and former Amazon employees. In memos and fiery meetings, they disagreed on what was best for a company that preached obsession with serving customers.

One camp believed that ads would erode customer trust, because shoppers expected Amazon to show them popular products with strong reviews and a good price.

The other camp saw ads as a cash machine Amazon could tap to drive down prices and fund new innovations for customers. The financial potential was obvious. When people shop online, they more often turn to Amazon than Google to start their search, according to multiple studies. And every brand wants to get in front of them.

Workers eventually got word that Mr. Bezos had settled the debate, according to two senior employees. Mr. Bezos said that Amazon had two options: Sell ads, and use the cash for investments. Or shun ads, and get beaten by competitors.

Ads soon appeared at critical locations, in particular on the page that pops up after a customer types a product into Amazon’s search bar. Some ads were rectangular blocks across the top of the page, and the top several products listed in the search results were ads disguised as a regular listing, aside from the word “Sponsored” in light gray. Combined, they have at times filled almost the entire first screen.

Mr. Wilke said the internal hesitation to ads was overcome by the results.

“It turned out they worked,” he said. “And by worked, I mean the ads help customers find what they’re looking for. And the reason we know that is cause they buy more stuff.”

But it added another cost for companies. Ranking high is essential to driving sales on the site. Competitors raced to place ads to ensure a prominent spot.

Out of antitrust concerns, company lawyers prohibit employees and advertising companies it works with from bragging that Amazon is where most people search for products online, according to two people who were warned about this.

Quartile, among the largest of a new breed of companies that help brands navigate Amazon advertising, tested the importance of the ads last year. It stopped running ads for 750 popular products. Immediately, sales shrank by 24 percent.

The effect then cascaded. That’s because the fewer recent sales a product has, including sales driven by ads, the lower it ranks on the site. At the end of 10 weeks, sales of the products without ads had tumbled 55 percent.

“It’s increasingly pay-to-play,” said Melissa Burdick, a 10-year Amazon veteran who now advises major consumer brands.

Amazon said its ads were optional and the majority of sellers built their businesses without them.

John Denny, who ran e-commerce for the drink company Bai, said brands used to believe that if they had a great product, it would show up in the search results, and sales would follow.

“Those days are over,” Mr. Denny said. “There are no lightning strikes on Amazon any more.”

A decade ago, Mr. Thompson, a former Microsoft software developer, recognized a big market for computer accessories like computer docking stations and cables. He started Plugable and betted big that depending on Amazon would turn his idea into a business.

It worked. In 2016, Mr. Bezos highlighted Mr. Thompson when talking about the success of sellers in his annual letter to investors. Amazon posted a video about Plugable on its website to attract new sellers.

“He has a history of good performance metrics, and an absence of things like safety and authenticity complaints,” Chris McCabe, a former Amazon fraud investigator, said in an interview.

But in the last couple of years, as rules shifted and his profit shrank, Mr. Thompson began warning people that working with Amazon had become increasingly difficult.

He took his concerns to Amazon this summer, giving a 20-slide presentation to a senior executive at the company’s Seattle headquarters. On slide No. 6, Mr. Thompson laid out his nightmare: Amazon cutting off sales of his best seller, a laptop docking station that is frequently one of the 100 most popular electronics products on the site.

His plea to the executive was simple. “No surprises,” he said.

He got surprised.

One Sunday in July, he got an email saying that Amazon had removed the docking stations. Amazon said it was because of complaints that Plugable’s products had not matched the condition described on the site.

Other docking stations, including one made by Amazon, filled the void online.

Mr. Thompson scrambled, contacting two high-level managers he knew and his account manager, who Amazon charges him $5,000 a month to have. None of them could fix it.

He and other staff members dug through customer feedback and returns. They found only outstanding reviews, said Gary Zeller, one of Mr. Thompson’s deputies.

“There was nothing borderline about it,” Mr. Zeller said.

After four days and at least $100,000 in lost sales, the listing went back up. Mr. Thompson said he still did not understand what ignited the problem.

Amazon declined to comment on Plugable. Mr. Wilke said that the company’s future depended on policing the site without harming well-meaning merchants.

“We have a strong incentive to be as accurate as possible in identifying bad actors, make very few mistakes when we’re wrong, on giving second chances to people who make an honest mistake,” he said.

Mr. Thompson is now looking for new ways to make money. But Amazon accounts for roughly 90 percent of electronics sales online, according to market research. His business at Walmart and eBay, the next largest online retailers, are less than 5 percent of his revenue.

In September, Plugable hired two people to sell directly to corporations.

“We really built the company on Amazon,” Mr. Thompson said. “We have no regrets about doing that. But today our focus has to be getting diversification off Amazon.”

He said he understood what he was up against.

“We are dealing with a partner,” he said, “who can and will disrupt us for unpredictable reasons at any time.”

Categories
5G (Wireless Communications) Antitrust Laws and Competition Issues Delrahim, Makan Justice Department Mergers, Acquisitions and Divestitures Regulation and Deregulation of Industry Sprint Nextel Corporation T-Mobile US Inc Uncategorized Wireless Communications

How a Top Antitrust Official Helped T-Mobile and Sprint Merge

WASHINGTON — As the $26 billion blockbuster merger between T-Mobile and Sprint teetered this summer, Makan Delrahim, the head of the Justice Department’s antitrust division, labored to rescue it behind the scenes, according to text messages revealed this week in a lawsuit to block the deal.

Mr. Delrahim connected company executives with the F.C.C. and members of Congress. And he gave executives insight into the thinking of Ajit Pai, the chairman of the F.C.C. who would also have to approve the merger.

He is “open and willing” to discussions about the deal, Mr. Delrahim said in one text message in June, a month before regulators blessed the transaction.

The messages between Mr. Delrahim and the executives involved in structuring one of the telecom industry’s most significant mergers in generations provide a rare inside look at the hands-on work the Justice Department’s top antitrust official undertook to shape the deal.

While it is not unusual for a law enforcement official to work behind the scenes to help companies overcome antitrust concerns, efforts like the one undertaken by Mr. Delrahim are almost always hidden from view.

The text messages show that he played a crucial role in bringing together top executives of T-Mobile, Sprint and another company, Dish, for negotiations. The Justice Department has said it would not have approved the merger without the emergence of another competitor like Dish.

The Obama administration rejected an earlier proposed merger between the companies, and it remains deeply unpopular with some consumer groups who fear it will increase prices for Americans, especially in rural areas.

Mr. Delrahim oversaw the often hostile talks between the companies, while pulling strings to get lawmakers and other regulators on board.

“Had a generally good chat with the chairman,” Mr. Delrahim wrote to Charles Ergen, the chief executive of Dish, the company that would prove crucial to the deal’s passage. The following day he encouraged Mr. Ergen to lobby lawmakers to urge Mr. Pai to approve new deal terms that would give Mr. Ergen more time to build out a competitive telecom business.

Mr. Ergen did so. He told Mr. Delrahim that he had “very good” meetings in Washington and that he talked to Mitch McConnell, the Senate majority leader, about the deal, according to the text messages.

When asked about the text messages, a Justice Department spokesman said that “the Antitrust Division is proud of its work in reviewing this important merger on behalf of the American consumer,” but declined to comment further.

T-Mobile and Dish declined to comment on the messages, which were submitted as evidence in a legal challenge to the merger led by the New York and California state attorneys general. Sprint didn’t immediately respond to requests for comment.

The messages also show that SoftBank, the Japanese conglomerate that owns the majority of Sprint, discussed lending Dish money to buy the assets it needed to become a telecom company.

In such an arrangement, SoftBank would essentially be financing a competitor to its own company, Sprint. But SoftBank also stood to lose financially if a Sprint-T-Mobile merger did not happen.

SoftBank declined to comment on Thursday.

In one strained exchange, Mr. Ergen told John Legere, the chief executive of T-Mobile, that he was still working to get terms of a deal done, pending board approval and “any other issues from our/your team.”

“And waiting on Softbank to finance the deal?” Mr. Legere wrote.

Mr. Ergen said publicly this week that several potential lenders had emerged to help his company buy assets, including JPMorgan Chase and SoftBank.

Sprint and T-Mobile, the third- and fourth-largest wireless companies, announced their latest merger plans in April 2018. The carriers promised their union would allow them to combine resources and bring the next generation of wireless broadband, known as 5G, for fifth generation, to rural America. They would have a combined 80 million United States subscribers.

The Justice Department announced its approval of the deal in July, citing the creation of a fourth and new competitor in Dish, which would buy assets from Sprint and T-Mobile to become a telecom company. In a parallel review, the chairman of the Federal Communications Commission announced it planned to approve the deal weeks later.

The merger is being challenged in court by several states and cannot close until that lawsuit is resolved. State attorneys general in New York and California are unconvinced that Dish will provide true market competition.

“Dish is a struggling satellite TV firm with no experience running a mobile wireless business — and no current mobile wireless business,” Paula Blizzard, California’s deputy attorney general, said on a call with journalists this month. “We cannot count on Dish one day in the future somehow growing into a viable wireless company equal to Sprint’s reach today.”

Mr. Delrahim was pressured to block the merger throughout the department’s review. Several Democratic lawmakers, consumer groups and state attorneys general said the deal would harm consumers by reducing the number of national wireless carriers to three from four. The reduction in competition would most likely lead to higher consumer wireless bills, the critics warned.

To salvage the deal, the companies came up with a solution: bring in Dish Network to buy some of their wireless assets to form another competitor and maintain four national mobile carriers.

Mr. Delrahim told reporters at a press event in July that the deal would not have passed muster without Dish, which had agreed to buy Sprint’s prepaid wireless service, Boost, for $5 billion, as well as other assets from T-Mobile.

“We were prepared to sue to block the deal,” Mr. Delrahim said in July, when he announced his approval.

In texts sent this May and June, Mr. Delrahim helped coordinate meetings between Mr. Ergen, Mr. Legere and Marcelo Claure, the chief operating officer of SoftBank and the chairman of the Sprint board, as they negotiated asset sales to Dish.

“I anticipate being part of the meeting and then leaving it to you guys to hash out details as needed,” Mr. Delrahim wrote in one text to Mr. Ergen about a meeting with Mr. Legere.

The telecom executives gave Mr. Delrahim regular updates on their often difficult negotiations. Both T-Mobile and Sprint executives were frustrated at times with Mr. Ergen, who told them he needed time to get his board to approve aspects of the deal.

“Why do you always play games. You got a deal of a lifetime and don’t blow it,” Mr. Claure told Mr. Ergen. “And you control your board.”

Mr. Legere and Mr. Ergen were sometimes hard to wrangle. At one point, when Dish sought funding from SoftBank, Mr. Legere was indignant.

“You’ve crossed the line,” he wrote. “For full disclosure (which may be a new term to you) I have told Makan I don’t believe you are serious about doing a deal.”

Mr. Delrahim seemed aware of the friction. In one set of messages, he invited Mr. Ergen to a meeting the next day with Mr. Legere and Mike Sievert, the president of T-Mobile, in his conference room at the Justice Department. “2pm confirmed,” Mr. Delrahim wrote. “I have not told John and Mike the meeting is w you yet, I will tell them in the AM.”

But the day the meeting was scheduled, Mr. Delrahim gave Mr. Ergen an update about a long talk he had held with Mr. Legere, Mr. Sievert and Mr. Claure.

“John is going to reach out to you,” Mr. Delrahim wrote. “May make good sense for you all to meet alone at 2, and then we all meet later today? I will make myself available.”

Categories
Amazon.com Inc Antitrust Laws and Competition Issues Cloud Computing Computers and the Internet Elastic NV Innovation Open-Source Software Regulation and Deregulation of Industry Start-ups Suits and Litigation (Civil) Uncategorized

Prime Leverage: How Amazon Wields Power in the Technology World

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Credit…Nolan Pelletier

Software start-ups have a phrase for what Amazon is doing to them: ‘strip-mining’ them of their innovations.


SEATTLE — Elastic, a software start-up in Amsterdam, was rapidly building its business and had grown to 100 employees. Then Amazon came along.

In October 2015, Amazon’s cloud computing arm announced it was copying Elastic’s free software tool, which people use to search and analyze data, and would sell it as a paid service. Amazon went ahead even though Elastic’s product, called Elasticsearch, was already available on Amazon.

Within a year, Amazon was generating more money from what Elastic had built than the start-up, by making it easy for people to use the tool with its other offerings. So Elastic added premium features last year and limited what companies like Amazon could do with them. Amazon duplicated many of those features anyway and provided them free.

In September, Elastic fired back. It sued Amazon in federal court in California for violating its trademark because Amazon had called its product by the exact same name: Elasticsearch. Amazon “misleads consumers,” the start-up said in its complaint. Amazon denied it had done anything wrong. The case is pending.

Not since the mid-1990s, when Microsoft dominated the personal computer industry with Windows, has a technology platform instilled such fear in competitors as Amazon is now doing with its cloud computing arm. Its feud with Elastic illustrates how it brandishes power in that technical world.

While cloud computing may appear obscure and geeky, it underlies much of the internet. It has grown into one of the technology industry’s largest and most lucrative businesses, offering computing power and software to companies. And Amazon is its single-biggest provider.

Amazon has used its cloud computing arm — called Amazon Web Services, or A.W.S. for short — to copy and integrate software that other tech companies pioneered. It has given an edge to its own services by making them more convenient to use, burying rival offerings and bundling discounts to make its products less expensive. The moves drive customers toward Amazon while those responsible for the software may not see a cent.

Even so, smaller rivals say they have little choice but to work with Amazon. Given the company’s broad reach with customers, start-ups often agree to its restrictions on promoting their own products and voluntarily share client and product information with it. For the privilege of selling through A.W.S., the start-ups pay a cut of their sales back to Amazon.

Some of the companies have a phrase for what Amazon is doing: strip-mining software. By lifting other people’s innovations, trying to poach their engineers and profiting off what they made, Amazon is choking off the growth of would-be competitors and forcing them to reorient how they do business, the companies said.

All of this has fueled scrutiny of Amazon and whether it is abusing its market dominance and engaging in anticompetitive behavior. The company’s tactics have led several rivals to discuss bringing antitrust complaints against it. And regulators and lawmakers are examining its clout in the industry.

“People are afraid that Amazon’s ambitions are endless,” said Matthew Prince, chief executive of Cloudflare, an A.W.S. competitor that protects websites from attacks.

A.W.S. is just one prong of Amazon’s push to dominate large swaths of American industry. The company has transformed retailing, logistics, book publishing and Hollywood. It is rethinking how people buy prescription drugs, purchase real estate and build surveillance for their homes and cities.

But what Amazon is doing through A.W.S. is arguably more consequential. The company is the unquestioned market leader — triple the size of its nearest competitor, Microsoft — in the seismic shift to cloud computing. Millions of people unknowingly interact with A.W.S. every day when they stream movies on Netflix or store photos on Apple’s iCloud, services that run off Amazon’s machines.

Jeff Bezos, Amazon’s chief executive, once called A.W.S. an idea “no one asked for.” The service began in the early 2000s when the retailer struggled to assemble computer systems to start new projects and features. Once it built a common computer infrastructure, Amazon realized other companies needed similar capabilities.

Now companies like Airbnb and General Electric essentially rent computing from Amazon — otherwise known as using the “cloud” — instead of buying and running their own systems. Businesses can then store their information on Amazon machines, pluck data from them and analyze it.

For Amazon itself, A.W.S. has become crucial. The division generated $25 billion in sales last year — roughly the size of Starbucks — and is Amazon’s most profitable business. Those profits enable the company to plow money into many other industries.

In a statement, Amazon said the idea that it was strip-mining software was “silly and off-base.” It said it had contributed significantly to the software industry and that it acted in the best interest of customers.

Some tech companies said they had found more customers through A.W.S.; even some companies that have tangled with Amazon have grown. Elastic, for instance, went public last year and now has 1,600 employees.

But in interviews with more than 40 current and former Amazon employees and those of rivals, many said the costs of what the company was doing with A.W.S. were hidden. They said it was hard to measure how much business they had lost to Amazon, or how the threat of Amazon had turned off would-be investors. Many spoke on the condition of anonymity for fear of angering the company.

In February, seven software chief executives met in Silicon Valley and discussed bringing an antitrust lawsuit against the giant, said four people with knowledge of the gathering. Their grievances echoed a complaint by vendors who use Amazon’s shopping site: Once Amazon becomes a direct competitor, it is no longer a neutral party.

The C.E.O.s did not press forward with a legal action, partly out of concern that the process would take too long, the people said.

Now regulators are approaching some of Amazon’s software rivals. The House Judiciary Committee, which is investigating the big tech companies, asked Amazon in a September letter about A.W.S.’s practices. The Federal Trade Commission, which is also investigating Amazon, has questioned A.W.S. competitors, according to officials at two software companies who were called in but were not authorized to discuss the matter.

What Amazon is doing to software start-ups is unsustainable, said Salil Deshpande, founder of Uncorrelated, a venture capital firm.

“It has intercepted their monetization, it has forcibly wrestled control of software from their owners and it has siphoned customers to its own proprietary services,” he said.

When Amazon Web Services began last decade, Amazon was struggling to turn a consistent profit. A service to provide computing power seemed like a distraction.

Yet start-ups embraced A.W.S. They saved money because they did not need to buy their own computing equipment, while spending only on what they used. Soon more companies flocked to Amazon for computing infrastructure and, eventually, the software that ran on its machines.

In 2009, Amazon established a template for accelerating A.W.S.’s growth. That year, it introduced a service for managing a database, which is critical software to help companies organize information.

The A.W.S. database service, an instant hit with customers, did not run software that Amazon created. Instead, the company plucked from a freely shared option known as open source.

Open-source software has few parallels in business. It is akin to a coffee shop giving away coffee on the hopes that people spend on milk or sugar or pastries.

But open source is a tried and true model nurtured by the software industry to get technology to customers quickly. A community of enthusiasts often springs up around the shareable technology, contributing improvements and spreading the word about its benefits. Traditionally, open-source companies later earn money for customer support or from paid add-ons.

Technologists initially paid little attention to what Amazon had done with database software. Then in 2015, Amazon repeated the maneuver by copying Elasticsearch and offering its competing service.

This time, heads turned.

“There was a company that built a business around an open-source product that people like using and, suddenly, they have a competitor using their own stuff against them,” said Todd Persen, who started a non-open-source software company this year so there was “zero chance” that Amazon could lift his creations. His previous start-up, InfluxDB, was open source.

Again and again, the open-source software industry became a well that Amazon turned to. When it copied and integrated that software into A.W.S., it didn’t need permission or have to pay the start-ups for their work, creating a deterrent for people to innovate.

That left little recourse for many of these companies, which could not suddenly start charging money for what was free software. Some instead changed the rules around how their wares could be used, restricting Amazon and others who want to turn what they have created into a paid service.

Amazon has worked around some of their changes.

When Elastic, now based in Silicon Valley, shifted the rules for its software last year, Amazon said in a blog post that open-source software companies were “muddying the waters” by limiting access to certain users.

Shay Banon, Elastic’s chief executive, wrote at the time that Amazon’s actions were “masked with fake altruism.” Elastic declined to make Mr. Banon available for an interview.

Last year, MongoDB, a popular technology for organizing data in documents, also announced that it would require any company that manages its software as a web service to freely share the underlying technology. The move was widely viewed as a hedge against A.W.S., which does not openly share its technology for creating new services.

A.W.S. soon introduced its own technology with the look and feel of MongoDB’s older software, which did not fall under the new requirements.

That experience was top of mind this year when Dev Ittycheria, MongoDB’s chief executive, attended the dinner with the heads of six other software companies. Their conversation, held at the home of a Silicon Valley venture capitalist, shifted to something drastic: whether to publicly accuse Amazon of behaving like a monopoly.

At the meal, which included the heads of the software firms Confluent and Snowflake, some of the C.E.O.s said they faced an uneven playing field, according to the people with knowledge of the gathering. No complaint has materialized.

“A.W.S.’s success is built on strip-mining open-source technology,” said Michael Howard, chief executive of MariaDB, an open-source company. He estimated that Amazon made five times more revenue from running MariaDB software than his company generated from all of its businesses.

Andi Gutmans, an A.W.S. vice president, said some companies wanted to be “the only ones” to make money off open-source projects. He said Amazon was “committed to making sure that open-source projects remain truly open and customers get to choose how they use that open-source software — whether they choose A.W.S. or not.”

By the time A.W.S. held its first developer conference in 2012, Amazon was no longer the only big player in cloud computing. Microsoft and Google had introduced competing platforms.

So Amazon unveiled more software services to make A.W.S. indispensable. In a speech at the event, Andy Jassy, the head of A.W.S., said it wanted to “enable every imaginable use case.”

Amazon has since added A.W.S. services at a blistering pace, going from 30 in 2014 to about 175 as of December. It also built in a home-field advantage: simplicity and convenience.

Customers can add new A.W.S. services with a single click and use the same system to manage them. The new service is added to the same bill and requires no extra permission from a finance or compliance department.

In contrast, using a non-Amazon service on A.W.S. is more complicated.

Today when a customer logs onto A.W.S., they see a home page called the management console. At the center is a list of about 150 services. All are A.W.S.’s own products.

When someone types “MongoDB,” the search results do not fetch information for MongoDB’s service on A.W.S.; it instead suggests an offering from Amazon that is “compatible with MongoDB.”

Even after a customer has selected a non-Amazon option, the company sometimes continues pushing its own product. When someone creates a new database, they are presented an ad for Amazon’s own technology called Aurora. If they pick something else, Amazon still highlights its option as “recommended.”

Mr. Gutmans said A.W.S. worked closely with many companies to integrate their offerings “as seamlessly as possible.”

Amazon’s A.W.S. developer conference is now one of the world’s biggest technology events, drawing tens of thousands of people to Las Vegas every year.

The highlight is a speech from Mr. Jassy where he showcases new services. Because a new A.W.S. feature often spells hardship for some start-up, the presentation has earned the nickname “The Red Wedding,” a bloody event in a “Game of Thrones” episode.

“Nobody knows who is going to get killed next,” said Corey Quinn of the Duckbill Group, who helps companies manage their A.W.S. bills and writes a newsletter called “Last Week in A.W.S.

At last year’s conference, Amazon unveiled a new tool — Amazon CloudWatch Logs Insights — to help customers analyze information about its services.

Daniel Vassallo, a former A.W.S. software engineer who helped develop the product, said executives wanted to go after the market, but were worried it would look like Amazon was targeting a company called Splunk, which offers a similar tool and is also a major spender with A.W.S.

So Amazon previewed its new product to Splunk before the conference and agreed not to announce it during Mr. Jassy’s speech, Mr. Vassallo said.

“They weren’t particularly happy. Who would be?” Mr. Vassallo, who left Amazon in February, said of Splunk. “But we still went ahead and did it anyway.”

Splunk said it had a “strong partnership” with A.W.S. and declined to comment further.

Amazon has also created rules for its developer conference. Companies that pay tens of thousands or hundreds of thousands of dollars for a booth said they must submit their banners, pamphlets and news releases to Amazon for approval.

According to an A.W.S. document from August explaining marketing guidelines for companies it works with, Amazon bans certain words or phrases, such as “multi-cloud,” the concept of using two or more cloud platforms. An Amazon spokesman said it had stopped this practice.

Companies are also instructed to strike claims about being “the best,” “the first,” “the only,” “the leader,” unless substantiated by independent research.

Redis Labs was founded in 2011 in Tel Aviv, Israel, to build a business around managing a free software called Redis, which people use to organize and update data quickly. Amazon soon offered a competing paid service.

While that created a formidable rival to Redis Labs, Amazon’s move also validated Redis technology. The start-up has since raised $150 million, exemplifying the can’t-live-with-can’t-live-without relationship that many software companies have with Amazon.

Former Redis Labs employees estimate that Amazon generates as much as $1 billion a year from Redis technology — or at least 10 times more revenue than Redis Labs. They said Amazon also tried to poach its staff and undercut it with hefty discounts.

A.W.S. offers a discount to customers who commit to spending at least a certain amount with it, but it does not treat money spent on A.W.S.’s own services and rival services equally. Spending on outside services counts as only 50 cents on the dollar toward the balance. And discounts do not apply to non-Amazon products, according to A.W.S. customers.

If a customer still chooses Redis Labs through A.W.S., Redis Labs is required to kick back around 15 percent of its revenue to Amazon.

At one point, Amazon’s attempts to hire Redis Labs employees became so aggressive that executives removed some online biographies of its technical staff, said the former employees. A Redis Labs spokesman said the start-up had no recollection of that.

Some Redis Labs executives considered bringing an antitrust action against Amazon this year, the former employees said. Others balked because 80 percent of the start-up’s revenue came from customers on A.W.S.

“It was a love-hate relationship,” said Leena Joshi, a former vice president of marketing at Redis Labs. “On one hand, most of our customers ran on A.W.S. so it was in our interest to be tightly integrated with them. At the same time, we knew they were taking away our business.”

Redis Labs declined to comment on its revenues or A.W.S. actions. It said Amazon offered “important services.”

Not every company views A.W.S. as a threat. Ali Ghodsi, chief executive of Databricks, a San Francisco start-up that uses artificial intelligence to analyze data, said A.W.S. salespeople have lifted sales of his company’s products.

“I don’t see them using shenanigans to stop us,” he said.

But Saket Saurabh, chief executive of Nexla, a 14-person start-up in Millbrae, Calif., said he had reservations about Amazon.

In August, Amazon began a service for processing and monitoring data that competes with Nexla. Investors warned him about sharing too much information with the giant.

Mr. Saurabh went ahead anyway and signed his company up to work with Amazon in September. The reason? Amazon’s giant sales teams can give Nexla access to a vast audience.

“What choice do we have?” he said.