Antitrust Law Daily Six individuals indicted in Amazon Marketplace commercial bribery scheme
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Friday, September 18, 2020

Six individuals indicted in Amazon Marketplace commercial bribery scheme

By Cheryl Beise, J.D.

The indictment comes less than five months after Senator Hawley called for an antitrust investigation into the conduct.

Six people have been indicted by a grand jury in Seattle with conspiring to pay over $100,000 in bribes to Amazon employees and contractors, in exchange for an unfair competitive advantage on the Amazon Marketplace, the Department of Justice announced on September 18. Ephraim Rosenberg, 45, of Brooklyn, New York; Joseph Nilsen, 31, and Kristen Leccese, 32, of New York City; Hadis Nuhanovic, 30, of Acworth, Georgia; Rohit Kadimisetty, 27, of Northridge, California; and Nishad Kunju, 31, of Hyderabad, India, have been charged with conspiracy to use a communication facility to commit commercial bribery, conspiracy to access a protected computer without authorization, conspiracy to commit wire fraud, and wire fraud.

According to the indictment, since at least 2017, the defendants have used bribery and fraud to benefit merchant accounts on the Amazon Marketplace, resulting in more than $100 million of competitive benefits to those accounts, harm to competitors, and harm to consumers. The defendants allegedly served as consultants to so-called third-party ("3P") sellers on the Amazon Marketplace. Those 3P sellers consisted of individuals and entities who sold a wide range of goods, including household goods, consumer electronics, and dietary supplements. Three of the defendants also sold goods on the Amazon Marketplace through 3P accounts they operated.

The indictment alleges that the defendants paid bribes to at least ten different Amazon employees and contractors, including Kunju, who accepted bribes as a seller-support associate in Hyderabad, India, before becoming an outside consultant who recruited and paid bribes to his former colleagues. In exchange for the bribes, the corrupted Amazon employees and consultants:

  1. reinstated Amazon Marketplace merchant accounts and product listings that had been suspended—including listings for products flagged for public safety or health concerns or intellectual property violations, and accounts flagged for manipulative reviews or violation of other Amazon seller policies;
  2. facilitated attacks against competitors—including by suspending competitors’ 3P accounts, sharing competitors’ revenues, customers, and advertising information, and providing information about Amazon’s internal algorithms, allowing the consultants to flood competitors’ product listings with fictitious negative product reviews;
  3. misappropriated Amazon’s confidential business information—including by providing consultants and 3P sellers with the contact information for Amazon employees and consumers, and providing unauthorized access to Amazon’s confidential standard operating procedures and algorithms, giving them insight into the systems that power Amazon’s search engine, Amazon’s product reviews, and Amazon’s enforcement processes; and
  4. circumvented Amazon’s internal limits on 3P accounts—including by increasing 3P sellers’ storage limits in Amazon’s warehouses and providing 3P sellers with inside knowledge about successful advertising campaigns and profitable product listings.

"As the world moves increasingly to online commerce, we must ensure that the marketplace is not corrupted with unfair advantages obtained by bribes and kick-backs," said U.S. Attorney Brian T. Moran for the Western District of Washington. "The ultimate victim from this criminal conduct is the buying public who get inferior or even dangerous goods that should have been removed from the marketplace."

Conspiracy to use a communication facility in furtherance of commercial bribery and to gain unauthorized access to a protected computer is punishable by up to five years in prison and a $250,000 fine. Conspiracy to commit wire fraud and wire fraud are each punishable by up to 20 years in prison and a $250,000 fine.

The defendants are scheduled to appear in the federal district court in Seattle on October 15.

The announcement does not detail any antitrust violations. However, the indictment comes less than 14 months after the Antitrust Division disclosed that it was reviewing the practices of major online platforms, such as Amazon. Further, in April, Senator Josh Hawley (R., Mo.) asked the Justice Department to open a criminal antitrust investigation of Amazon, alleging that the company used its position as an online platform to stifle competition by collecting detailed data on merchandise in order to create rival products under its own brand. According to the letter sent by Hawley, a Wall Street Journal investigation found that Amazon collected data from its third-party sellers in order to make and sell its own products.

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