Amazon Emails Show Effort to Weaken Diapers.com Before Buying It
(Bloomberg) -- At the congressional hearing on tech industry competition Wednesday, a Democrat looking to prove Amazon.com Inc. has too much market power revived one of the best-known examples of the retailer’s competitive streak: an effort to win market share from, and ultimately acquire, the parent company of Diapers.com.
Amazon acquired Quidsi Inc. for $545 million in 2010, absorbing a competitor then making headway in the lucrative market for products to new parents. Emails released by the antitrust subcommittee detail Amazon’s plan to weaken Quidsi, including undercutting its smaller rival on price.
“We have already initiated a more aggressive ‘plan to win’ against diapers.com,” longtime Amazon retail executive Doug Herrington apparently wrote in an email released by the committee. “To the extent that this plan undercuts the core diapers business for diapers.com, it will slow the adoption of Soap.com,” another company owned by Quidsi.
Herrington called Quidsi Amazon’s No. 1 short-term competitor. “We need to match pricing on these guys no matter what the cost,” he said in the email.
As reported in “The Everything Store,” Bloomberg Technology Executive Editor Brad Stone’s 2013 book chronicling the rise of Amazon and Chief Executive Officer Jeff Bezos, the Seattle retailer’s concerted effort to win Diapers.com customers continued during acquisition talks. While those discussions were ongoing, Amazon was willing to swallow steep losses, including those that came with a moms-focused variant of its Prime membership program, Stone reported.
In questioning Bezos on Wednesday, Representative Mary Gay Scanlon said documents show that Amazon was willing to lose $200 million in one month on diapers alone. Scanlon accused Amazon of raising prices on diapers following the elimination of its competitor.
Asked if he personally signed off on higher diaper prices, Bezos said he didn’t recall the episode. “I don’t remember that at all,” he said, adding that Amazon matches competitor prices.
Scanlon also raised Project Gazelle, an initiative also reported by Stone during which the company targeted small publishers with less leverage the way a cheetah would go after its prey. Amazon’s top lawyer previously told the committee that the project is not still active and that the committee’s descriptions of it were inaccurate.
“I cannot comment on that because I don’t remember it,” Bezos testified. In a familiar refrain, he added: “What I can tell you is we are very, very focused on the customer.”
©2020 Bloomberg L.P.