Amazon Demands Suppliers Give Up Financial Ownership Rights In Exchange For Its Business

Amazon ties financial warrants and other conditions to how much business it gives to its suppliers.

Since the early 1900s, Chicago and New York mobsters used strong-arm tactics to extort payments of cash or benefits-in-kind in exchange for physical security, business advantage, and protection.
Fast forward to the present day. A Wall Street Journal investigative report exposes that Amazon struck at least a dozen deals with publicly traded companies in which it gets rights, called warrants, to buy the vendors’ stock in the future at what could be below-market prices. In some cases, Amazon was also given rights such as board representation and the ability to top any acquisition offers from other companies.
Dana Mattioli’s WSJ investigation reveals, “Amazon over the past decade also has done more than 75 such deals with privately held companies, according to a person familiar with the matter. In all, the tech titan’s stakes and potential stakes amount to billions of dollars across companies that provide everything from call-center services to natural gas, and in some cases position Amazon among the top shareholders in those businesses.”
Amazon routinely leverages its size and power to force terms that benefit itself, including getting partners in one business to sign on to its other services, learning about up-and-coming technology companies through its venture capital fund, or creating top selling Amazon branded goods that compete with small sellers on its site. It has aggressively competed to wrest market share from rivals, which Amazon says results in better deals for shoppers.
Former Amazon executives said they avoided doing anything during supplier negotiations, such as putting its ultimatums in writing, that would give fodder to critics who have said Amazon abuses its power. One of the former executives said that most companies complied with its demands over warrants. Several former Amazon executives who worked on such deals said in interviews that they found them to be unfair and one-sided, saying the companies weren’t in a position to refuse and that most of the upside went to Amazon.
More from the WSJ investigation:
Amazon often ties its warrants to how much business it gives a supplier. In a deal with Startek Inc., the Colorado-based call-center company agreed to give Amazon the right to acquire 20% of its shares if Amazon does $600 million of business with Startek over eight years.
Michigan-based grocery distributor SpartanNash Co. had been supplying Amazon with food since 2016. The contract was amended last year to deliver groceries to the Amazon Fresh arm, but this time Amazon added a condition: if it bought $8 billion worth of groceries over seven years, it could get warrants to purchase around 15% of SpartanNash’s stock at a price potentially lower than the market. Amazon also said it wanted to be notified of any takeover offers for SpartanNash and have a 10-day window to offer a counterbid. A spokeswoman for SpartanNash declined to comment.
Amazon broached a 10-year leasing deal including similar terms with Atlas Air Worldwide Holdings Inc. Amazon demanded warrants that would amount to up to 20% of Atlas’s equity over five years — with an option for 10% more later — depending on how much business it gave Atlas. Amazon also wanted the right to elect a director to Atlas’s board after meeting certain milestones. Atlas announced the deal in 2016 and has never done a similar deal, according to the Atlas spokeswoman.
Clean Energy Fuels Corp. struck a deal with Amazon earlier this year that could give the larger company a 20% stake over the next decade, making it the No. 2 shareholder.
According to people familiar with the matter, Ohio aircraft-leasing company Air Transport Services Group Inc. initially pushed back on the warrant stipulation. Its team flew to Seattle and had “intense, protracted negotiations” where Amazon got ATSG to agree to the structure, one of the people said. “It took a lot of convincing,” the person said. Amazon currently owns around 19.5% of ATSG, making it the biggest shareholder.
Amazon also signed a vendor deal with Cargojet Inc. that included warrants. Cargojet didn’t respond to requests for comment.
Amazon is a mercenary with a strategy to own the infrastructure that other businesses rely on to get to market through three channels: Amazon’s retail marketplace, Amazon Prime, and Amazon Web Services. The result is a destructive retail apocalypse that is gaining a stranglehold on retail that is destroying competition and eroding jobs. Amazon’s unchecked monopoly power is leaving a tsunami of destruction on Amazon third-party sellers, bullied retail partners, manufacturers, and deceived consumers.
In addition to fraud, scams, counterfeits, replicas, and false claims, allegations of stealing from its employees, fake product reviews and blocked feedback, along with improperly using third-party data for its strategy for developing and selling its own private-label products contribute to its nefarious business profile. Amazon’s self-preferencing predatory pricing and exclusionary conduct exploits their power to become even more dominant and unaccountable to anyone but themselves, while ravaging dozens of businesses.
Amazon is facing up to $36 billion in fines after Europe’s antitrust regulators charged Amazon with violating competition law. However, the U.S. has lagged far behind, allowing e-commerce sites to operate virtually immune to product liability claims and destructive anti-competitive behavior. There is no incentive for Amazon to stop — they make too much money.
While the U.S. Congress is engaged in partisan bickering, America is being destroyed by China, unregulated e-commerce, and big tech. Amazon may be just another massive corporate entity to feel a vague sense of guilt about giving your money to, but consumers have a choice.
The powers that be at Amazon have often attempted to sweep these stories under the rug, but with social media and the Internet, squashing the stories has become difficult. After all, there really are shady things going on inside Amazon and the public ought to know! Whistleblowers, step forward.