Amazon is in the hot seat as lawmakers question their business practices. Last week, Sen. Bob Menendez (D-N.J.) and Sen. Richard Blumenthal (D-Conn.) sent a letter to Amazon founder and CEO Jeff Bezos to ask how products receive the Amazons Choice badge. Started in 2015, the Amazons Choice badge is supposed to mark products with the highest customer satisfaction ratings, but the senators believe this practice may be deceptive. They believe the badge may mislead consumer to purchase Amazons own, sometimes inferior products instead of a competitors products, because shoppers view the badge as an endorsement by Amazon.

As you know, when a search for a product such as dish soap on the Amazon marketplace yields over 20,000 products, consumers look for distinctive product features to help narrow the extensive search results, wrote Senators Menendez and Blumenthal to Bezos. Your customers reasonably rely on the Amazons Choice badge to guide their final purchasing decisions. In the minds of some consumers, the Amazons Choice badge is a material representation of Amazons recommendations. (…) Yet, the badge may be misleading consumers into thinking the products that receive this distinction are the best available products.

On Sen. Menendezs website, he references a study by OC&C Strategy Consultants that found products with the Amazons Choice badge have three times the number of sales, while products that lose the badge lose 30% in sales. The senators expressed their concern that consumers are receiving defective or poorly manufactured products.

Amazon bears the responsibility of providing its customers with accurate information to ensure they can make informed purchasing decisions. Unfortunately, Amazon has failed to fulfill this responsibility with its use of the Amazons Choice badge. We are concerned the badge is assigned in an arbitrary manner, or worse, based on fraudulent product reviews, said the senators.

The senators asked Bezos six multi-part questions about how the Amazons Choice is awarded. They are paraphrased below.

1. Provide a detailed explanation of the process Amazon uses to identify the products to receive the Amazons Choice badge. Does Amazon use an algorithm to make this decision? Do employees verify the results of the algorithm before assigning the badges? Do Amazon employees personally review the products for quality control?
2. What metrics does Amazon use to decide if a product receives the badge? Does Amazon consider product reviews? If so, how does Amazon ensure the reviews arent fraudulent? What steps has Amazon taken to review fraudulent reviews? How does Amazon penalize sellers and reviewers that post or instigate fraudulent reviews?
3. Amazons Choice describes the designation as highly-rated, well-priced products. How does Amazon define highly-rated and well-priced?
4. What efforts has Amazon made to fight the practice of review recycling
5. Can Amazon sellers apply or pay to have their products designated as Amazons Choice? If not, does Amazon receive financial compensation in another form from the seller of Amazons Choice products?
6. Are Amazons Choice badges tailored to individual buyers? Does Amazon consider a buyers browsing and purchase history to determine which Amazons Choice products will appear in that buyers search results?

The senators asked Bezos to reply by September 16, giving him a full month to respond. You can read the full letter here.

There is precedent for this letter. In December, Sen. Blumenthal wrote to Bezos saying that Amazons policy to block third-party sellers from offering lower prices on competing sites would stifle market competition. Amazon later removed that policy, reports CNBC. In July, Rep. Frank Pallone, Jr. (D-NJ) and Rep. Jan Shackowsky (D-IL) asked Amazon to remove and reconcile fraudulent reviews on its cite.

Last week, The New York Times reported that Amazon uses employees on Twitter to tweet about the great working conditions at the company. Known as FC ambassadors, the employees attempt to counter complaints about the work environment, anti-union sentiments and other less-than-complimentary comments about Amazon. The FC ambassador program started in 2018. Through the program, Amazon pays employees to follow social media full-time, said The Times.

An Amazon spokesperson said the FC ambassadors share their personal experiences online.

Its important that we do a good job educating people about the actual environment inside our fulfillment centers, and the FC ambassador program is a big part of that along with the FC tours we provide, said Lindsay Campbell, an Amazon spokesperson, in its response to The Times.

Insider Take:

We are curious to see if and/or how Amazon will choose to respond to the senators letter, as well as other inquiries about the companys business practices. Will they be transparent about their business practices and share details about internal processes and procedures? Do they have an obligation to respond? Bezos is a prudent businessman, and he likely has a team of advisors helping him decide how best to proceed. Well be watching to see how this unfolds.